Thursday, March 8, 2007

The Freakonomics of Carbon Offsets

Regarding my post Supply & Demand in Carbon Offsets, Peter made the observation that it is quite like the experiment documented in Freakonomics of the day care center charging a late fee for parents - rather than discouraging the activity, it actually encourages it because it gives people an artificially clear conscious.


Joe said...

The idea of the Freakonmics story was not to illustrate that pecuniary incentives (or disincentives) do not work, but rather that ill-designed incentives do not work. Had the late fee been a higher amount (it would also need to be enforceable), it could have discouraged lateness. In the same way, carbon offsets have the potential to decrease consumption of "dirty" energy, but as the MR article points out, it would require drastic subsidization of offsetting technologies in order to compete with local power companies, and it appears people do not value clean energy quite that much.

Ken said...

Joe -

Thanks for the thoughtful and accurate comment. Just to be clear, I didn't mean to state or imply that carbon offsets (or the day care late fee) are inherently bad ideas - I was just relaying the observation regarding their possible correlation in terms of having an unintended (and adverse) effect. I apologize if I painted with too broad a brush in the post.

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