A recent report from The Nordic Council of Ministers ( title: Flexible emission fees – An incentive for driving sustainable production and consumption) is optimistic that growth and environmental goals can be reconciled. If the conclusions of the report can be implemented, it could set a new direction towards sustainable development.
The starting point for the investigation that forms the basis of the report is an economic innovation from Swedish engine innovator, Anders Höglund, from the Swedish Sustainable Economy Foundation.
Höglund postulated that the principles of control engineering that he had applied to make diesel engines burn clean could be applied to the economy.
Control technology is the application of control devices to a process to ensure it performs to requirements. In the case of the engine, advanced micro-processor and sensing technology is applied to a rather “dirty” invention like the diesel engine. Fast feedback, computer control and some final stage cleaning ensure that the combustion in the engine is controlled precisely.
The height of control technology is possibly the modern fighter jet that is unstable without the help of the advanced computer control.
In the old days, the economy was paper-controlled; it could take a long time to obtain an accurate picture of the state of the economy as reports needed collecting and summing by hand.
This is not the case today. Stock prices, oil prices and sales figures are available almost in real-time. Höglund saw that this fast feedback of the economy could form the backbone of a system that forces the economy to “run clean”.
Especially the old criticism that emission fees hold economic growth back is negated when the money from fees is channeled back into the economy as a general tax rebate. And no physical money changes hands. The fees can be distributed electronically to tax payer’s accounts as a credit at digital speed.
The other bugbear of emissions fees is that they are not effective: polluters continue to pollute and producers are slow to introduce clean-tech. Höglund’s innovation solves this by raising the fee at regular intervals until market behavior complies with requirements. Höglund says that market behavior will change as the fees become sufficiently high. As the fees are channeled back into the economy there is an equivalent amount of money available to either purchase the “dirty” service at higher prices or alternatives at relatively lower prices.
The Nordic Council investigation engaged a researcher to review economic literature. The idea of flexible control fees seems to have been sparsely investigated. A workshop involving some of Sweden’s leading sustainability experts and authorities focused on finding ways to drive sustainability into the economy utilizing market forces. The workshop looked at two emission problem areas: carbon dioxide and phosphorous. Most participants were positive to the idea of testing flexible fees in a limited area.
Karl-Henrik Robért, founder of the Natural Step, said:
– Hence, flexible fees offers an elegant pragmatic means for policy-making to support strategic sustainable development.
To download the report visit the Nordic Council’s website.
For more information on the workshop see the Swedish Sustainable Economy Foundation’s website.
See also “Flexible emissions charges are a floating congestion charge for nature“.