Abstract
Effluent charges and tradeable permits are economically efficient but rarely used. A new explanation for this discrepancy is offered. Pricing may crowd out environmental ethics in the pricing, and via spillovers, also in non-pricing sectors. Pricing may therefore increase pollution, providing a reason why decision-makers tend to reject environmental pricing. Five propositions showing the conditions for counterproductive effects are advanced. They are consistent with available empirical evidence. Regulation by setting standards and subsidies damage environmental ethics less than pricing, because pollution is condoned. Damaging environmental ethics may prevent political action in favor of the environment.
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Frey, B.S. Pricing and regulating affect environmental ethics. Environmental and Resource Economics 2, 399–414 (1992). https://doi.org/10.1007/BF00304969
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DOI: https://doi.org/10.1007/BF00304969