On how to incentivize good behaviour / by Simmon Li

There are a few ways to encourage good behaviour. You can reward good behaviour, or you can punish bad behaviour. I was reading an article in the Sun (which was super biased btw) about Smitherman's green energy plan, and it made me think about this. ((http://www.torontosun.com/news/torontoandgta/2010/08/31/15199181.html)) In relation to the whole "green" issue, what's the best way to go about it? Right now, we tend to reward good behaviour in very novel ways, without actually punishing bad behaviour. "Oh you installed a solar panel? Here have a tax rebate on it." "Oh, you want an energy efficient appliance? Here have a tax credit." Now, don't get me wrong, I think these are great initiatives that get the ball started, but what we really ought to do is start to punish people that are behaving poorly. Tax credits cost money. Taxes generate money.

A carbon tax has to be progressive, because lower income people have a relatively higher tax burden, and with the cost of the tax being paid by consumers. Such a tax would take a lot of political capital and political will to pass, but I think it's important that we do what we can. The argument is that with a carbon tax, businesses are given price certainty in which they can look at to judge investments that move us away from carbon fuels. With price certainty, companies will be more willing to risk the market and innovate.

I think people really only get their act together when they're pushed to because not doing so gets too expensive. A carbon tax is a good way to start to address the global climate change issue. Then, once that's implemented, we can continue to work on it (perhaps add a cap-and-trade system to add quantity certainty), while looking forward to solving the other challenges that we will be facing (material scarcity, water scarcity, etc etc).