It is a mistake that policy makers keep repeating: By imposing a standard that stipulates a design, rather than one that defines the performance or outcome desired, innovation is stifled and the often-beneficial effects of competition are eliminated.
The latest example of this folly comes from the often-gridlocked streets of London where a Congestion Charge actually discourages vehicles that are cleaner and more efficient than the ones the regulation exempts. The driver of a hybrid vehicle can travel within the so-called Congestion Charge zone free-of-charge while the driver of a similar, or even lower, carbon dioxide emitting conventional internal combustion-powered car is charged £8.
This “tax” could add a financial burden of over £2,000 per year to those drivers who select a traditionally powered low emission car. Not good if you are the driver. Not bad if you are collecting the revenue.
Small wonder then that Volvo, not without self-interest of course, is calling on The Mayor of London, Boris Johnson, to publish the findings of the review of the Congestion Charge exemptions that he promised to deliver before the end of 2009.
Johnson was a bit busy last week hob-knobbing with many other government grandees in Copenhagen at taxpayer expense discussing the various, expensive, approaches that need to be imposed on you and me to ameliorate the possibly pernicious effects of man-made carbon dioxide emissions on the global climate.
I do not believe this regulatory problem of unintended consequences and perverse effects came up while Johnson was boasting about the wonderful benefits of the Congestion Zone, but it should have because it raises many, well, inconvenient truths about economic and free market behaviors that need to be at the heart of any global warming regulatory debate. (more…)