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perverse incentives - Terra Infirma


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2 March 2011

Plenty more fish in the sea?

Great news in the Guardian this morning that the EU is to end the incredibly wasteful practice of fish discards. This is the situation where fishermen could catch however many fish they want, but can only land a certain number, so the rest are thrown back - usually dead. This is worse than landing them where at least they would be put to good use - and would offset other food production.

The story illustrates a number of important points:

  • The power of perverse incentives - fisherman are currently encouraged to be wasteful;
  • The risk of unintended consequences - the landing quota was introduced to try and protect fish stocks but has arguably made the situation worse;
  • The stultifying effect of institutional inertia - everybody has known discarding fish is a problem, yet it has taken decades to actually do anything.

These are three potential pitfalls that all of us in the sustainability world come up against some time or other, whether in communities, organisations or in international policy. Watch out for them!

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5 December 2008

Another Perverse Incentive

A perverse incentive is an economic driver that encourages 'bad' behaviour. Examples in the sustainability field include the lack of tax on airline fuel (how do you think those cheap flights are so cheap?), the lack of VAT on building materials for new build when you pay VAT for refurbishment materials and the fact that, despite all the belly aching from the trucking industry, lorries do not pay road tax commensurate with the damage they cause.

Well, when I had to adjust the VAT rate on the Green Business Bible on Monday, it struck me as odd that ebooks are regarded as 'software' by Her Majesty's Revenue and Customs and thus attract VAT when paper books don't.

Ebooks are eco-friendly, books require trees, pulping, glue, distribution, waste. It's perverse...

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