Should there be incentives, grants, subsidies and tax beaks for green companies…?

In order to stimulate the green sector of the economy and get companies started when that sector of the economy was at it’s worst incentives helped to keep companies in it in business and at best help the country come closer and closer to environmental sustainibility for all the resources we use.

Here are two situations where the answer is “yes”: (1) The green products produce positive externalities that are not factored into either the production or purchasing decisions. If, for example, a greener production process lessens water pollution, then an incentive equal to the value of those externalities could be given. Similarly, on the consumer side, if use of the good produces positive externalities that are not captured by the user, then the price of the good can be subsidized (or a tax break given). Tax breaks are given in some states (e.g., Oregon) for energy efficient appliances. (2) If non-green companies or products generate negative externalities but no tax or disincentive is levied, then you could either tax those firms, or give incentives to the green firms. This is an attempt to get the “mix” of green/non-green industries correct. In the absence of either (1) or (2), giving incentives can lead to inefficient resource uses. It IS possible to “overdo a good thing”. Some believe, for example, that the incentives given for ethanol production will eventually be shown to have led to some major inefficiencies and a worsening of “environmental sustainability”.

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