Why do governments encourage saving resources instead of simply raising the price on them?

Question

Every day we hear messages from the government about the importance of saving fuel, natural gas, water, electricity, etc. Governments pass laws requiring that showers are not too powerful, cars consume less gas, homes require less heating, light bulbs are more energy efficient, etc. In addition consumers are bombarded by campaigns encouraging citizens to save up precious resources by changing their daily behavior.

But what's the point of all these laws and propaganda? If a given resource needs to be saved up, why not raise the taxes every year to a point where people start saving without requiring any external reminders? If a single shower starts costing you $1, you'd surely be willing to invest in a more efficient showerhead completely voluntarily.

Answer 1

Consumption taxes have a disproportionate impact on the poor, which many find unacceptable. It would be possible to compensate this by giving more money to the poor, but many also find that unacceptable. In the end, it is often easier to reach a compromise, where undesirable things are regulated or banned instead of taxing them. And if everything else fails, there is always the option to appeal to the public to take voluntary actions.

Answer 2

1. Because taxes are unpopular. While nagging may also be unpopular with some people, taxes would generally be more unpopular.
2. Because responding to nagging is discretionary. Don't care about the environment? Just ignore the nagging. That person is annoyed, but not as much as taxes would matter.
3. People who do care are stuck with the actual burden. But they don't mind as much, because they agree with the program.
4. Because rich people (e.g. Al Gore) can just pay the tax and use more energy.
5. Because poor people can't afford the tax.
6. Because it makes it seem like the government is doing something, even if it isn't effective.
7. Because of arguments like: poor people rent and are stuck with the home they get; they'd be stuck with cheap energy inefficient appliances and lights. Of course, turn this around. With nagging, poor people rent and are stuck with cheap, inefficient appliances. After all, the landlord can ignoring the nagging for many apartments as well as one.

I would tend to agree that these are addressable. Send the inefficiency tax bill to the landlords. So they have to pay for both the inefficiency and the appliances. Give refundable tax credits that the poor can use. But these remain the current reasons.

The real problem is that people are not yet convinced that it is enough of a priority. So when a "Green New Deal" is proposed, they think that it is a great idea, until told how their taxes would change to pay for it (spending would double, so revenues would have to increase by 167% to get a balanced budget; of course, 33% of that is just to balance the current United States budget). That's a US specific example; presumably other countries have similar issues).

Nagging costs very little. It somewhat satisfies those who want less energy usage. It doesn't annoy those who don't want to reduce energy usage nearly as much as actually forcing a reduction. All those things are valuable to politicians.

That it's not effective? Not great, but more easily survivable than high taxes or not maintaining the appearance of doing something.

Until the general population regards climate change as important enough to pay more of their own money in taxes, nothing serious will be done.

Answer 3

Your proposed tax doesn't just hurt the "poor," it would be a difficult burden upon most Americans, as they are living paycheck to paycheck. Even if we add in credits for those buying their own appliances and put the penalty on landlords for rented properties (that "paycheck to paycheck" number almost certainly includes people who own two houses and rent one out, by the way), you will still have a significant portion of "middle class" families that can't simply absorb the cost of replacing appliances worth hundreds or thousands of dollars. On the other hand, having higher standards for new appliances means that over time you will accomplish making appliances more efficient, while allowing those who can't immediately afford them to wait until the market price goes down for appliances meeting the new standards as they are replaced by newer models.

Answer 4

This is too long for a comment, and may well be an answer.

There are two possible fallacies in your question: taxes aren't free, and picking the right incentives isn't easy.

If there were no costs associated with taxes (more on that in a second) then sure why not, add a few more to the pile to incentivize the desired behavior.

Here's a short list of some problems with these sorts of taxes:

1. People resent them. They seem paternalistic.
2. You have to pay people to implement them, to monitor them (are they actually driving the desired behavior?), you have to have committees who periodically review them for update, etc.
3. As other answers have said, anything touching a necessity (water, food, energy) will have a disproportionate impact on the poor.
4. (Important one) you have to deal with the unforseen consequences, and there will be unforseen consequences.

Note well: this does not mean that we should have no taxes of this sort, and in the US we do indeed have many taxes of this sort (and the inverse, behavior-motivating tax breaks) already. But it's a tradeoff, not a clean win.

As for the incentives, people in the US frequently complain about the tax "loopholes" (primarily benefiting the wealthy) and the complexity of the tax code in general. Most of those loopholes don't start out as such, they're intended to motivate desirable behavior (like saving for retirement), but they wind up that way because, again, it's difficult to set incentives in a way that motivates without too much abuse.

None of this to say is that your suggestion is bad, and it may be better than what we have now, but it isn't necessarily an easy, obvious improvement over the current state of affairs.

Answer 5

Adjusting prices in the way you describe is really difficult to do without causing some other problem.

Prices emerge from all interactions between buyers and sellers in a market for a particular good or service. The price contains information about the supply and demand of that good or service that is not obtainable in any other way.

When the government messes with prices, people stop making decisions based upon how scarce something actually is and instead make decisions based on how scarce the government imagines how scarce the thing ought to be. The resulting changes in behavior are really, really hard to predict in advance.

You used water as an example...

If a single shower starts costing you $1, you'd surely be willing to invest in a more efficient showerhead completely voluntarily.

Not necessarily at all. $1 shower would require very expensive water. At that price, I might forgo showering entirely. Maybe I'll be concerned if the price of water is that high, that it might not be available when I really need it, so I'll start stockpiling jugs of water in my basement, and end up using more water than I would have taking a shower at the market price. I dunno because it's hard to imagine and our imagination cannot be based on reality, because the act of taxing in this way is a deliberate decision to ignore reality.

The market for many commodities also extends beyond the boundaries of a single polity. Suppose in Country A, the price of a shower is $1, but in Country B, the price is the market price. Except, people in Country A may be using less water, so the supply of water will be greater than it otherwise would be, reducing the price in Country B, whose citizens would then act as though water more plentiful than it would be.

This is hard to figure out and plan. It is easier to tell people to use less and institute social stigma than it is to pick a socially optimal price that will do that just right.

Answer 6

One might argue "What the h--- business is it of the government's?" although I freely admit that that old-fashioned American sentiment is less popular now than it was a century ago. (But maybe more popular now than it was a decade ago!) Quite simply, we citizens created a government for various important tasks, but we never asked it to make our everyday decisions for us or to control our personal behaviors. That's not government's job, and not part of its just powers.

On the whole, letting the government spend a small percentage of its budget on late-night radio ads about saving water (or whatever) is a minor annoyance, and therefore much less likely to get the voters up in arms, compared to your proposal for government to invent new powers solely designed to compel free people to make politically directed purchases.

Answer 7

I'm confused, because it seems to me that this is already the way things are done, at least in the US. Gas (petrol) is heavily taxed, natural gas, water, electricity, etc (utilities) have rates that are effectively set by the government, and set up on tiered systems such that they are affordable for low use, but above a certain amount, the price increases significantly (tiered pricing).

The informational campaigns and supplementary laws (such as water pressure) are meant to help folks reduce usage. If you get a big power bill at the end of the month, you might wonder what you did that consumed all that power - the informational campaigns might inform you so that you realize that maybe you should switch to more energy efficient bulbs, or get a more energy efficient refrigerator, and so on. They give you places to look and things to do to reduce your usage, but the main incentive to do so is that bill you get every month that can get quite large if you slip into the next pricing tier due to excessive use.

Generally, the law of supply and demand will take care of limiting resource use to some degree, but in a few cases, the resource might be cheap and abundant, but the external costs of consuming it (pollution, for example) might be expensive, and so artificial measures must be implemented to better reflect the costs of consuming that resource. This is partially the reason for such high taxes on gas.

Answer 8

Because the fundamental fact of the matter is a certain resource is limited and sonthe use of that resource has to be managed. That fundamental recognition has to be acknowledged first. That is an end; everything else is a means - relatively speaking. For example, when we raise or put taxes on such a resource to make the cost of them using a particular resource more costly in order to limit its use.

But let’s say I’m cooking a meal and I decide to ration my use of oil, because there’s a limited quantity of that in my cupboard; well, then I wouldn’t be so stupid to put a tax on it, in order to limit my use of it. In that situation there is no sense to it. Such taxes are used not when there is one consumer, but many.

Answer 9

Two reasons I can think of:

1. Disruption to the economy. In the US, gas taxes are very low compared to Europe. Slapping a $2/gallon tax on gasoline would certainly discourage use, but it would also have unintended consequences, such as raising the price of everything that depends on being transported, which is... just about everything. Taxes aren't just tossed out willy-nilly. Their impact on the economy must be considered for unintended consequences - a stalling economy cuts productivity and jobs... and also cuts tax revenue.

2. The natural reaction. In the US, if the government were to put on such a tax, the next congressional midterms would be a bloodbath, and that tax would be removed quickly. Nothing gets people to the polls faster than the government taking a lot more of their money, and a politician campaigning on stopping that.

Answer 10

you are making a bad assumption about raising the prices will cause less use because it will cause different activities to cost more. The problem with that is there is no current way to determine how much those activities cost. Your example was a shower costing $1 a day but there is no technology that we have available to track the costs of individual appliances let alone the activities associated with them. The best you can do is track overall usage in a billing period (some newer tech can track some usages over different time frames). Because of this raising the price will not help conserve because consumers can't track specific usage of the commodity but can only track the overall price. If you want to control the usage of it you need to find ways to reduce the usage and not just charge more. Also it should be remembered that there are places that can't reduce the amount of water and increased costs will cause increased prices for consumers which means that they are paying more for other things in addition to the increased prices they pay directly.

The other key point you need to remember is that if you raise the price of the commodities you will force some people to make some very difficult choices of what they can and can't afford to do anymore.

As for your example that is unfortunately not the way things work in the real world. For example take a family renting a house or apartment, they won't have a say in what kind of appliances or fixtures are used in it. Now say that a normal shower head is cheaper then a more water efficient shower head which one do you think the landlord is going to put in? The the landlord it doesn't matter that one is going to cause a higher water bill because they will not be paying it. However the person in question may not be able to change to a lower cost shower head because the contract may not allow for that.

Now say you have someone who is much better off they might continue to waste the water because they can afford to. In the end you will find a lot of the extra costs from using something less efficient is hard to see. An example of this is the fight to remove incandescent bulbs which not only use much more electricity but have a higher long term cost due to needing to be replaced more often.

Another key point to add is there are places where there is a drought in progress and watering bans in place but homeowners associations will still take actions against homeowners for not watering their lawn. The simple fact is that people don't want to conserve and paying a higher price will not stop people. In truth the only way to get people to conserve is to force it with technology designed to be more efficient.