Question

Environmental protection programs are frequently designed to require all polluters to cut back emissions by a certain percentage. What are the perverse incentives built into this type of program?

Answer 1

Perverse incentive is an incentive that has an unintended and undesirable result which is contrary to the interests of the incentive makers.

Perverse incentives and environment protection programs:

Many environment protection programs are often require for all polluters to cut down emissions by a certain percentage. The Perverse incentives built into his type of program.

• If pollution reduction program reduce the pollution based on the equi-proportionate in future, then increases their pollution mount at present allow them to pollute higher amount in future. Thus, they might pollute more than the necessary amount.

• When the regulators tighten the standards due to new technology which makes the firms worse off than before with the old technology, they might increase the level of pollution.