Abstract:
Permit trading is a preferred environmental policy instrument among economists, and has become a popular tool in environmental treaties the last decades. The reason is that market-based policy instruments such as permit trading have been shown to foster cost-effectiveness. However, many non-economists have not embraced permit trading as the right way to attack environmental problems, and even among economists, there are many arguments for other market based instruments such as taxation.
In this paper, we show some results from two experiments where the participants were asked about their attitude to emissions permit trading. In spite of the behavior in the experiments, a large majority of the subjects found permit trading among nations morally unacceptable. Permit trading among firms were found more acceptable, but still a significant number of people found it immoral. We then continue by studying reasons to oppose permit trading. In ethical reasoning, there are two ways to justify if an action is good or bad. The first is to refer to the consequences. Based on this, an action is good if it is the best way to attain the aim we strive for. However, another way of moral thinking argues that consequences alone do not guide us whether something is right or wrong. It is not enough to know that the action is the most effective way to attain the aim. The results from both experiments may indicate that people are not too concerned about the consequences of trading a public bad in general. However, when the public bad is associated with certain goods such as emissions permits, people tend to find it immoral.