How Flexible Emissions Fees Can Drive Sustainable Development

coverWhitepaper FEVolvo engineer Anders Höglund managed to make a diesel engine burn clean by adding sophisticated control technology, thanks to advanced sensors and electronics. To make it even cleaner he added a catalyst converter to the exhaust. The story of the clean diesel engine is a story of one approach to clean-tech: Take outdated, inefficient, polluting technology and with the application of advanced computer control and some addition of cleaning technologies produce services with less emissions more efficiently. This is Control Engineering: the engineering discipline that focuses on the modelling of a diverse range of dynamic systems (e.g. mechanical systems) and the design of controllers that will cause these systems to behave in the desired manner.

But Höglund wanted to take his ideas into another dimension: to go into the economy and take something as outdated as fee systems for pollutants. The system is still inefficient and, frankly, still dirty. His idea was to add a control layer – to make the fee flexible, and determine the fee based on the behaviour of the system. In this case the system is not a truck drive train, but a supply chain for energy. And it is not the combustion processes that work more efficiently, but the market.

The idea is simple: if pollutants are being phased out at a pace determined by national government, the fee remains low. if the pollutant is still being used above the reduction rate called for by government plans, the rate is raised. At this point the complexities of the market – the price of alternatives, the price of pollution capture, the Price of buying pollutants in the futures market, all the complexities play in.

In this way, the government, which actually in many cases has no mandate to allow pollution, gets back in control of phasing out the pollutant, using the most powerful known mechanism of change : the market.

Read more in the white paper recently released by the Swedish Foundation for Sustainable Economics.

Leave a Reply

Your email address will not be published. Required fields are marked *