The Business of Free. Something to learn for climate change?

“We could have saved [the Earth] but we were too damned cheap.”  -Kurt Vonnegut, Jr., A Man Without a Country.

Recently, I became aware of a Pew Research Center poll that found overwhelming support for requiring better fuel efficiency for vehicles (79%), funding for alternative energy (74%), and strong support for spending more on mass transit (63%) and tax incentives for hybrid or electric vehicles (60%).

Americans seem very willing to spend public funds on improving energy efficiency and developing alternative sources of energy that have lower greenhouse gas emissions. Not surprisingly, however, given the American allergy to taxes, support for internalizing the cost of greenhouse gas emissions into the price of energy is not popular. The Pew Center poll did not even bother to ask about increasing prices for carbon-heavy energy.

Many economists tell us that this is a mistake. Market-based policies such as taxes are more efficient than fuel economy regulations or R&D funding. We could pay less overall for the same greenhouse gas reductions by implementing the unpopular polices in place of the popular. In a departure from Kurt Vonnegut’s line above, many Americans are willing to spend public funds on relatively expensive policies but not on the cheaper ones. So why do they prefer the more expensive options?

When presented with this question, I can’t help but think about the strategies of monetizing free content from online media. People don’t want to pay for climate pollution when it has been so conveniently free for so long. Facing the same situation with free media content, many media companies are developing pay strategies that are presumably more acceptable to their customers than tacking a price sticker on a service that was free yesterday. One strategy, which the NY Times is now following, is to allow free content up to a specific limit after which the consumer must pay. Another is to add content at the same time as levying a charge so that consumers feel they are gaining more from the service for their money. Extending this analogy to paying to abate climate change, perhaps Americans are comfortable paying for higher fuel-efficient vehicles, R&D, and mass transit because they feel like they are getting more in return for their money.

Does this notion really relate to climate pollution? I’m not sure, but I think it’s worth looking into. A BBC World Service poll in 2007 reported that 46% of Americans supported paying more for coal and oil but this support rose to 74% if the revenue was devoted to improving efficiency and developing new sources of energy.

Written by KATIE WHITEFOOT.

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