When it comes to Pigouvian taxes, like taxes for car emissions, it is thought by some that they are primarily stealth methods for generating government income under the pretext of positive change. So the theory goes, politicians are using a ubiquitously held public view (that we seriously need to become greener) and capitalising on that with green taxes. I don’t have much of a problem with most green taxes – taxing extra on car emissions because it incentivises people to care about cleaner air by caring more about their car tax bill does, in effect, resemble the market.
Alas, there are lots of people who think it is only politicians who can engender this change to make us greener. I think this assumption needs correcting. Although Pigouvian taxes bring in revenue for politicians short-term (for a few decades maybe), the long-term indicators are that the market left to run by itself will naturally make us greener anyway. The reason being: businesses are already looking for the most efficient means of supplying customers using as little energy as possible, because in a highly competitive market it is in their interest to do so to remain profitable. The goal to reduce energy output can, and has, come in various ways: replacement of human energy for machines, replacement of metal-based technology for higher intensity resources or carbon-cased materials, replacement of paper for digital devices, and so forth – and these are improvements in production that naturally improve business’s cost-effectiveness.
Consequently, compared with how the market engenders continually increased efficiency, emission taxes probably will turn out to have had only a much more negligible effect on lower energy output and more efficient use of resources than the free market, because the market is driven by efficiency far more than politicians with political interest. If there is a race to make us greener, politicians are more like the tortoise and the market is more like the hare.