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![handle is hein.taxfoundation/iretpbul0026 and id is 1 raw text is: July 8, 1996
No. 67
GREEN PRICING OF ELECTRICITY: THE CHIMERA OF
EFFICIENCY, THE REALITY OF POLITICS*
Consumers of electricity should get their checkbooks ready; environmentalists have discovered
economic theory. The latest trend in environmental policy and the regulation of public utilities is
the market-based approach called green pricing. It has been reported that 29 state public utility
commissions (PUCs) have either adopted or are considering the adoption of some form of green
pricing policy toward electric utilities.1 In true Orwellian fashion, though, this entire approach has
little to do with actual markets or prices and a great deal to do with the use of taxation and the power
of public utility commissions to promote a green agenda that may be rooted more in ideology than
science.
[T]he market-based approach called green pricing has little to do with
actual markets or prices and a great deal to do with the use of taxation and the
power of public utility commissions to promote a green agenda...
For decades environmentalists have shunned the use of economic analysis in pursuing their
political agenda. Their view has been that economics supports free markets and economic growth,
both of which allegedly lead to environmental degradation. But in recent years these same advocates
have discovered an ally buried in the pages of every principles of economics textbook. It is the
chapter devoted to externalities and market failure. This discovery has led to a costly marriage of
* An earlier draft of this paper was presented in a session on Austrian Economics and Public Policy at the 1995
meetings of the Southern Economic Association in New Orleans. The author would like to thank Professor E. C. Pasour
for helpful comments on this earlier draft.
' Ballal Butraw, Winston Harrington, et. al., Some Simple Analytics of Social Costing in a Regulated Industry,
Discussion Paper, QE93-13-REV (Washington, DC: Resources For The Future, 1993), p. 1.
Institute for IRET is a non-profit, tax exempt 501(c)3 economic policy research and educational
Research organization devoted to informing the public about policies that will promote
on the economic growth and efficient operation of the market economy.
Economics of 1730 K Street, N.W., Suite 910 * Washington, D.C. 20006
Taxation (202) 463-1400 e Fax (202) 463-6199 e Internet www.iret.org](ViewImageLocal?handle=hein.taxfoundation/iretpbul0026&div=1&collection=&method=preview&ext=.png&size=3)