Perverse Incentives

Unfortunately, when some companies know that a chemical or product is about to be banned, they push it off onto unsuspecting customers in other countries. Or, if companies anticipate being paid not to produce a certain chemical, they boost production to capture high returns in the short run. Unfortunately, some firms take advantage of international treaties like the Kyoto Treaty, violating the overall goal to eliminate discharge of dangerous chemicals into the atmosphere. The so called cap-and-trade in emissions can create complicated incentives for pollution, especially when businesses boost production of dangerous chemicals in order to profit later by slowing down production and trading emissions. Such arrangements do not promote overall goals to slow global warming, reports this article in "The Economist." International treaties must encourage nations and businesses alike to pursue voluntary compliance in slowing emissions for the overall good and not use problems like global warming for profit-seeking. – YaleGlobal