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Electric car subsidies

An example of government failure?

Government failure occurs when well-intentioned government interventions lead to unintended consequences and a reduction in economic welfare in society. In this article, Robert Nutter explores whether the policy of subsidising electric cars is an example of this phenomenon

Microstockfish /Fotolia

The UK has an impressive record in setting strong greenhouse-gas reduction targets. UK emissions have fallen by twice as much as the 12.5% set in the Kyoto Protocol which ended in 2012 (Figure 1). Since then, despite agreements such as the Copenhagen Accord (2009), no legally binding international targets have been set for the post-Kyoto years.

The UK continues to set the pace in emissions targets with a 34% planned cut in emissions by 2020, which was made legally binding in the April 2009 Budget. In addition, an 80% planned cut in emissions by 2050 was made law in the Climate Change Act of 2008. Cynics might argue that the UK’s impressive cuts in emissions to date were the result of the deindustrialisation of the UK economy in the 1980s and 90s. It could even be argued that the UK has ‘exported’ its emissions to the countries from which we now import the goods we used to make.

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