This proposal has four issues: 1. the additional tax only makes sense if the existing taxes are inefficiently low; 2. Is this idea not already implemented in the various cap-and-trade agreements? 3. what stops producers from transferring the tax onto consumers? 4. Who is the real polluter? I discuss these questions here: http://wp.me/p3yx1u-9I.
Thank you for these nice insights. An article with similar ideas has been written by Sian Sullivan on http://www.greeneconomycoalition.org/, entitled "Should nature have to prove its value?". A discussion on why nature gets more and more monetarized can be found here http://wp.me/p3yx1u-4A.
Overall I am missing the point that nowadays a price tends to get put on nature in order to efficiently internalize externalities. How is one supposed to be able to know the value of nature if one does not place a price on it?
China is starting that war on subsidies now, or at least trying to rescue its failing solar giants, see http://grist.org/news/china-plans-a-major-solar-spree/#.UeWgL_EHoVQ.twitter and discussions http://wp.me/p3yx1u-48 and http://wp.me/p3yx1u-4y.
It is certainly correct to emphasize that prizes have the potential to attract R&D directed towards clean technology. However, the one big problem with relying on prizes is that they provide money only ex post, if an innovation has been made and proven useful. But it is also true that R&D for clean technology often requires substantial finances up front. It is, therefore, more likely that prizes attract R&D activities on smaller problems that may be solvable without large up-front sunk costs than on bigger ones like car engine efficiency.
Also, it may be questionable inhowfar prizes really provide incentives to undertake R&D activities. It may simply be that someone wants to make a certain process more efficient or attempts to find a solution to a problem without having been initially drawn to it by the possibility of obtaining a prize. This was, for example, the case for the development of the zeer pot.
Clearly, it is unlikely that prizes harm incentives. However, one way to really increase the usefulness of prizes is to link prizes to specific research questions. Like this researchers will know what financial remuneration they may obtain in case they find a solution to that specific question.
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