Let us dispose of the idea that net zero is popular. Yes, in Ipsos surveys, voters endorse various green policies by supermajorities. But when a financial cost is attached to them, most are rejected. ...Last month, a YouGov poll found that around 70 per cent of [UK] adults support net zero. If this entailed “some additional costs for ordinary people”, however, that share falls to just over a quarter. The beginning of the end of Britain’s net zero consensus, Janan Ganesh, Financial Times, 2 August (archived here)
Government, unfortunately, rarely sets out transparent, explicit, verifiable goals. One such is the 2 percent annual inflation rate, targeted by the UK Government: currently the rate exceeds 8 percent. The same Government's goal of 'net zero' by 2050 is even less credible. Perhaps, like most others, knows that nobody takes its goals seriously, and that nobody will be held accountable for its failure to achieve them.
A Social Policy Bond regime would be different. Under a bond regime a government would spend more time setting explicit, clear and meaningful goals than trying to achieve them, or hiding or explaining away its failure to do so. Democratic governments could be effective at articulating society's wishes and raising the revenue to fulfil them. They are not so effective at actually achieving them. Still less do they correctly estimate or explain the inevitable trade-offs that their policies entail. They can get away with such irresponsible behaviour because society is complex, and people too preoccupied with more day-to-day matters.
As I explain in more detail in my book, under a government-backed Social Policy Bond regime, costs of achievement of goals need not be accurately estimated. Government would put funds for the ultimate redemption of the bonds into an escrow account; the bonds would be redeemed only when the specified social or environmental goal had been achieved. If the funds are deemed by the market to be insufficient, then investors will show no interest in the bonds. If the funds are roughly equal to, or even much, much greater than, the market's view of how much achievement will cost, then investors would buy the bonds, bidding for them against each other, so that the net cost to the government of achieving the goal will be minimised. The market for the bonds would ensure that this would happen continuously, with investors having powerful incentives to assess the effects of new knowledge and events quickly. Tradeability, which I discuss here and here, greatly expands the range of goals that the bonds can achieve: government could target very long-term outcomes, such as universal literacy or greater life expectancy and then disengage from any attempt to achieve them, which would become the responsibility of investors in the bonds.
Sadly, governments today, knowing that they are rarely held accountable, are prone to preach such uncosted goals as 'net zero' that function as little more than self-satisfied advertising slogans.
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