Why we should target environmental outcomes

'Don't overlook the many benefits of plastics', writes the Economist:

Plastic packaging prevents perishable foodstuffs from spoiling, making possible global trade in meat, fish, fruit and vegetables. It enables essentials like rice, cooking oil and powdered milk to be stored and distributed safely and cheaply. A one-litre plastic bottle weighs 5% as much as a glass one; plastic packaging thus reduces shipping costs and emissions. ... When properly managed and well monitored, [landfill] is far less environmentally ruinous than often portrayed, and can be simpler and more effective than poorly executed recycling. Don't overlook the many benefits of plastics, the 'Economist', dated 19 April 2025

The sort of life-cycle analysis required to establish the environmental benefits or otherwise of shifts in our behaviour are bedevilled by boundary issues, measurement difficulties and the difficulty of weighting one type of environmental impact against another. They are better than blandly assuming that rail is ‘better’ than air travel, that solar power is better than coal-fired power stations, but for the making of robust policy they would need to be continually reassessed in the light of our ever-expanding knowledge of the environment and our ever-changing environmental priorities. Government policy cannot be so responsive: if government did use life-cycle analysis with the aim of altering our behaviour, it would probably do so on the basis of a one-time, necessarily limited, and (probably) subjective assessment of environmental costs and benefits. It’s not good enough, but even worse would be what we largely have now: government environmental policy based on corporate interests, media stories and the launching of visually appealing initiatives that look good but otherwise achieve nothing.

Social Policy Bonds would take a different approach. They would subordinate environmental policy to society's  desired environmental outcomes. Say we wish to reduce our use of plastics. A Social Policy Bond issue that rewarded achievement of such a reduction would generate incentives for bondholders to bring it about at least cost. They might well carry out life-cycle analyses in their attempt to do so. But there is an important difference between the way do they would conduct their research and the way government would do so: bondholders have incentives to achieve their goal efficiently. This is likely to mean responding to - and stimulating - increased knowledge of scientific relationships and technical advances.

A single environmental goal, such as reduction in use of plastics will necessarily require diverse, adaptive responses. These are precisely the sort of responses that government does very badly. Government can and should articulate society’s environmental goals, and can help pay for their achievement: in the democratic countries it performs these functions quite well. But most of our environmental goals require complete and responsive understanding of complex relationships, and actually achieving such goals requires continuous, well-informed and impartial decisions to be made about the allocation of scarce resources. For that purpose, Social Policy Bonds, with their incentives to achieve targeted outcomes efficiently would, I believe, be far better than the current ways in which environmental policy is formulated.

For more about Social Policy Bonds please see here. For applying the Social Policy Bond idea to environmental problems, see here.