17 December 2008

Gaming the System

A key component of the cap and trade "solution" to carbon emissions is the notion of "certified" output, i.e., the idea that a building can be certified for low carbon emissions.

Such a system -- the Leadership in Energy and Environmental Design (LEED) Green Building Rating System -- already exists, and those who want LEED certification pay to get it.

The trouble is that LEED certification is voluntary, which means that the only people to get it do so as a means of advertising their "green cred." Now what happens if LEED certification is worth money, i.e., if a LEED gold certification will allow its owner to have or sell carbon credits? Well, I would suggest that a monetized LEED will lead (pun!) to greater corruption and/or sloppier certification standards. There are over 60,000 LEED Accredited Professionals, and it only takes a few "bad apples" giving out incorrect certifications for dodgy clients before the whole system is devalued. (The same way that the credit rating agencies are now devalued.)

Bottom Line: The guardians of LEED certification need to be careful about how their system is used. When incentives go from "low-power" (voluntary) to high-power (mandatory/valuable), it's more likely that the system will be mistreated.

2 comments:

Michelle said...

David - if the big problem with everything is corruption or potential corruption (i.e. both private and government or public control can result in resource and human rights abuse if over site doesn't prevent the selfish actions of those in charge) - how do we stem corruption?

You have stated that, at least in some matters, over 80 percent of the population doesn't really give a rats a**. Can the caring, overworked, 20% of the population exert enough pressure to stem corruption? What methods should be used by the average joe-ette with limited time to spare on private investigating? What sort of laws, if any, would you like to see passed that would make stopping corruption easier? Probably you just need to point me to previous posts on gaming theory and unequal information or some such.

David Zetland said...

Michelle -- good question. The easiest way to reduce corruption is to allow competition, i.e., so that people can just walk away.

Given that most corruption happens in government (in fact, one definition is "use of public office for private gain"), then it's harder to fight corruption. One way is by "bureaucratic" competition. Another way us through greater transparency...

There are many examples of the latter, but no so many of the former...