Brookes also adds taxing resources to reflect the cost of negative externalities, which one assumes, would be spent on reparation activities to return to a new optimal resource allocation which internalises the cost of pollution and eliminates the possibility of rebound effects (if reparations are possible).
It is worth reading his conclusions in full (below the fold):
"The lesson is inescapable that optimal allocation of the economic resources available to us—fuel included— and measures to reduce consumption of any given resource—fuel, for example—are two quite different exercises. Neither one implies the other.
If one’s object is to reduce fuel consumption to serve, for example, some environmental end, fallacious ideas about the economics of activities that involve fuel consumption do not help. Putting the economic spotlight on such activities is as likely to throw up cases where economic optimality calls for the substitution of fuel for other resources as cases where substitution in the other direction is indicated. The right course, given the object, is to bear down on energy use directly, outlawing it (if it is of a particularly damaging kind), rationing it (if you have in mind a total that you are not prepared to exceed) or taxing it (if you believe you can reflect in the tax the environmental damage that concerns you).
It would then be up to individual consumers—both producers and suppliers of services as well as final consumers - to make the best of all the resources available to them in the light of the new constraints and any others they may be experiencing. Only they know what is the best response for them in their own individual circumstances.
It is necessary always to distinguish between engineering efficiency and economic efficiency. To invoke cost effectiveness as justification for a change in resource relationships to achieve any given end is to embark on an exercise in the field of economic efficiency. Fuel can never be employed with greater economic efficiency than in a system in which the allocation of all the relevant resources is collectively at an optimum. Economic optimisation requires an even-handed approach as between all the economic resources involved in any given activity: there is no case for giving pride of place to fuel in such a quest. Seeking optimal allocation of economic resources and reducing national energy consumption for environmental reasons are two quite different exercises and should be treated as such.
Limiting the availability of fuel, whatever the purpose and the means chosen, involves an economic cost in the shape of a reduction in production and consumption possibilities. Not for the first time it has to be concluded that there is no ‘‘free lunch’’. Reducing energy consumption for environmental reasons can never be a costless option unless by chance the action taken happens to coincide with the action necessary to achieve general economic optimisation."