A perverse incentive is when the incentives, rewards, or penalties associated with a given behavior actually lead to unanticipated and undesired outcomes. This can occur when the incentives are insufficiently designed, or they actually cause people to take a course of action that was unintended. For instance, the widespread use of subsidies and tax incentives to reduce consumption of greenhouse gases can have the perverse effect of actually locking in and reinforcing existing technologies, rather than incentivizing a shift towards newer, lower carbon technologies.

See also: carrying capacity, fossil fuel, economic system, income inequality, wealth inequality