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The Positive Political Economy of Instrument Choice in Environmental Policy

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Author Info
Stavins, Robert
Keohane, Nathaniel
Revesz, Richard

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Abstract

In the realm of environmental policy instrument choice, there is great divergence between the recommendations of normative economic theory and positive political reality. Four gaps stand out. First, despite the advantages of market-based policy instruments, they have been used to a minor degree, compared with conventional, command-and-control instruments. Second, pollution-control standards have typically been much more stringent for new than for existing sources, despite the inefficiency of this approach. Third, in the few instances in which market-based instruments have been adopted, they have nearly always taken the form of grandfathered tradeable permits, rather than auctioned permits or pollution taxes, despite the advantages in some situations of these other instruments. Fourth, the political attention given to market-based environmental policy instruments has increased dramatically in recent years. We search for explanations for these four apparent anomalies by drawing upon intellectual traditions from economics, political science, and law. We find that all fit quite well within an equilibrium framework, based upon the metaphor of a political market. In general, explanations from economics tend to refer to the demand for environmental policy instruments, while explanations from political science refer to the supply side. Overall, we find that there are compelling theoretical explanations for the four apparent anomalies, although these theories have yet to be empirically verified.

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Paper provided by Resources For the Future in its series Discussion Papers with number dp-97-25.

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Palmer, Karen & Ando, Amy, 1998. "Getting on the Map: The Political Economy of State-Level Electricity Restructuring," Discussion Papers dp-98-19-rev, Resources For the Future. [Downloadable!]
  2. Enrique Calfucura & Jessica Coria & José Miguel Sánchez, 2008. "Permisos Transables de Emisión en Chile: Lecciones, Desafíos y Oportunidades para Países en Desarrollo," Documentos de Trabajo 347, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
  3. Zhao, Jinhua & Kling, Catherine L., 2000. "Policy Persistence in Environmental Regulation," Staff General Research Papers 1906, Iowa State University, Department of Economics. [Downloadable!]
    Other versions:
  4. Louis Kaplow & Steven Shavell, 1997. "On the Superiority of Corrective Taxes to Quantity Regulation," NBER Working Papers 6251, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. K. Fisher-Vanden, 1997. "International Policy Instrument Prominence in the Climate Change Debate: A Case Study of the United States," Working Papers ir97033, International Institute for Applied Systems Analysis. [Downloadable!]
  6. Stavins, Robert, 2000. "A Two-Way Street Between Environmental Economics and Public Policy," Working Paper Series rwp00-005, Harvard University, John F. Kennedy School of Government. [Downloadable!]
  7. Reto Schleiniger, 2004. "Global Carbon Trade and Local Externalities," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 140(II), pages 245-264, June. [Downloadable!]
  8. Philippe Quirion, 2004. "Prices versus Quantities in a Second-Best Setting," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 29(3), pages 337-360, November. [Downloadable!] (restricted)
    Other versions:
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