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Market-Based Environmental Policies

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  • Stavins, Robert

Abstract

Some eighty years ago, economists first proposed the use of corrective taxes to internalize environmental and other externalities. Fifty years later, the portfolio of potential economic-incentive instruments was expanded to include quantity-based mechanisms--tradable permits. Thus, economic-incentive approaches to environmental protection are clearly not a new policy idea, and over the past two decades, they have held varying degrees of prominence in environmental policy discussions. This paper summarizes U.S. experiences with such market-based policy instruments, including: pollution charges; deposit-refund systems; tradable permits; market barrier reductions; and government subsidy reductions. No particular form of government intervention, no individual policy instrument--whether market-based or conventional--is appropriate for all environmental problems. Which instrument is best in any given situation depends upon a variety of characteristics of the environmental problem, and the social, political, and economic context in which it is being regulated. There is no policy panacea. Indeed, the real challenge for bureaucrats, elected officials, and other participants in the environmental policy process comes in analyzing and then selecting the best instrument for each situation that arises.

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-98-26.

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Date of creation: 01 Mar 1998
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Handle: RePEc:rff:dpaper:dp-98-26

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Cited by:
  1. MAHENC Philippe, 2008. "Persuasive Subsidies in a Clean Environment," LERNA Working Papers 08.02.246, LERNA, University of Toulouse.
  2. Fischer, Carolyn & Parry, Ian W. H. & Pizer, William A., 2003. "Instrument choice for environmental protection when technological innovation is endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 523-545, May.
  3. Delmas, Magali & Marcus, Alfred, 2003. "Firms' Choice of Regulation Instruments to Reduce Pollution: A Tansaction Cost Approach," Research Papers 1806, Stanford University, Graduate School of Business.
  4. Blackman, Allen & Harrington, Winston, 1999. "The Use of Economic Incentives in Developing Countries: Lessons from International Experience with Industrial Air Pollution," Discussion Papers dp-99-39, Resources For the Future.
  5. Caginalp, Gunduz & Porter, David & Smith, Vernon, 2000. "Momentum and overreaction in experimental asset markets," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 187-204, January.
  6. A. Myrick Freeman III, 2002. "Environmental Policy Since Earth Day I: What Have We Gained?," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 125-146, Winter.
  7. Gramig, Benjamin M. & Skees, Jerry R. & Black, J. Roy, 2004. "Utilizing Contingent Claims to Improve the Management of CAFOs," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(02), August.
  8. Fischer, Carolyn, 2004. "Emissions Pricing, Spillovers, and Public Investment in Environmentally Friendly Technologies," Discussion Papers dp-04-02, Resources For the Future.
  9. Sheila M. Olmstead & Robert N. Stavins, 2008. "Comparing Price and Non-price Approaches to Urban Water Conservation," Working Papers 2008.66, Fondazione Eni Enrico Mattei.
  10. Paul R. Portney, 2000. "Environmental Problems and Policy: 2000-2050," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 199-206, Winter.
  11. Wadud, Zia, 2011. "Personal tradable carbon permits for road transport: Why, why not and who wins?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(10), pages 1052-1065.
  12. Skees, Jerry R. & Black, J. Roy & Gramig, Benjamin M., 2003. "CONSIDERING MARKET-BASED ALTERNATIVES TO IMPROVE THE MANAGEMENT OF CAFOs," 2003 Annual meeting, July 27-30, Montreal, Canada 22248, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  13. Parry, Ian & Pizer, William & Fischer, Carolyn, 2000. "How Important is Technological Innovation in Protecting the Environment?," Discussion Papers dp-00-15, Resources For the Future.
  14. Burtraw, Dallas, 2000. "Innovation Under the Tradable Sulfur Dioxide Emission Permits Program in the U.S. Electricity Sector," Discussion Papers dp-00-38, Resources For the Future.
  15. Hurley, Sean P. & Kliebenstein, James B., 2005. "An Examination of Additively Separable Willingness-To-Pay for Environmental Attributes: Evidence from a Pork Experiment," 2005 Annual meeting, July 24-27, Providence, RI 19370, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  16. Cristina Ciocirlan & Bruce Yandle, 2003. "The Political Economy of Green Taxation in OECD Countries," European Journal of Law and Economics, Springer, vol. 15(3), pages 203-218, May.

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