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The Use of Economic Incentives in Developing Countries: Lessons from International Experience with Industrial Air Pollution

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Blackman, Allen () (Resources for the Future)
Harrington, Winston () (Resources for the Future)

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Abstract

To what extent should developing countries eschew conventional command and control environmental regulation that is increasingly seen as inefficient and rely instead on economic incentives? This paper addresses this question as it pertains to industrial air pollution. The paper discusses the advantages and disadvantages of various economic incentive instruments, presents in-depth case studies of their application in Sweden, the United States, China, and Poland, and proposes a number of policy guidelines. The authors argue that both design deficiencies and pervasive constraints on monitoring and enforcement impede the effectiveness of economic instruments in developing countries. The latter are difficult to rectify, at least in the medium term. As a result, tradable permits are generally not practical. Suitably modified however, emissions fee policies probably are appropriate. They can provide a foundation for a transition to an effective economic incentive system, and can raise much needed revenue for environmental projects and programs. In addition, if political opposition can be overcome, environmental taxes constitute a second-best but potentially effective pollution control instrument.

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Paper provided by Resources For the Future in its series Discussion Papers with number dp-99-39.

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Date of creation: 01 May 1999
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Handle: RePEc:rff:dpaper:dp-99-39

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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. Dasgupta, Susmita & Hua Wang & Wheeler, David, 1997. "Surviving success : policy reform and the future of industrial pollution in China," Policy Research Working Paper Series 1856, The World Bank. [Downloadable!]
  2. Atkinson, Scott & Tietenberg, Tom, 1991. "Market failure in incentive-based regulation: The case of emissions trading," Journal of Environmental Economics and Management, Elsevier, vol. 21(1), pages 17-31, July. [Downloadable!] (restricted)
  3. Eskeland, Gunnar S & Jimenez, Emmanuel, 1992. "Policy Instruments for Pollution Control in Developing Countries," World Bank Research Observer, Oxford University Press, vol. 7(2), pages 145-69, July.
  4. Malik, Arun S, 1992. "Enforcement Costs and the Choice of Policy Instruments for Controlling Pollution," Economic Inquiry, Oxford University Press, vol. 30(4), pages 714-21, October.
  5. Schmalensee, Richard, et al, 1998. "An Interim Evaluation of Sulfur Dioxide Emissions Trading," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 53-68, Summer. [Downloadable!] (restricted)
  6. Buchanan, James M & Tullock, Gordon, 1975. "Polluters' Profits and Political Response: Direct Controls Versus Taxes," American Economic Review, American Economic Association, vol. 65(1), pages 139-47, March. [Downloadable!] (restricted)
  7. Roberts, Marc J. & Spence, Michael, 1976. "Effluent charges and licenses under uncertainty," Journal of Public Economics, Elsevier, vol. 5(3-4), pages 193-208. [Downloadable!] (restricted)
  8. Adamson, S. & Bates, R. & Laslett, R. & Pototschning, A., 1995. "Energy Use, Air Pollution, and Environmental Policy in Krakow. Can Economic Incentives Really Help," Papers 308, World Bank - Technical Papers.
  9. Afsah, Shakeb & Laplante, Benoit & Wheeler, David, 1996. "Controlling industrial pollution : a new paradigm," Policy Research Working Paper Series 1672, The World Bank. [Downloadable!]
  10. Dasgupta, Susmita & Huq, Mainul & Wheeler, David, 1997. "Bending the rules : discretionary pollution control in China," Policy Research Working Paper Series 1761, The World Bank. [Downloadable!]
  11. Larsen, Bjorn & Shah, Anwar & DEC, 1992. "World fossil fuel subsidies and global carbon emissions," Policy Research Working Paper Series 1002, The World Bank. [Downloadable!]
  12. Foster, Vivien & Hahn, Robert W, 1995. "Designing More Efficient Markets: Lessons from Los Angeles Smog Control," Journal of Law & Economics, University of Chicago Press, vol. 38(1), pages 19-48, April.
  13. Harford Jon D., 1993. "Improving on the Steady State in the State-Dependent Enforcement of Pollution Control," Journal of Environmental Economics and Management, Elsevier, vol. 24(2), pages 133-138, March. [Downloadable!] (restricted)
  14. Swierzbinski Joseph E., 1994. "Guilty until Proven Innocent-Regulation with Costly and Limited Enforcement," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 127-146, September. [Downloadable!] (restricted)
  15. Tietenberg, T H, 1990. "Economic Instruments for Environmental Regulation," Oxford Review of Economic Policy, Oxford University Press, vol. 6(1), pages 17-33, Spring.
  16. Heyes, Anthony & Rickman, Neil, 1999. "Regulatory dealing - revisiting the Harrington paradox," Journal of Public Economics, Elsevier, vol. 72(3), pages 361-378, June. [Downloadable!] (restricted)
  17. Arora Seema & Cason Timothy N., 1995. "An Experiment in Voluntary Environmental Regulation: Participation in EPA's 33/50 Program," Journal of Environmental Economics and Management, Elsevier, vol. 28(3), pages 271-286, May. [Downloadable!] (restricted)
  18. Bates, R. & Cofala, J. & Toman, M., 1994. "Alternative Policies for the Control, of Air Pollution in Poland," Papers 7, World Bank - The World Bank Environment Paper.
  19. Eric Helland, 1998. "The Enforcement Of Pollution Control Laws: Inspections, Violations, And Self-Reporting," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 141-153, February. [Downloadable!] (restricted)
  20. Pargal, Sheoli & Wheeler, David, 1996. "Informal Regulation of Industrial Pollution in Developing Countries: Evidence from Indonesia," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1314-27, December. [Downloadable!] (restricted)
  21. Stavins, Robert, 1998. "Market-Based Environmental Policies," Discussion Papers dp-98-26, Resources For the Future. [Downloadable!]
  22. Harrington, Winston, 1988. "Enforcement leverage when penalties are restricted," Journal of Public Economics, Elsevier, vol. 37(1), pages 29-53, October. [Downloadable!] (restricted)
  23. Eskeland, Gunnar S. & Jimenez, Emmanuel & Lili Liu & DEC, 1994. "Energy pricing and air pollution : econometric evidence from manufacturing in Chile and Indonesia," Policy Research Working Paper Series 1323, The World Bank. [Downloadable!]
  24. Burtraw, Dallas, 1996. "The SO2 Emissions Trading Program: Cost Savings without Allowance Trades," Contemporary Economic Policy, Oxford University Press, vol. 14(2), pages 79-94, April.
  25. Stavins, Robert N, 1998. "What Can We Learn from the Grand Policy Experiment? Lessons from SO2 Allowance Trading," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 69-88, Summer. [Downloadable!] (restricted)
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(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. Blackman, Allen, 2005. "Colombia's Discharge Fee Program: Incentives for Polluters or Regulators?," Discussion Papers dp-05-31, Resources For the Future. [Downloadable!]
  2. Pizer, William & Kruger, Joseph, 2004. "The EU Emissions Trading Directive: Opportunities and Potential Pitfalls," Discussion Papers dp-04-24, Resources For the Future. [Downloadable!]
  3. Blackman, Allen, 1999. "The Economics of Technology Diffusion: Implications for Climate Policy in Developing Countries," Discussion Papers dp-99-42, Resources For the Future. [Downloadable!]
  4. Blackman, Allen, 1999. "Informal Sector Pollution Control: What Policy Options Do We Have?," Discussion Papers dp-00-02-rev, Resources For the Future. [Downloadable!]
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  5. Blackman, Allen & Sisto, Nicholas, 2005. "Muddling Through while Environmental Regulatory Capacity Evolves: What Role for Voluntary Agreements?," Discussion Papers dp-05-16, Resources For the Future. [Downloadable!]
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