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Creating Markets for Air Pollution Control in Europe and the USA

  • Ger Klaassen
  • Andries Nentjes

This paper surveys recent efforts to relax the rigid regulatory frameworks for air pollution control in Europe and the USA. European policies have mainly taken the form of bubbles and compensation or offset schemes. Emission trading has been limited to intra-firm solutions for various reasons: industry structure, absence of real scarcity, and too restrictive trading rules. Bubbles have been granted to homogenous sectors only and can be characterized as direct regulation for a group rather than tradable permit systems. By contrast, the sulphur allowance program in the USA has laid down the foundation for a pollution permit market with few formal restrictions. Problems that arise are mainly related to local environmental and public utility controls. Europe can learn from the USA that regular national permit markets could be installed, preferably for homogenous sectors. In designing the permit system, the differences between the USA and Europe in terms of ecosystem sensitivity, stringency of regulation and differentiation of regional environmental policy have to be taken into account. Copyright Kluwer Academic Publishers 1997

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Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 10 (1997)
Issue (Month): 2 (September)
Pages: 125-146

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Handle: RePEc:kap:enreec:v:10:y:1997:i:2:p:125-146
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  1. Hahn, Robert W, 1989. "Economic Prescriptions for Environmental Problems: How the Patient Followed the Doctor's Orders," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 95-114, Spring.
  2. Cason Timothy N., 1993. "Seller Incentive Properties of EPA's Emission Trading Auction," Journal of Environmental Economics and Management, Elsevier, vol. 25(2), pages 177-195, September.
  3. Tietenberg, T H, 1990. "Economic Instruments for Environmental Regulation," Oxford Review of Economic Policy, Oxford University Press, vol. 6(1), pages 17-33, Spring.
  4. Kornai, Janos, 1986. "The Soft Budget Constraint," Kyklos, Wiley Blackwell, vol. 39(1), pages 3-30.
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