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Creating Markets for Air Pollution Control in Europe and the USA

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  • Ger Klaassen
  • Andries Nentjes

Abstract

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

Suggested Citation

  • Ger Klaassen & Andries Nentjes, 1997. "Creating Markets for Air Pollution Control in Europe and the USA," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 10(2), pages 125-146, September.
  • Handle: RePEc:kap:enreec:v:10:y:1997:i:2:p:125-146
    DOI: 10.1023/A:1026444926074
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    References listed on IDEAS

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    1. János Kornai, 2014. "The soft budget constraint," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 64(supplemen), pages 25-79, November.
    2. Tietenberg, T H, 1990. "Economic Instruments for Environmental Regulation," Oxford Review of Economic Policy, Oxford University Press, vol. 6(1), pages 17-33, Spring.
    3. 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.
    4. 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.
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    Cited by:

    1. Stavins, Robert N., 2003. "Experience with market-based environmental policy instruments," Handbook of Environmental Economics,in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 1, chapter 9, pages 355-435 Elsevier.
    2. Raúl O'Ryan & Rodrigo Bravo, 2001. "Permisos transables frente a la introducción de un combustible limpio: estudio de caso para PM-10 y NOx en Santiago, Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 28(2 Year 20), pages 267-291, December.
    3. Wolfgang,O., 2001. "Cost-effective abatement of ground-level ozone in cities and for larger regions : implications of non-monotonicity," Memorandum 30/2001, Oslo University, Department of Economics.
    4. Odd Godal & Yuri Ermoliev & Ger Klaassen & Michael Obersteiner, 2003. "Carbon Trading with Imperfectly Observable Emissions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 25(2), pages 151-169, June.
    5. Wolfgang, Ove, 2001. "Eco-Correlation in Acidification Scenarios," Memorandum 23/2001, Oslo University, Department of Economics.

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    Keywords

    emission trading; bubbles; Europe; USA; air pollution;

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