IDEAS home Printed from
   My bibliography  Save this article

Toward enhancement of the contribution of theory to environmental policy


  • William Baumol


Theory can be helpful to policy makers by pointing out surprising relationships unlikely to be recognized by unaided common sense; by noting significant exeptions to principles widely accepted; and by offering generalizations of its own. The paper argues that theorists may not have done enough of the first two and may have overstressed the last, giving insufficient warnings of pitfalls. Examples of each of the three are provided. The first is illustrated by a theorem which shows that any new energy source, such as gasohol, which is supplied only because of a subsidy, prospectively uses up more energy than it creates. The important exception application is illustrated by showing that subsidies which reward reduced emissions by the firm tend to increase pollution by the industry. Finally, the paper discusses inadvertent bias in the empirical evidence reasserting the superior performance of fiscal incentives for reduced environmental damage as compared to direct controls, thus casting doubt on the allegedly universal superiority of incentives. Copyright Kluwer Academic Publishers 1991

Suggested Citation

  • William Baumol, 1991. "Toward enhancement of the contribution of theory to environmental policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 1(4), pages 333-352, December.
  • Handle: RePEc:kap:enreec:v:1:y:1991:i:4:p:333-352
    DOI: 10.1007/BF00377491

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, March.
    2. Baumol, William J & Wolff, Edward N, 1981. "Subsidies to New Energy," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 891-913, October.
    3. Plott, Charles R, 1983. "Externalities and Corrective Policies in Experimental Markets," Economic Journal, Royal Economic Society, vol. 93(369), pages 106-127, March.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Labandeira-Villot, Xavier, 1996. "Market instruments and the control of acid rain damage : Effects of a sulphur tax on the Spanish electricity generating industry," Energy Policy, Elsevier, vol. 24(9), pages 841-854, September.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:enreec:v:1:y:1991:i:4:p:333-352. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.