IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Regulation by Prices, Quantities, or Both: A Review of Instrument Choice

  • Cameron Hepburn

Choosing appropriate policy instruments is an important part of successful regulation. Once objectives are agreed and suitable targets adopted, policy-makers can employ command-and-control regulation and/or economic instruments, and choose between fixing a price or a quantity. This paper examines the relative advantages of price, quantity, and hybrid instruments according to: their efficiency under uncertainty; the trade-off between credible commitment and flexibility; implementation; international considerations; and political economy. Various illustrations of the theory are provided, with two detailed applications to climate change and transport policy, specifically congestion and 'safety pricing'. Copyright 2006, Oxford University Press.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Article provided by Oxford University Press in its journal Oxford Review of Economic Policy.

Volume (Year): 22 (2006)
Issue (Month): 2 (Summer)
Pages: 226-247

as
in new window

Handle: RePEc:oup:oxford:v:22:y:2006:i:2:p:226-247
Contact details of provider: Web page: http://oxrep.oupjournals.org/

References listed on IDEAS
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.:

as in new window
  1. Oran R. Young, 2003. "Environment and Statecraft: The Strategy of Environmental Treaty-Making," Global Environmental Politics, MIT Press, vol. 3(1), pages 145-147, 02.
  2. Parry, Ian, 2003. "Fiscal Interactions and the Case for Carbon Taxes over Grandfathered Carbon Permits," Discussion Papers dp-03-46, Resources For the Future.
  3. Parry, Ian W. H. & Bento, Antonio, 2002. "Estimating the Welfare Effect of Congestion Taxes: The Critical Importance of Other Distortions within the Transport System," Journal of Urban Economics, Elsevier, vol. 51(2), pages 339-365, March.
  4. Robin Lindsey, 2006. "Do Economists Reach A Conclusion on Road Pricing? The Intellectual History of an Idea," Econ Journal Watch, Econ Journal Watch, vol. 3(2), pages 292-379, May.
  5. Ian W. H. Parry & Roberton C. Williams III & Lawrence H. Goulder, 1997. "When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets," NBER Working Papers 5967, National Bureau of Economic Research, Inc.
  6. Hepburn, C. & Grubb, M. & Neuhoff, K. & Matthes , F. & Tse, M., 2006. "Auctioning of EU ETS Phase II allowances: how and why?," Cambridge Working Papers in Economics 0644, Faculty of Economics, University of Cambridge.
  7. Stavins, Robert N., 1996. "Correlated Uncertainty and Policy Instrument Choice," Journal of Environmental Economics and Management, Elsevier, vol. 30(2), pages 218-232, March.
  8. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Papers 2004-W09, Economics Group, Nuffield College, University of Oxford.
  9. Joseph E. Aldy & Scott Barrett & Robert N. Stavins, 2003. "Thirteen Plus One: A Comparison of Global Climate Policy Architectures," Working Papers 2003.64, Fondazione Eni Enrico Mattei.
  10. Krupnick, Alan & Harrington, Winston & Alberini, Anna, 1998. "Overcoming Public Aversion to Congestion Pricing," Discussion Papers dp-98-27, Resources For the Future.
  11. Bovenberg, A.L. & van der Ploeg, F., 1992. "Environmental policy, public finance and the labour market in a second-best world," Discussion Paper 1992-43, Tilburg University, Center for Economic Research.
  12. repec:ner:tilbur:urn:nbn:nl:ui:12-73560 is not listed on IDEAS
  13. McKibbin, Warwick J. & Wilcoxen, Peter J., 2004. "Estimates of the costs of Kyoto: Marrakesh versus the McKibbin-Wilcoxen blueprint," Energy Policy, Elsevier, vol. 32(4), pages 467-479, March.
  14. Warwick J. McKibbin & Peter J. Wilcoxen, 2002. "The Role of Economics in Climate Change Policy," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 107-129, Spring.
  15. David Pearce, 1998. "Environmental Appraisal and Environmental Policy in the European Union," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 11(3), pages 489-501, April.
  16. Malcomson, James M, 1978. "Prices vs. Quantities: A Critical Note on the Use of Approximations," Review of Economic Studies, Wiley Blackwell, vol. 45(1), pages 203-07, February.
  17. Pizer, William A., 2002. "Combining price and quantity controls to mitigate global climate change," Journal of Public Economics, Elsevier, vol. 85(3), pages 409-434, September.
  18. Lawrence H. Goulder & Ian W. H. Parry & Roberton C. Williams III & Dallas Burtraw, 1998. "The Cost-Effectiveness of Alternative Instruments for Environmental Protection in a Second-Best Setting," NBER Working Papers 6464, National Bureau of Economic Research, Inc.
  19. Dieter Helm & Cameron Hepburn & Richard Mash, 2003. "Time Inconsistent Environmental Policy and Optimal Delegation," Economics Series Working Papers 175, University of Oxford, Department of Economics.
  20. Barrett, Scott & Stavins, Robert, 2002. "Increasing Participation and Compliance in International Climate Change Agreements," Working Paper Series rwp02-031, Harvard University, John F. Kennedy School of Government.
  21. Freixas, Xavier & Guesnerie, Roger & Tirole, Jean, 1985. "Planning under Incomplete Information and the Ratchet Effect," Review of Economic Studies, Wiley Blackwell, vol. 52(2), pages 173-91, April.
  22. A. Lans Bovenberg & Lawrence H. Goulder & Derek J. Gurney, 2005. "Efficiency Costs of Meeting Industry-Distributional Constraints Under Environmental Permits and Taxes," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 950-970, Winter.
  23. Lawrence Goulder, 1995. "Environmental taxation and the double dividend: A reader's guide," International Tax and Public Finance, Springer, vol. 2(2), pages 157-183, August.
  24. Lave, Charles & Elias, Patrick, 1994. "Did the 65 mph Speed Limit Save Lives?," University of California Transportation Center, Working Papers qt0z88b38t, University of California Transportation Center.
  25. Herman Vollebergh & Jan Vries & Paul Koutstaal, 1997. "Hybrid carbon incentive mechanisms and political acceptability," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 9(1), pages 43-63, January.
  26. Requate, Till, 2005. "Dynamic incentives by environmental policy instruments--a survey," Ecological Economics, Elsevier, vol. 54(2-3), pages 175-195, August.
  27. Aidt, Toke S., 1998. "Political internalization of economic externalities and environmental policy," Journal of Public Economics, Elsevier, vol. 69(1), pages 1-16, July.
  28. Bovenberg, A Lans & de Mooij, Ruud A, 1997. "Environmental Levies and Distortionary Taxation: Reply," American Economic Review, American Economic Association, vol. 87(1), pages 252-53, March.
  29. Adar, Zvi & Griffin, James M., 1976. "Uncertainty and the choice of pollution control instruments," Journal of Environmental Economics and Management, Elsevier, vol. 3(3), pages 178-188, October.
  30. de Bovenberg, A Lans & Mooij, Ruud A, 1994. "Environmental Levies and Distortionary Taxation," American Economic Review, American Economic Association, vol. 84(4), pages 1085-89, September.
  31. Tarui, Nori & Polasky, Stephen, 2005. "Environmental regulation with technology adoption, learning and strategic behavior," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 447-467, November.
  32. Pizer, William & Newell, Richard & Zhang, Jiangfeng, 2003. "Managing Permit Markets to Stabilize Prices," Discussion Papers dp-03-34, Resources For the Future.
  33. Verhoef, Erik T., 1999. "Time, speeds, flows and densities in static models of road traffic congestion and congestion pricing," Regional Science and Urban Economics, Elsevier, vol. 29(3), pages 341-369, May.
  34. Susan Rose-Ackerman, 1973. "Effluent Charges: A Critique," Canadian Journal of Economics, Canadian Economics Association, vol. 6(4), pages 512-28, November.
  35. Moledina, Amyaz A. & Coggins, Jay S. & Polasky, Stephen & Costello, Christopher, 2003. "Dynamic environmental policy with strategic firms: prices versus quantities," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 356-376, March.
  36. Chris Nash & Tom Sansom, 2001. "Pricing European Transport Systems: Recent Developments and Evidence from Case Studies," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 35(3), pages 363-380, September.
  37. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  38. William Nordhaus, 2005. "Life After Kyoto: Alternative Approaches to Global Warming," NBER Working Papers 11889, National Bureau of Economic Research, Inc.
  39. De Fraja, Gianni & Iossa, Elisabetta, 1998. "Price Caps and Output Floors: A Comparison of Simple Regulatory Rules," Economic Journal, Royal Economic Society, vol. 108(450), pages 1404-21, September.
  40. Pizer, William, 1997. "Prices vs. Quantities Revisited: The Case of Climate Change," Discussion Papers dp-98-02, Resources For the Future.
  41. Jan Rouwendal & Erik Verhoef & Piet Rietveld & Bert Zwart, 2002. "A Stochastic Model of Congestion Caused by Speed Differences," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 36(3), pages 407-445, September.
  42. Gene M. Grossman & Elhanan Helpman, 1992. "Protection For Sale," NBER Working Papers 4149, National Bureau of Economic Research, Inc.
  43. M. L. Weitzman, 1973. "Prices vs. Quantities," Working papers 106, Massachusetts Institute of Technology (MIT), Department of Economics.
  44. William Poole, 1970. "Optimal choice of monetary policy instruments in a simple stochastic macro model," Staff Studies 57, Board of Governors of the Federal Reserve System (U.S.).
  45. Hoel, Michael & Karp, Larry, 2001. "Taxes versus Quotas for a Stock Pollutant," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt5fx9p7kf, Department of Agricultural & Resource Economics, UC Berkeley.
  46. Dieter Helm, 2006. "Regulatory Reform, Capture, and the Regulatory Burden," Oxford Review of Economic Policy, Oxford University Press, vol. 22(2), pages 169-185, Summer.
  47. Frey, Bruno S & Jegen, Reto, 2001. " Motivation Crowding Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 15(5), pages 589-611, December.
  48. Biglaiser, Gary & Horowitz, John K & Quiggin, John, 1995. "Dynamic Pollution Regulation," Journal of Regulatory Economics, Springer, vol. 8(1), pages 33-44, July.
  49. Alfred Endres & Michael Finus, 2002. "Quotas May Beat Taxes in a Global Emission Game," International Tax and Public Finance, Springer, vol. 9(6), pages 687-707, November.
  50. Dieter Helm, 2005. "Economic Instruments and Environmental Policy," The Economic and Social Review, Economic and Social Studies, vol. 36(3), pages 205-228.
  51. Jacoby, Henry D. & Ellerman, A. Denny, 2004. "The safety valve and climate policy," Energy Policy, Elsevier, vol. 32(4), pages 481-491, March.
  52. Aidt, T.S.Toke Skovsgaard & Dutta, Jayasri, 2004. "Transitional politics: emerging incentive-based instruments in environmental regulation," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 458-479, May.
  53. Dieter Helm & Cameron Hepburn & Richard Mash, 2003. "Credible Carbon Policy," Oxford Review of Economic Policy, Oxford University Press, vol. 19(3), pages 438-450.
  54. Michael Hoel & Larry Karp, 1999. "Taxes and Quotas for a Stock Pollutant with Multiplicative Uncertainty," Working Papers 1999.15, Fondazione Eni Enrico Mattei.
  55. repec:dgr:uvatin:19970070 is not listed on IDEAS
  56. Richiardi Matteo G, 2005. "On the Virtues of the Shame Lane," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-25, May.
  57. Helfand, Gloria E, 1991. "Standards versus Standards: The Effects of Different Pollution Restrictions," American Economic Review, American Economic Association, vol. 81(3), pages 622-34, June.
  58. repec:ner:tilbur:urn:nbn:nl:ui:12-152985 is not listed on IDEAS
  59. repec:reg:rpubli:59 is not listed on IDEAS
  60. Parry Ian W. H., 1995. "Pollution Taxes and Revenue Recycling," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages S64-S77, November.
  61. Newbery, David M, 1990. "Pricing and Congestion: Economic Principles Relevant to Pricing Roads," Oxford Review of Economic Policy, Oxford University Press, vol. 6(2), pages 22-38, Summer.
  62. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production II: Tax Rules," American Economic Review, American Economic Association, vol. 61(3), pages 261-78, June.
  63. Fishelson, Gideon, 1976. "Emission control policies under uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 3(3), pages 189-197, October.
  64. Verhoef, Erik & Nijkamp, Peter & Rietveld, Piet, 1995. "The economics of regulatory parking policies: The (IM)possibilities of parking policies in traffic regulation," Transportation Research Part A: Policy and Practice, Elsevier, vol. 29(2), pages 141-156, March.
  65. Bovenberg, A.L. & Goulder, L.H., 1996. "Optimal environmental taxation in the presence of other taxes : General equilibrium analyses," Other publications TiSEM 5d4b7517-c5c8-4ef6-ab76-3, Tilburg University, School of Economics and Management.
  66. Baldursson, Fridrik M & von der Fehr, N.-H.M.Nils-Henrik M, 2004. "Price volatility and risk exposure: on market-based environmental policy instruments," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 682-704, July.
  67. Heyes, Anthony G, 1998. "Making Things Stick: Enforcement and Compliance," Oxford Review of Economic Policy, Oxford University Press, vol. 14(4), pages 50-63, Winter.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:oup:oxford:v:22:y:2006:i:2:p:226-247. 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: (Oxford University Press)

or (Christopher F. Baum)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.