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Environmental policy, government, and the market

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  • Cameron Hepburn

Abstract

Environmental policy is made in a context of both market failure and government failure. On the one hand, leaving environmental protection to the free market, relying on notions of corporate social responsibility and altruistic consumer and shareholder preferences, will not deliver optimal results. On the other hand, nationalizing the delivery of environmental protection is likely to fail because nation states rarely have the depth and quality of information required to instruct all the relevant agents to make appropriate decisions. Thus, as for many areas of policy, appropriate models of environmental intervention will lie between these two extremes. While it is impossible to specify general rules concerning the precise form of intervention, in part because the type of intervention depends upon value judgements, this paper sets out some of the considerations that are particular to environmental policy, and explores several principles for policy design, including information, coordination, and principal--agent problems, with a particular focus on the international context. Copyright 2010, Oxford University Press.

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  • Cameron Hepburn, 2010. "Environmental policy, government, and the market," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 26(2), pages 117-136, Summer.
    • Handle: RePEc:oup:oxford:v:26:y:2010:i:2:p:117-136
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    File URL: http://hdl.handle.net/10.1093/oxrep/grq016
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    2. Alessio D’Amato & Roberta Sestini, 2023. "Buying or performing abatement: environmental policy and welfare when commitment is (not) credible," SEEDS Working Papers 0423, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Nov 2023.
    3. Song, Chun & Sesmero, Juan Pablo, 2017. "Tenure Stability and Environmental Performance: a Study of Chinese Cities," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258033, Agricultural and Applied Economics Association.
    4. Caiyun Lin & Shibao Lu & Xuyang Su & Chuanhao Wen, 2024. "RETRACTED ARTICLE: Can the greening of the tax system improve enterprises’ ESG performance? Evidence from China," Economic Change and Restructuring, Springer, vol. 57(3), pages 1-32, June.
    5. Shafiu Ibrahim Abdullahi, 2019. "Financing Afforestation in the Organization of Islamic Cooperation Countries: What Role for Islamic Economics and Finance? تمويل استزراع الغابات في دول منظمة التعاون الإسلامي: ما دور الاقتصاد والتمويل," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 32(2), pages 161-177, January.
    6. Basu, Parantap & Jamasb, Tooraj & Sen, Anupama, 2024. "Trilemma or Trinity? The nexus of economic growth, circular economy and net zero," Energy Economics, Elsevier, vol. 138(C).
    7. Dominika Czyz & Karolina Safarzynska, 2023. "Catastrophic Damages and the Optimal Carbon Tax Under Loss Aversion," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 85(2), pages 303-340, June.
    8. Yves Steinebach, 2022. "Instrument choice, implementation structures, and the effectiveness of environmental policies: A cross‐national analysis," Regulation & Governance, John Wiley & Sons, vol. 16(1), pages 225-242, January.
    9. Burtraw, Dallas & Woerman, Matt, 2013. "Economic ideas for a complex climate policy regime," Energy Economics, Elsevier, vol. 40(S1), pages 24-31.
    10. Dong-Xiao Yang & Lei Yang & Xiao-Ling Chen & Chan Wang & Pu-Yan Nie, 2023. "Research on credit pricing mechanism in dual-credit policy: is the government in charge or is the market in charge?," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(2), pages 1561-1581, February.
    11. Wei-Ta Fang & Yi-Te Chiang & Eric Ng & Jen-Chieh Lo, 2019. "Using the Norm Activation Model to Predict the Pro-Environmental Behaviors of Public Servants at the Central and Local Governments in Taiwan," Sustainability, MDPI, vol. 11(13), pages 1-20, July.
    12. Matt Andrews, 2014. "An Ends-Means Approach to Looking at Governance," CID Working Papers 281, Center for International Development at Harvard University.
    13. Rosetta Lombardo, 2011. "The Role Of Corporate Social Responsibility In Consumer Behaviour: An Unresolved Paradox," Working Papers 201115, Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF.
    14. Martin, Paul V., 2018. "Managing the risks of ecosystem services markets," Ecosystem Services, Elsevier, vol. 29(PB), pages 404-410.
    15. Tao, Yunqing & Wang, Dianjie & Ye, Yongwei & Wu, Haitao & Zhang, Yao, 2023. "The role of public environmental concern on corporate social responsibility: Evidence from search index of web users," Energy Economics, Elsevier, vol. 126(C).
    16. Okereke, Chukwumerije & McDaniels, Devin, 2012. "To what extent are EU steel companies susceptible to competitive loss due to climate policy?," Energy Policy, Elsevier, vol. 46(C), pages 203-215.
    17. Dong, Weijia & Dong, Xinyang & Lv, Xin, 2022. "How does ownership structure affect corporate environmental responsibility? Evidence from the manufacturing sector in China," Energy Economics, Elsevier, vol. 112(C).
    18. George Blumberg & Maurizio Sibilla, 2023. "A Carbon Accounting and Trading Platform for the uk Construction Industry," Energies, MDPI, vol. 16(4), pages 1-20, February.
    19. Wolfgang Buchholz & Jonas Frank & Hans-Dieter Karl & Johannes Pfeiffer & Karen Pittel & Ursula Triebswetter & Jochen Habermann & Wolfgang Mauch & Thomas Staudacher, 2012. "Die Zukunft der Energiemärkte: Ökonomische Analyse und Bewertung von Potenzialen und Handlungsmöglichkeiten," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 57.
    20. Andrews, Matt, 2014. "An Ends-Means Approach to Looking at Governance," Working Paper Series rwp14-022, Harvard University, John F. Kennedy School of Government.
    21. Cojoianu, Theodor F. & Clark, Gordon L. & Hoepner, Andreas G.F. & Veneri, Paolo & Wójcik, Dariusz, 2020. "Entrepreneurs for a low carbon world: How environmental knowledge and policy shape the creation and financing of green start-ups," Research Policy, Elsevier, vol. 49(6).
    22. Joas, Fabian & Pahle, Michael & Flachsland, Christian & Joas, Amani, 2016. "Which goals are driving the Energiewende? Making sense of the German Energy Transformation," Energy Policy, Elsevier, vol. 95(C), pages 42-51.
    23. Yunhee Kim, 2015. "Environmental, Sustainable Behaviors and Innovation of Firms During the Financial Crisis," Business Strategy and the Environment, Wiley Blackwell, vol. 24(1), pages 58-72, January.
    24. Guta, Dawit & Jara, Jose & Adhikari, Narayan & Qiu, Chen & Gaur, Varun & Mirzabaev, Alisher, 2015. "Decentralized energy in Water-Energy-Food Security Nexus in Developing Countries: Case Studies on Successes and Failures," Discussion Papers 207713, University of Bonn, Center for Development Research (ZEF).
    25. Egüez, Alejandro, 2020. "Energy Efficiency, District Heating and Waste Management," Umeå Economic Studies 979, Umeå University, Department of Economics.

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