IDEAS home Printed from
   My bibliography  Save this paper

Are cap-and-trade programs more environmentally effective than conventional regulation?


  • A. Denny Ellerman


Market-based instruments (MBI’s) are advocated because of their presumed lower economic cost in comparison with conventional regulatory instruments. The environmental effectiveness of the MBI is typically assumed to be the same as that of the conventional alternative (Crocker, 1966; Dales, 1968; Montgomery, 1972). Recent experience with cap-and-trade systems has confirmed the economic advantages of MBI’s (Ellerman et al., 2000; Carlson et al., 2000; Ellerman et al., 2003) and failed to find a degradation of environmental performance (Burtraw and Mansur, 1999; Swift, 2000). As a result, MBI’s, and especially cap-and-trade systems, have become widely accepted in the policy community. Recognizing this circumstance, opponents of the use of MBIs tend to attack the assumption that the environmental performance is equal (Clear the Air, 2002; Moore, 2002). Their argument is that, while the economic performance may be better, the environmental performance is worse, and that the increased environmental damages outweigh the savings in abatement cost.

Suggested Citation

  • A. Denny Ellerman, 2003. "Are cap-and-trade programs more environmentally effective than conventional regulation?," Working Papers 0315, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  • Handle: RePEc:mee:wpaper:0315

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Access and download statistics


    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:mee:wpaper:0315. 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: (Sharmila Ganguly). 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.

    We have no references for this item. You can help adding them by using 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.