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Market-Based Environmental Policies

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  • Stavins, Robert N.

Abstract

Some eighty years ago, economists first proposed the use of corrective taxes to internalize environmental and other externalities. Fifty years later, the portfolio of potential economic-incentive instruments was expanded to include quantity-based mechanisms--tradable permits. Thus, economic-incentive approaches to environmental protection are clearly not a new policy idea, and over the past two decades, they have held varying degrees of prominence in environmental policy discussions. This paper summarizes U.S. experiences with such market-based policy instruments, including: pollution charges; deposit-refund systems; tradable permits; market barrier reductions; and government subsidy reductions. No particular form of government intervention, no individual policy instrument-- whether market-based or conventional--is appropriate for all environmental problems. Which instrument is best in any given situation depends upon a variety of characteristics of the environmental problem, and the social, political, and economic context in which it is being regulated. There is no policy panacea. Indeed, the real challenge for bureaucrats, elected officials, and other participants in the environmental policy process comes in analyzing and then selecting the best instrument for each situation that arises.

Suggested Citation

  • Stavins, Robert N., 1998. "Market-Based Environmental Policies," Discussion Papers 10506, Resources for the Future.
  • Handle: RePEc:ags:rffdps:10506
    DOI: 10.22004/ag.econ.10506
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    Cited by:

    1. Fletcher, Jerald, 1999. "Watershed Economics: Resource Valuation Issues," Western Region Archives 321705, Western Region - Western Extension Directors Association (WEDA).
    2. MAHENC Philippe, 2008. "Persuasive Subsidies in a Clean Environment," LERNA Working Papers 08.02.246, LERNA, University of Toulouse.
    3. Milt, Austin W. & Armsworth, Paul R., 2017. "Performance of a cap and trade system for managing environmental impacts of shale gas surface infrastructure," Ecological Economics, Elsevier, vol. 131(C), pages 399-406.
    4. Olmstead, Sheila M. & Stavins, Robert N., 2008. "Comparing Price and Non-price Approaches to Urban Water Conservation," RFF Working Paper Series dp-08-22, Resources for the Future.
    5. Bovenberg, A. Lans & Goulder, Lawrence H., 2002. "Environmental taxation and regulation," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 23, pages 1471-1545, Elsevier.
    6. A. Myrick Freeman III, 2002. "Environmental Policy Since Earth Day I: What Have We Gained?," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 125-146, Winter.
    7. Gramig, Benjamin M. & Skees, Jerry R. & Black, J. Roy, 2004. "Utilizing Contingent Claims to Improve the Management of CAFOs," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(2), pages 1-16, August.
    8. Fischer, Carolyn & Parry, Ian W. H. & Pizer, William A., 2003. "Instrument choice for environmental protection when technological innovation is endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 523-545, May.
    9. Blackman, Allen & Harrington, Winston, 1999. "The Use of Economic Incentives in Developing Countries: Lessons from International Experience with Industrial Air Pollution," Discussion Papers 10601, Resources for the Future.
    10. Fischer, Carolyn, 2008. "Emissions pricing, spillovers, and public investment in environmentally friendly technologies," Energy Economics, Elsevier, vol. 30(2), pages 487-502, March.
    11. Caginalp, Gunduz & Porter, David & Smith, Vernon, 2000. "Momentum and overreaction in experimental asset markets," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 187-204, January.
    12. Plevin, Richard J. & Delucchi, Mark A. & O’Hare, Michael, 2017. "Fuel carbon intensity standards may not mitigate climate change," Energy Policy, Elsevier, vol. 105(C), pages 93-97.
    13. Denise Trebes, 2017. "Die Einführung von marktbasierten Maßnahmen zur Emissionsbegrenzung im internationalen Flugverkehr unter besonderer Berücksichtigung der Beschlüsse des ICAO," Discussion Paper Series RECAP15 27, RECAP15, European University Viadrina, Frankfurt (Oder), revised May 2018.
    14. Paul R. Portney, 2000. "Environmental Problems and Policy: 2000-2050," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 199-206, Winter.
    15. Wadud, Zia, 2011. "Personal tradable carbon permits for road transport: Why, why not and who wins?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(10), pages 1052-1065.
    16. Hurley, Sean P. & Kliebenstein, James B., 2005. "An Examination of Additively Separable Willingness-To-Pay for Environmental Attributes: Evidence from a Pork Experiment," 2005 Annual meeting, July 24-27, Providence, RI 19370, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    17. Boisvert, Valérie, 2015. "Conservation banking mechanisms and the economization of nature: An institutional analysis," Ecosystem Services, Elsevier, vol. 15(C), pages 134-142.
    18. Cristina Ciocirlan & Bruce Yandle, 2003. "The Political Economy of Green Taxation in OECD Countries," European Journal of Law and Economics, Springer, vol. 15(3), pages 203-218, May.
    19. Burtraw, Dallas, 2000. "Innovation Under the Tradable Sulfur Dioxide Emission Permits Program in the U.S. Electricity Sector," Discussion Papers 10599, Resources for the Future.
    20. Hahn, Robert W., 2000. "The Impact of Economics on Environmental Policy," Journal of Environmental Economics and Management, Elsevier, vol. 39(3), pages 375-399, May.
    21. Slaev, Aleksandar D. & Alexander, Ernest R. & Zdravkov, Zdravko & Ivanov, Valeri & Georgieva, Snezhina, 2022. "Market tools for the provision of urban green spaces in post-socialist Sofia," Land Use Policy, Elsevier, vol. 122(C).
    22. Parry, Ian & Pizer, William & Fischer, Carolyn, 2000. "How Important is Technological Innovation in Protecting the Environment?," RFF Working Paper Series dp-00-15, Resources for the Future.
    23. Delmas, Magali & Marcus, Alfred, 2003. "Firms' Choice of Regulation Instruments to Reduce Pollution: A Tansaction Cost Approach," Research Papers 1806, Stanford University, Graduate School of Business.
    24. Skees, Jerry R. & Black, J. Roy & Gramig, Benjamin M., 2003. "CONSIDERING MARKET-BASED ALTERNATIVES TO IMPROVE THE MANAGEMENT OF CAFOs," 2003 Annual meeting, July 27-30, Montreal, Canada 22248, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    25. Moeltner, Klaus & van Kooten, G. Cornelis, 2003. "Voluntary Environmental Action and Export Destinations: The Case of Forest Certification," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(2), pages 1-14.

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    Keywords

    Environmental Economics and Policy;

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