Experience with Market-Based Environmental Policy Instruments

By R. Stavins. 2002

877 citations recorded by the source corpus.

Environmental policies typically combine the identification of a goal with some means to achieve that goal. This paper, prepared as a chapter draft for the forthcoming Handbook of Environmental Economics, focuses exclusively on the second component, the means--the "instruments"--of environmental policy, and considers, in particular, experience around the world with the relatively new breed of economic-incentive or market-based policy instruments. I define these instruments broadly, and consider them within four categories: pollution charges; tradable permits; market barrier reductions; and government subsidy reductions. By defining market-based instruments broadly, I cast a large net for this review of applications. As a consequence, the review is extensive. But this should not leave the impression that market-based instruments have replaced, or have come anywhere close to replacing, the conventional, command-and-control approach to environmental protection. Further, even when and where these approaches have been used in their purest form and with some success, such as in the case of tradeable-permit systems in the United States, they have not always performed as anticipated. In the final part of the paper, I ask what lessons can be learned from our experiences. In particular, I consider normative lessons for: design and implementation; analysis of prospective and adopted systems; and identification of new applications.

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/7fb5eb14c59b88d8323c8d5271990bc140c7619e

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Citations in the corpus

The most popular tax in Europe? Lessons from the Irish plastic bags levy (2007, background): “In a hierarchy of analytical attention, the literature has focused on environmental taxes in air/energy; water and waste respectively (see for example www.economicinstruments.com, OECD 2001; Stavins 2001; or Sterner 2003).”
Thirteen plus one: a comparison of global climate policy architectures (2003, background): “Individuals’ rates of time preference and expectations about future income growth (which affects future consumption opportunities) influence how individuals discount future consumption (Goulder and Stavins, 2002).”
A Dynamic Model for Construction and Demolition (C (2014, background): “According to [24], several instruments to support the role of government as regulator should be defined (Line 1).”
The problem of the commons: still unsettled after 100 years. (2010, neutral): “This is not strictly correct if one defines environmental tax systems broadly (Stavins 2003).”
National and Sub-national Policies and Institutions (2014, background): “In ‘baseline and credit’ emission trading 12 systems, polluters may create emission reduction credits (often project-based) by emitting below a 13 baseline level of emissions (Stavins, 2003).”
Cost Heterogeneity and the Potential Savings from Market-Based Policies (2002, background): “In addition, by clearly demonstrating the relationship between cost savings and different sources of underlying heterogeneityÐsuch as the slope of marginal costs, baseline emissions, and ®rm sizeÐour analytical results can provide guidance for the design of relatively cost-effective policies in the…”
Capabilities and strategic entrepreneurship in public organizations (2013, background): “…include legislation by the European Commission (Convery and Redmond, 2007; Knoll and Engels, 2012) that helped in the creation of carbon markets (Olmstead and Stavins, 2006; Stavins, 2003) and legislation aimed at promoting the use of electric cars in California (Calef and Goble, 2007; Kemp, 2005).”