Abstract

http://ssrn.com/abstract=11487
 
 

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Economic Incentives for Environmental Regulation


Robert N. Stavins


Harvard University - Harvard Kennedy School (HKS); Resources for the Future; National Bureau of Economic Research (NBER)


The New Palgrave Dictionary of Economics and the Law.

Abstract:     
This paper, prepared for The New Palgrave Dictionary of Economics and the Law, provides a summary of the theory and the reality of economic-incentive approaches to environmental regulation. The paper begins with a derivation of the necessary and sufficient condition for a policy instrument to be cost effective, namely that the instrument induces all sources to abate emissions at the same marginal cost. Subsequent sections introduce economic-incentive policy instruments, including emission charges and tradeable permits, and show that these instruments, in theory, meet the specified condition. Then, six U.S. applications are described: EPA's emissions trading program; the leaded gasoline phasedown; water quality permit trading; the CFC phaseout; the SO2 allowance system; and the RECLAIM program. Reasons for the limited use of incentive-based instruments are examined, including the role of interest groups; ambivalence by regulated firms; and consumers' perspectives. Reasons for the mixed record of implemented instruments are also examined: inaccurate predictions; design problems; and limitations in firms' internal structures.

JEL Classification: Q28, Q48, Q38

Accepted Paper Series





Not Available For Download

Date posted: June 13, 1997  

Suggested Citation

Stavins, Robert N., Economic Incentives for Environmental Regulation. The New Palgrave Dictionary of Economics and the Law.. Available at SSRN: http://ssrn.com/abstract=11487

Contact Information

Robert N. Stavins (Contact Author)
Harvard University - Harvard Kennedy School (HKS) ( email )
79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-495-1820 (Phone)
617-496-3783 (Fax)
Resources for the Future
1616 P Street, NW
Washington, DC 20036
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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