Information Technology as Agent of Change in Environmental Policy

Abstract

Increased dissatisfaction with the efficacy, efficiency and equity of the existing command-and-control system for environmental regulation has led to an increased call for new approaches to environmental problems, in particular, decentralized environmental regulation incorporating economic incentive mechanisms.

This article examines some of the structural characteristics, strengths and weaknesses of the existing system of command-and-control regulation; compares those with the features exhibited by economic incentive strategies; and identifies how such strategies might be enabled by the emergent digital information technologies.

It is the thesis of this article that information technology can act as agent of change in environmental policy, in particular, by improving information flows for identifying and monitoring environmental harms, modeling causation, and lowering transaction costs for incentive-based mechanisms as well as for traditional regulatory and common law methods.

We conclude that centralized federal resources should be focused increasingly on enhancing information flows (by investing in and disseminating environmental information and scientific research as well as technologies for identifying, monitoring and understanding environmental problems) and to lowering transaction costs for cooperative or private law resolution (by encouraging the creation of decentralized mechanisms with an emphasis, where appropriate, on letting markets exist and set prices for environmental harm, benefit and abatement).

Keywords: environment, environmental regulation, market mechanisms, economic incentive mechanisms, information technology,

JEL Classification: K32