Pollution Trading Permits as a Half-Way Solution
Policy Analysis No. 13
35 Pages Posted: 9 Apr 1998
Date Written: July 1996
The concept of marketable pollution permits (MPP) has become an increasingly popular topic of discussion for environmentalists in recent years, although the idea has been around since at least 1968, when J.H. Dales published a book on the issue. This approach was given added credibility when the Congress passed the Clean Air Act of 1990, which made the concept an official part of environmental regulatory policy. A typical solution in this regard is for the government to mandate that a certain kind of pollutant in a specified geographic area be reduced by a defined target percentage within a certain time period. Basically, such nostrums are based on a centralized command system rather than the market place. This paper applies market theories to the problem of pollution. It maintains that while market socialism (e.g., tradeable emission rights) is preferable to central commands, a system of fully protected private property rights is superior to both.
JEL Classification: K32, Q25
Suggested Citation: Suggested Citation