Economic incentives for environmental protection: Integrating theory and practice.

The author says that for decades, economists have been extolling virtues of market-based or economic-incentive approaches to environmental protection. Both environmental taxes and marketable permits are coming of age in the policy arena. Examples include the introduction of marketable permits in the United States to control acid rain, the use of charges in Europe to limit air and water pollution, and the employment of deposit-refund schemes for products ranging from beverage containers to batteries. Although some policymakers would likely claim that the singular objective of environmental regulation is to protect environmental quality, the decision problem actually faced by policymakers is far more complex, involving trade-offs among multiple objectives. Comparisons between conventional command-and-control regulation, including technology standards and performance standards, and market-based approaches, including taxes and markets in pollution rights, have repeatedly noted that conventional regulations fail to achieve environmental objectives in the least costly manner.