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...

Policy makers and analysts are often faced with situations where it is unclear whether market-based instruments hold real promise of reducing costs, relative to conventional uniform standards. We develop analytic expressions that can be employed with modest amounts of information to estimate the...