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...

This paper reviews lessons from the two decades of experience in the United States with market-based instruments for environmental protection. Normative lessons are considered for design and implementation, for analysis of prospective and adopted systems, and for identification of new...

Environmental policies typically combine the identification of a goal with some means to achieve that goal. This chapter focuses exclusively on the second component, the means – the “instruments” – of environmental policy, and considers, in particular, experience around the world with...

Some eighty years ago, economists first proposed the use of corrective taxes to internalize environmental and other externalities. Fifty years later, the portfolio of potential economic-incentive instruments was expanded to include quantity-based mechanisms -- tradeable permits. Thus,...

Policy makers and policy analysts in the environmental realm are frequently faced with situations where it is unclear whether market-based instruments hold real promise of reducing costs, relative to conventional command-and-control approaches. We develop some simple rules-of-thumb that can be...

This paper examines the extent to which income taxation interferes with cap-and-trade environmental regulation, and reaches two conclusions. First, within a single tax period, imposing an income tax will not undermine the cost-effectiveness of cap-and-trade regulation. Second, taxes may distort...

In the past 15 years, incentive-based environmental policy instruments, such as pollution taxes and tradeable pollution permits, have become an important supplement to tradition command-and-control instruments in Europe and the U.S. This paper proposes a positive theory of environmental...

In June 2018, an agreement between key EU institutions – the Commission, the European Parliament, and the European Council – was reached after a long-lasting discourse over the 2030 EU climate and energy policy package. This paper offers a comprehensive assessment of the EU package, with its...

This article constitutes a new contribution to the analysis of overlapping instruments to cover the same emission sources. Using both an analytical and a numerical model, we show that when the risk that the CO2 price drops to zero and the political unavailability of a CO2 tax (at least in the...

The effects of two environmental policy options for the reduction of pollution emissions, i.e. taxes and non-tradable quotas, are analyzed. In contrast to the prior literature this work endogenously takes into account the level of emissions before and after the adoption of the new environmental...