Transitional politics: Emerging incentive-based instruments in environmental regulation

Arbeitspapier

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 instrument choice that can be used to explain this trend. We imagine a democratic society that seeks to lower the level of pollution from industrial production to a pre-specified target. The target can be implemented by one of three instruments: [Q]: quantity controls; [P]: tradeable permits; and [T]: pollution taxes. We characterize political equilibrium as an evolving policy compromise between special-interests, representing polluters, and the electorate. We identify three factors that play a key role in explaining the recent trend in instrument choice: increasingly ambitious environmental targets, learning-by-doing driven reductions in transaction costs associated with permit trading, and (abatement) cost-reducing technological progress.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Nota di Lavoro ; No. 78.2001

Classification and Topics

• Classification: Wirtschaft ; Positive Analysis of Policy Formulation and Implementation ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; Renewable Resources and Conservation: Government Policy
• Subject: Instrument choice ; political economy ; environmental policy ; Umweltpolitik ; Umweltstandard ; Ökosteuer ; Emissionshandel ; Neue politische Ökonomie ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Aidt, Toke S. ; Dutta, Jayasri
• Event: Veröffentlichung
• (who): Fondazione Eni Enrico Mattei (FEEM)
• (where): Milano
• (when): 2001

Further information

• Handle: http://hdl.handle.net/10419/155241
• Last update: 10.03.2025, 11:45 AM CET