Market-based Approaches to Environmental Regulation

Ted Gayer and John K. Horowitz

Foundations and Trends(R) in Microeconomics, 2006, vol. 1, issue 4, 201-326

Abstract: Economists argue that policymakers should take advantage of market principles in designing environmental regulations. Such market-based approaches – environmental taxes and cap-and-trade – use economic incentives to achieve environmental goals at lower costs. Market-based approaches have now become common due to near-unanimous advocacy by economists and early positive policy experiences. Despite this acceptance, policymakers have often merged market-based incentives onto existing non-market approaches resulting in a set of mixed policies whose economic properties are often difficult to unravel. Thus, even the most prominent market-based regulations contain many non-market elements. The authors review the economics literature on the rationale for and optimal design of environmental taxes and cap-and-trade systems. They then discuss the structure and economics of the major U.S. market-based policies.

Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:now:fntmic:0700000013

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