The Price-Standard Approach to Environmental Policy

Hans Wiesmeth
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Hans Wiesmeth: TU Dresden, Faculty of Business and Economics

Chapter Chapter 10 in Environmental Economics, 2022, pp 183-210 from Springer

Abstract: Abstract Similarly to the command-and-control policy, the price-standard approach focuses on attaining certain environmental standards – but by “motivating” the economic agents to join with their knowledge and their information. This corresponds to internalizing the environmental effects through completing the market system. The price-standard approach, by decentralizing decisions, thus “imitates” the pricemechanism to reach the standards. As known from Part II, this can be achieved by means of a Pigou tax, which can be interpreted as the “equilibrium price” on an artificial market, or by establishing a market for tradeable certificates. These tools are helpful for incorporating individual knowledge into decision-making. In addition to some theoretical issues, this chapter analyzes various practical approaches, including ecological tax reforms, the EU Emissions Trading Scheme, and the attempt to introducing a cap and trade policy in the U.S.

Date: 2022
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DOI: 10.1007/978-3-031-05929-2_10

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