On markets and the conditions of a profitable use of economic instruments for environmental policy in countries in transition to market

Olivier Godard

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Abstract: Economic instruments for environmental policies could reach their full potential of efficiency in economies in which all commodities are exchanged on competitive markets and agents are maximising operators, ready for catching any market opportunity and sensitive to price signals. This ideal cannot be held as a realistic picture neither of OECD countries nor economies in transition to market, even if market mechanisms have gained, to a different degree, a considerable influence on their economic life. As far as environmental issues are concerned, contexts of action are of mixed-economies type, with an important role given to public regulation and public or collective financial circuits for environmental programmes. Happily, well designed economic instruments can do quite well for improving the cost-effectiveness of such policy contexts without waiting a full development of a market economy. This gains may be derived directly (positive incentives to minimise abatement costs), or by opportunity (alleviating technological and administrative rigidities). They can also result from reforms and new institutional settings they make possible ('green tax reform', or setting up water communities) on top of their direct incentive dimension.

Keywords: Integrating Environmental Policy; Sectoral Policies (search for similar items in EconPapers)
Date: 1998-03-02
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00624095v1
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Published in J. Becvar and M. Kokine. Role of Economic Instruments in Integrating Environmental Policy with Sectoral Policies, New-York and Geneva, Economic commission for Europe, United Nations, pp.11-21, 1998

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