Journal
JOURNAL OF ENVIRONMENTAL ECONOMICS AND MANAGEMENT
Volume 47, Issue 3, Pages 458-479Publisher
ACADEMIC PRESS INC ELSEVIER SCIENCE
DOI: 10.1016/j.jeem.2003.07.002
Keywords
instrument choice; political economy; environmental policy
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This paper proposes a positive theory of environmental instrument choice. We study a democratic society that seeks to lower the level of pollution from industrial sources to a pre-specified target. The target can be implemented by one of three instruments: [S]: uniform emission standards; [P]: tradeable permits; and [T]: emission taxes. The conflict of interest between special-interests, representing polluters, and the electorate is resolved by an elected politician. We characterize when each of the three policy instruments is chosen in political equilibrium and show that the transition, observed in many countries, from [S] to either [P] or [T] can be. understood as a natural consequence of increasingly ambitious environmental targets. (C) 2003 Elsevier Inc. All rights reserved.
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