Assessing Environmental Policy Instruments

In this chapter, the main instruments of environmental policyEnvironmental policy are considered. In particular, the advantages that price-based instrumentsPrice-based instruments, i.e., emissionEmissions taxes and cap-and-tradeCap-and-trade systems, are expected to have over command-and-control approaches are described and problems that may occur with emissionEmissions pricing are illuminated. It is also explained why—despite their basic advantages—price-based instruments have often to be complemented by other measures. The chapter moreover considers the distributional effectsDistributional effects of environmental policiesEnvironmental policy and aspects of their political feasibility—as well as practical experiences that have been with the application of environmental policyEnvironmental policy instruments.