Project Abstract

Abstract
This research project explores the concept of moving towards market-based mechanisms in environmental regulation. The traditional command-and-control approach to environmental regulation has been criticized for being costly, inefficient, and inflexible. In response, many policymakers and scholars have advocated for the adoption of market-based instruments such as emissions trading systems, pollution taxes, and subsidies. These market-based approaches aim to achieve environmental goals by harnessing the power of market forces to incentivize firms to reduce their pollution levels. The research examines the theoretical foundations of market-based environmental regulation and reviews empirical studies that have evaluated the effectiveness of different market-based instruments in achieving environmental objectives. The analysis considers key factors such as cost-effectiveness, environmental performance, and regulatory complexity. By comparing the outcomes of market-based approaches with traditional regulatory methods, the research seeks to identify the strengths and weaknesses of each approach and provide insights into the conditions under which market-based instruments are most effective. Moreover, the project considers the political and institutional challenges associated with the adoption and implementation of market-based environmental regulations. It explores the role of stakeholders, interest groups, and regulatory agencies in shaping the design and implementation of market-based instruments. Additionally, the research investigates the potential distributional impacts of market-based regulations on different groups within society and assesses strategies for addressing equity concerns. Furthermore, the research project examines case studies of countries that have successfully implemented market-based environmental regulations, such as the European Union's Emissions Trading System and various carbon pricing initiatives in North America. By analyzing these real-world examples, the research aims to draw lessons for policymakers and regulators seeking to design and implement effective market-based environmental regulations. Overall, this research project contributes to the ongoing debate on the future of environmental regulation by providing a comprehensive analysis of the opportunities and challenges associated with moving towards market-based mechanisms. By synthesizing theoretical insights, empirical evidence, and case studies, the research offers valuable insights for policymakers, regulators, and scholars interested in advancing the use of market-based instruments to address environmental challenges in a more cost-effective and efficient manner.

Project Overview

INTRODUCTION

Over the last decade, market-based incentives have become the regulatory tool of choice when trying to solve difficult environmental problems. They are widely viewed as more efficient than traditional command and control regulation. This collection of essays takes a critical look at this question, evaluates whether the promises of market-based regulation have been fulfilled, and recommends future research that no longer pits one kind of approach against the other, but instead examines their interaction and compatibility.

This book had its genesis in conversations that took place over a period of months in 2002, conversations that were helped along by fine Santa Barbara County wine. Our topic was environmental regulation—in particular the long-standing debate over command and control versus market-based environmental regulation—and our discussions made us wonder: How could two scholars—one of us an economist, the other a lawyer—be so concerned about the same problem yet have such different perspectives? The literatures we drew on seemed to have little in common, and our normative frameworks seemed like ships passing in the night. Were we typical? In what ways did economists think about these regulatory design issues differently than legal scholars? Beyond the differences in approach, what did each field actually know? Now that we had some experience with market-based regulations, what did the experience tell us? In particular, if we could draw on the most interesting and recent work in both fields, what would it tell us about how well market instruments had performed, relative to prescriptive regulation, to date? To answer these questions, we invited some of the brightest minds concerned with environmental regulation, from both economics and law, to prepare papers and convene for a focused one-day workshop in Santa Barbara in August 2003. Our hope was that the whole emerging from such a dialogue would be much more than the sum of the two disciplinary parts.

The result was quite remarkable. Over the course of the very long day, the intensity never waned. The conversation was relentlessly interesting and truly cross-disciplinary. There were fascinating moments of translation and synergy, agreement and disagreement. The interchange frequently surprised the group and led to questions and issues we had not . . .