Using Economic Incentives to Regulate Toxic Substances

Using Economic Incentives to Regulate Toxic Substances

Using Economic Incentives to Regulate Toxic Substances

Using Economic Incentives to Regulate Toxic Substances

Excerpt

Since the mid- to late 1960s, economists at Resources for the Future and elsewhere have sounded a common theme when discussing environmental regulation. Specifically, they have recommended that, wherever possible, so-called command-and-control regulation (for instance, requirements that manufacturers install specific types of pollution control equipment) be replaced by the use of economic incentives such as the imposition of taxes on pollutant emissions or the introduction of a system of marketable permits limiting the amount of pollution that can be discharged during some specified period of time. In demonstrating the considerable advantages of incentive- based approaches -- most importantly, the cost savings they make possible -- environmental economists have almost always used as examples air and water pollutants that are discharged from easily identifiable smokestacks or outfall pipes at which continuous monitoring of emissions is at least conceivable if not already currently practiced.

There is nothing wrong with these examples at all. In fact, because much work had been done on possible incentive-based approaches to air pollution control, it was possible in the 1990 amendments to the Clean Air Act to include a dramatically innovative system of marketable "pollution allowances" to implement the required reductions in sulfur dioxide emissions from electric utility generating stations. Nevertheless, not all environmental regulatory problems are as conceptually straightforward as the canonical air or water pollution control examples in textbooks. In addition to traditional air and water pollutants, the U.S. Environmental Protection Agency (EPA) must regulate the manufacture and use of chemicals and other toxic substances that can generate risks to human health and the environment not as a result of emissions from discrete smokestacks or outfall pipes but rather from a wide variety of some-

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