International Experience with Competing
Approaches to Environmental Policy:
Results from Six Paired Cases
Winston Harrington & Richard D. Morgenstern
This chapter reports on the results of an international effort1 to compare the actual outcomes of pollution control policies using economic incentive (El) instruments with those using direct regulation or “command and control” (CAC).2 For six environmental problems, we compare the policies used by the federal government in the United States with the policies of one or more Western European countries. To the extent possible the problems and the policies were chosen so that a CAC policy on one side of the Atlantic is paired with an El policy on the other.
The six problems are: (1) SO2 emissions from utility and industrial boilers, (2) NOX emissions from utility and industrial boilers, (3) pointsource industrial water pollution, (4) phaseout of leaded gasoline, (5) phaseout of chlorofluorocarbons (CFCs) and other ozone-depleting substances (ODSs), and (6) chlorinated solvents. We identified researchers who had previously worked on these policies and commissioned them to update previous work and in a few instances prepare new case studies.
At the outset we define what we mean by El and CAC. In a strict (and perhaps trivial) sense, all environmental policies are both regulations and economic instruments. They are regulations in that they involve coercion, and they provide economic incentives because the coercion generally takes the form of economic penalties. The key difference is that in a CAC regime the quantity of pollutant discharge is specified in the regulation or by the regulatory authority. In an El regime, each firm has discretion over its pollutant discharge, but at a cost. The authority directly or indirectly controls the aggregate emissions, rather than the emissions of each firm.