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United States Experience with Economic Incentives for Pollution Control

An important new trend in environmental management is the use of voluntary programs to accomplish the goals of environmental protection. This trend involves implementing methods to cut waste, conserve materials, and improve efficiency— outcomes that increase the value added by business, improve competitiveness, and reduce pollution. Voluntary programs are an important addition to the more market-based incentive measures discussed elsewhere in this report. While the market-based programs offer financial and other closely related incentives to encourage firms and individuals to reduce pollution, voluntary programs offer less tangible rewards such as public recognition and access to information on ways to reduce pollution at low or no cost. Governments promote voluntary initiatives for a variety of reasons, including the pilot testing of new approaches and the absence of legislative authority to establish mandatory programs. As such, many voluntary programs offer unique approaches to environmental management.

Two major federal initiatives are responsible for many of the federal voluntary programs. One is pollution prevention, particularly as articulated in the Pollution Prevention Act of 1990. The second is the reduction of greenhouse gas emissions called for in the Clinton administration’s 1993 Climate Change Action Plan (CCAP). A variety of private-sector and state-led initiatives also are noteworthy.

Without other legislative authorities, the objectives of pollution prevention in the United States are pursued largely through voluntary actions by firms or agreements negotiated between government agencies and individual firms. The objective of pollution prevention is to reduce the pollution intensity of production through changes in input use, technologies, processes, management, and other parameters. Because the full range and effectiveness of these parameters cannot be well-known to regulatory agencies, governments pursue the goals of pollution prevention by providing information to firms and encouraging the firms to use production methods that are less pollution-intensive. Similarly, the Climate Change Action Plan relies on a series of voluntary initiatives that are supplemented by modest subsidy programs to induce meaningful reductions in greenhouse gas emissions.

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