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1. INTRODUCTION

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Economic Incentives for Pollution Control


In recent years, economic instruments have achieved a prominent place among tools for managing the environment. Once mainly an academic proposition, or a revenue-raising adjunct to command and control mechanisms, market-based economic incentives are now being used as the principal instrument of control for a number of environmental issues. Nowhere is this fact more evident than in the 1990 Clean Air Act Amendments, which created many programs underpinned by market-based mechanisms. The Clean Water Act Amendments of 1992, the Safe Drinking Water Act, and a host of state and local initiatives also contain important new incentive-based initiatives. For example, solid waste disposal currently is priced on a per unit basis in more than 3,000 communities throughout the United States.

The reliance on economic instruments is growing, not only here, but in many other nations as well. Quite possibly nowhere else is interest in these mechanisms higher than in the former Soviet Union, where newly-independent nations are moving quickly from central planning to market-based approaches to improve the environment and overall economic conditions. The pace of change toward market-based mechanisms also has been rapid throughout Western Europe and other areas such as Australia, Korea, and Chile.

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