The purpose of this research is to examine the role for incentive-based (IB) regulation approaches to environmental policy in the general context of regulated industries. The researchers will focus on three main approaches to IB environmental policies: tradable permits, taxes, and deposit-refund systems. They will compare the performance of different IB approaches under different economic regulatory environments, and the effect of changing economic regulation on the performance of each instrument. They also will examine the consequences of economic regulation for the environmental performance of IB tools. To accomplish these objectives, the researchers will extend existing literature to deal with multiple compliance options, alternative regulatory influences, and intertemporal behavioral responses. The analysis will provide a basis for the design of IB instruments in regulated industries and for suggesting possible regulatory reforms to facilitate their use.