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The United States Experience with Economic Incentives in Environmental Pollution Control Policy (1997)

Paper Number: EE-0216A

Document Date: 08/01/1997

Author(s): Robert C. Anderson, Andrew Q. Lohof

Subject Area(s):

Economic Incentives

Keywords:  Incentives, Pollution Fees, Charges, Taxes, Trading and Marketable Permits, Deposit-Refund Systems, Liability, Information, Subsidies, Voluntary Programs


With the current high level of interest in economic incentive mechanisms for environmental management, it is useful to examine the record to date. Over the past 20 years, federal, state, and local authorities as well as many foreign nations have enacted a diverse array of environmental incentive mechanisms. This report presents one of the most comprehensive surveys available of these mechanisms both in the United States and other countries, but attempts to go beyond enumerating them by examining several key issues:

  • How well have these instruments performed?
  • What can be learned from the record that will assist in the formulation of new mechanisms?
  • How economically efficient or cost-effective are these mechanisms in achieving the goals of environmental management?
  • What have been their environmental effects?
  • Why is it that the theoretical gains from economic instruments seldom are observed in practice and what can be done to improve this record?

This report is an update and extension of a previous 1992 report, including many additional economic incentive instruments. A later and further updated version was issued in January, 2001.

The report is divided into 11 sections as follows: 

1. Introduction
2. Government Policies on Economic Incentives
3. The Economic Efficiency and Environmental Effects of Incentive Systems
4. Fees, Charges, and Taxes
5. Deposit-Refund Systems
6. Trading Systems
7. Subsidies
8. Liability Approaches
9. Information Approaches
10. Voluntary Programs
11. Foreign Experiences with Incentive Systems
12. Conclusions

This paper is part of the  Environmental Economics Research Inventory.

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