Instrument Mixes for Environmental Policy: How Many Stones Should be Used to Kill a Bird?

Abstract

How many instruments should be used to address a particular environmental problem? That is the question this article addresses. According to the "Tinbergen rule," one instrument per target is needed. The existence of any non-environmental market failures affecting the environmental problem at hand will also require one additional instrument per market failure. However, detailed case studies reveal that it is no simple task to count neither the number of relevant targets, nor the number of instruments applied. While there are good reasons to apply several instruments in combination to address a given environmental problem (non-environmental market failures, "multi-aspect" character of many problems, cases where one instrument underpin the use of other instruments, the need to address non-environmental policy concerns, etc.), it is sometimes difficult to see that such arguments have been the main explanations for the instrument mixes in practical use. There are also cases where the environmental effectiveness or economic efficiency of an instrument mix is hampered by lacking instruments.This article draws heavily on work undertaken together with my colleague Ysé Serret at OECD. I am also grateful for this helpful comments from my colleagues Jean-Philippe Barde, Tom Jones and Henrik Harjula, and from Henk Folmer, Tom Tietenberg and an anonymous referee.The opinions expressed in the article are, however, my own and do not necessarily reflect the views of the OECD or its member countries.

The Use of Economic Instruments in Nordic Environmental Policy 2006–2009

“…The second market failure is the limited information (or education of people supposed to digest such information) that hinders people in making informed choices where the external effects are part of the basis for decision-making. This was as also found in Braathen (2007) and OECD (2007). These two market failures are jointly ameliorating in the language of B&S (2007).…”

“…Thus, information activities could contribute to strengthen the impacts of the taxes and subsidies. Several investigations show that information activities in combination with taxes increase the impacts (elasticity) of the taxes, among other cases in the energy efficiency policy, see OECD (2007) and Braathen (2007).…”

Combining Policies for Renewable Energy: Is the Whole Less Than the Sum of Its Parts?

“…In an aptly titled IRERE article, "Instrument Mixes for Environmental Policy: How Many Stones Should Be Used to Kill a Bird?" Braathen (2007) reviews the common practice of using multiple policy instruments for environmental purposes from household waste management to energy efficiency and derives some principles for determining appropriate environmental policy mixes. For renewable energy policies, then, the analogous question is how many "birds" are there to "kill"?…”

Marginal abatement cost curves and the optimal timing of mitigation measures

“…Also, objectives need to be updated when new information is available (Rodrik, 2008); for instance if one measure turns out to be more expensive, or turns out to save less GHG, than expected. Finally, if sectoral policies overlap, they may come with additional costs (Braathen, 2007;Böhringer and Rosendahl, 2010) or benefits (Fischer and Preonas, 2010;Lecuyer and Quirion, 2013) that should be analyzed carefully and taken into account.…”