Moving to Markets in Environmental Regulation

Abstract

Over the last decade, market-based incentives have become the regulatory tool of choice when trying to solve difficult environmental problems. Evidence of their dominance can be seen in recent proposals for addressing global warming (through an emissions trading scheme in the Kyoto Protocol) and for amending the Clean Air Act (to add a new emissions trading systems for smog precursors and mercury — the Bush administration's “Clear Skies” program). They are widely viewed as more efficient than traditional command and control regulation. This collection of essays takes a critical look at this question, and evaluates whether the promises of market-based regulation have been fulfilled. Contributors put forth the ideas that few regulatory instruments are actually purely market-based, or purely prescriptive, and that both approaches can be systematically undermined by insufficiently careful design and by failures of monitoring and enforcement. All in all, the essays recommend future research that no longer pits one kind of approach against the other, but instead examines their interaction and compatibility. This book should appeal to academics in environmental economics and law, along with policymakers in government agencies and advocates in non-governmental organizations.

Adaptive governance and managing resilience to natural hazards

“…Another challenge is joining up agencies and governments to willingly share power. Many studies in collaborative natural resource management and watershed management have provided evidence that cooperation at these higher levels poses one of the greatest challenges to the effectiveness of multilevel nested collaboration models (Freeman and Farber 2005;Margerum 2008). One way of overcoming this is for national governments to provide sufficient incentives (legal and economic) to ensure lower-level bodies have sufficient motivation to genuinely engage in joint governance processes…”

“…It is important to recognize that collaboration not only requires bringing actors together, but also maintaining participatory and collaborative responses over the longer term. Studies into collaborative forms of environmental management have emphasized the need for a strong ongoing governmental role, including funding and/or in-kind assistance to offset the inevitably high transaction costs that confront volunteers engaged in day-to-day decision making and action (Freeman 1997(Freeman -1998Freeman and Farber 2005;Holley 2009). Such support can be particularly vital when dealing with marginalized populations.…”

“…Agencies themselves might resist change and refuse to have different forms of coordination beyond their mandates (Freeman and Farber 2005). Accountability can be difficult to determine and measure in a flexible arrangement.…”

“…Accountability can be difficult to determine and measure in a flexible arrangement. If a new institution is formed, new layers of accountability can emerge (Freeman and Farber 2005). Duit et al (2010) warned that heavy reliance on selforganized networks in managing social-ecological systems can lead to government failure since its empirical applications are still rare.…”

Regulatory Theory

“…Similar claims were levelled at domestic systems, where the centralised and uniform nature of command-and-control regulation was increasingly criticised as costly, cumbersome, inefficient and insensitive to local contextualities (Stewart 2001;Karkkainen 2006;). This insensitivity, along with the tendency of governments to administer regulation through departments that are fragmented along ecologically arbitrary, human-defined boundaries, made it increasingly difficult for traditional regulation to address more complex environmental problems, which often involved multiple polluters and required a more holistic and integrated management approach (Freeman and Farber 2005;Durant et al 2004;Holley et al 2012: 2). Adversarial enforcement by 'stick'-waving agencies, particularly in the United States, also produced counterproductive resistance from regulated individuals and enterprises (Lazarus 2004).…”