Market-Based Approaches to Environmental Protection

This chapter reviews alternative market-based approaches and how they might apply to a program aimed at reducing or eliminating the use of toxic chemicals. Initially, environmental protection programs were based on a “command-and-control” strategy. In command-and-control environmental protection, the overall limit on pollution is determined and allocated to each discharger through individual permits. A wider application of the cap-and-trade approach is the United States Environmental Protection Agency acid rain program, which allocates emissions of oxides of nitrogen and sulfur that are combined with water to produce nitric and sulfuric acid across the dischargers in the United States. In addition, a country that introduces national policies to protect the environment will be more competitive when international environmental regulation is implemented. Acid rain is a national or regional problem caused by widespread dispersion of acid-forming gases by a relatively small number of coal-fired electricity-generating stations and metal refineries.