The Case of Markets versus Standards for Pollution Policy

Market-based incentives (MBI) for pollution control (pollution taxes, subsidies for abatement, and marketable emissions permits) have gained attention and increased in use in recent years, due to their potential for achieving the same emissions goals as traditional "command and control" (CAC) (also known as standards) approaches at lower cost. This article reviews the evidence of the superiority of MBI relative to CAC. While MBI will achieve a specified emissions level at lower cost, their ability to achieve the same environmental effectiveness is not always certain, and the "commodification" of the environment associated with MBI raises ethical concerns among some.