Authors: Robert Stavins
John F. Kennedy School of Government
Market-based instruments have been part of the environmental policy landscape in the United States for twenty years. Although such instruments were first introduced early in the 1970s and the surge of high-level, national interest in this set of policy tools did not commence until late in the 1980s, twenty years is a reasonable reference point to use to reflect on our experiences, and search for lessons from this set of experiments with economic-incentive approaches to public policy. In the intervening years, the concept of harnessing market forces to protect the environment seems to have evolved from being almost politically anathema to being close to politically correct. The paper summarizes a few highlights of the American experience with market-based instruments for environmental protection. It also examines normative lessons that can be learned from these experiences, and focuses on positive political economy lessons.
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