The Use of Economic Incentives in Developing Countries: Lessons from International Experience with Industrial Air Pollution

To what extent should developing countries eschew conventional command and control environmental regulation that is increasingly seen as inefficient and rely instead on economic incentives? This paper addresses this question as it pertains to industrial air pollution. The paper discusses the advantages and disadvantages of various economic incentive instruments, presents in-depth case studies of their application in Sweden, the United States, China, and Poland, and proposes a number of policy guidelines. We argue that both design deficiencies and pervasive constraints on monitoring and enforcement impede the effectiveness of economic instruments in developing countries. The latter are difficult to rectify, at least in the medium term. As a result, tradable permits are generally not practical. Suitably modified however, emissions fee policies probably are appropriate. They can provide a foundation for a transition to an effective economic incentive system, and can raise much needed revenue for environmental projects and programs. In addition, if political opposition can be overcome, environmental taxes constitute a second-best but potentially effective pollution control instrument.


Issue Date:
1999
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/10601
Total Pages:
37
JEL Codes:
Q25; Q28
Series Statement:
Discussion Paper 99-39




 Record created 2017-04-01, last modified 2017-08-23

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