Working Paper: NBER ID: w13574
Authors: Robert N. Stavins
Abstract: This article provides an overview of the economics of environmental policy, including the setting of goals and targets, notably the Kaldor-Hicks criterion and the related method of assessment known as benefit-cost analysis. Also reviewed are the means of environmental policy, that is, the choice of specific policy instruments, featuring an examination of potential criteria for assessing alternative instruments, with focus on cost-effectiveness. The theoretical foundations and experiential highlights of individual instruments are reviewed, including conventional command-and-control mechanisms and market-based instruments.
Keywords: environmental policy; benefit-cost analysis; externalities; Kaldor-Hicks criterion
JEL Codes: K32; Q28; Q38; Q48
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Government intervention (O25) | pollution control (Q52) |
| Pigovian tax (H23) | efficient level of pollution control (Q52) |
| Policies producing net benefits (H43) | welfare improvement (I38) |
| Market-based instruments (D47) | better outcomes (I14) |
| Benefit-cost analysis (H43) | policy outcomes (D78) |