Economic Instruments for Pollution Control and Prevention – A Brief Overview

The key benefit of economic (or fiscal) instruments is that they would allow a given pollution target to be met for lower overall cost than traditional regulations a considerable advantage given the perceived high financial burden of regulatory compliance. There are other benefits too. Economic instruments grant firms and individuals greater autonomy in deciding how to meet targets; they create ongoing incentives for firms to design new and improved abatement technologies ensuring that pollution control becomes ever cheaper; they reduce the information burden on regulators; and they provide potential revenue sources for state or federal governments. In addition, economic instruments may provide greater flexibility in dealing with smaller and diffuse emissions sources which collectively contribute large amounts of pollution, but which until now have been largely ignored in favor of controlling the pollution from more obvious sources.