Markal for Policy Instrument Assessment

Since the early nineties, attention has been given to the possible effects of subsidies and tax incentives (including low preferential statutory tax rates). Most recently OECD concluded a programme on subsidies and the environment with the publication of Improving the Environment through Reducing Subsidies (OECD 1998). This and other studies suggest a significant effect of such support measures on greenhouse gas (GHG) emissions. It was felt, however, that these studies did not cover in sufficient detail the effects of changes in substance flows and materials substitution on both, GHG emissions and other objectives of environmental policy, such as waste minimisation. In addition, these studies did not explore the choice between pricing instruments (taxes or tradable permits) or regulatory instruments (permitting and negotiated agreements) in much detail.