The Institutional Economics of Market-Based Climate Policy

The objective of this book is to analyze the institutional barriers to implementing market-based climate policy, as well as to provide some opportunities to overcome them. The approach is that of institutional economics, with special emphasis on political transaction costs and path dependence.

Instead of rejecting the neoclassical approach, this book uses it where fruitful and shows when and why it is necessary to employ a new or neo-institutionalist approach. The result is that equity is considered next to efficiency, that the evolution and possible lock-in of both formal and informal climate institutions are studied, and that attention is paid to the politics and law of economic instruments for climate policy, including some new empirical analyses.

The research topics of this book include the set-up costs of a permit trading system, the risk that credit trading becomes locked-in, the potential legal problem of grandfathering in terms of actional subsidies under WTO law or state aid under EC law, and the changing attitudes of various European officials towards restricting the use of the Kyoto Mechanisms.

"...Woerdman presents a careful and wide-ranging analysis of the institutional challenges involoved in implementing the flexibility mechanisms associated with the Kyoto Protocol and the emerging international climate change regime...On the whole, this book provides insight into the general structure of institutional economics and it's applications to environmental policy analysis."
-Richard B. Howarth, Environmental Studies Program, Dartmouth College, in ECOLOGICAL ECONOMICS, 2005

P. Lehmann
this is an accomplished book that will be of interest to researchers in the field of climate policy and those with a more general interest in applying institutional economics to analyse environmental policies.
European Environment, 2005