Targeting Economic Incentives for Environmental Protection (M I T PRESS SERIES ON THE REGULATION OF ECONOMIC ACTIVITY)

Economists have long argued that environmental regulation should rely less on command and control approaches that employ uniform standards, and more on economic incentives, such as emission charges and marketable emission permits. This book makes a major and original contribution to the "incentives vs. standards" debate by showing how different targets (the points at which incentives are applied) affect the ability of regulation to provide environmental protection at lowest possible cost. In particular, it argues that scholars and regulators both have paid insufficient attention to developing strategies that are sensitive to major variations across plants in the benefits of controlling emissions.

The book develops a theory that shows how the choice of target interacts with the charge or standard in determining the net benefits of regulation. This conceptual framework is applied to a case study of proposed regulations for chemical plants that emit benzene, which is a suspected cause of leukemia. It reveals that a charge targeted on exposure would perform much better than an emission standard or the type of uniform emission charge usually advocated by economists.

Albert L. Nichols is presently on leave from Harvard as Director of the Economic Analysis Division of the Office of Policy, Planning, and Evaluation, and Special Assistant to the Assistant Administrator for Policy, Planning, and Evaluation, U.S. Environmental Protection Agency, Washington, D.C. The book is eighth in the Regulation of Economic Activity Series, edited by Richard Schmalensee.

Albert L. Nichols is presently on leave from Harvard as Director of the Economic Analysis Division of the Office of Policy, Planning, and Evaluation, and Special Assistant to the Assistant Administrator for Policy, Planning, and Evaluation, U.S. Environmental Protection Agency, Washington, D.C.