Instrument Mixes for Environmental Policy

image of Instrument Mixes for Environmental Policy

What are the impacts on environmental effectiveness and economic efficiency of using an “instrument mix”, rather than a single instrument, to address a given environmental problem? What are the main arguments for using such instrument mixes, and are the instrument mixes currently in use actually well designed in response to these arguments? These are the main questions addressed in this report, which is based on a series of in-depth case studies. The case studies analyse instrument mixes applied in OECD countries to address household waste, non-point sources of water pollution in agriculture, residential energy efficiency, regional air pollution and emissions to air of mercury.

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Analysis of Current Use of Instrument Mixes

This chapter demonstrates that many of the instrument mixes analysed find support in theoretical arguments for using instruments in combination, e.g. by reflecting the multi-aspect character of many of the environmental issues addressed. Many instrument mixes are also applied to reduce information problems and other “failures” in the markets in which environmental policy operate, and in several cases one instrument enhances the functioning of other instruments applied. However, in a number of situations, the use of overlapping instruments reduces the economic efficiency of the mix, while in other cases, the lack of some instruments can jeopardise environmental effectiveness and/or economic efficiency.

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