Policy design
When environmental problems are first identified, it is often thought that we must first understand the natural mechanism through which damage occurs and then find technical solutions. However, we maintain that we must first and foremost understand the societal mechanisms underlying the problem and then also find what social or economic mechanisms can be used to solve it.
The design of policy instruments is thus an important and practical area of environmental economics. Let us take an example from climate change:
The natural science of the problem identifies increased concentrations of carbon dioxide, methane, and other gases as the cause of rising temperatures. The increased emissions of gases are in turn related to transport, combustion, heating, and other industrial activities but also for instance to agricultural and silvicultural practices. The technical solutions may include a range of solutions such as energy efficient pumps, lighting, insulation, and energy supply options such as wind, solar power, or carbon sequestration. The socioeconomic explanation for the problem is however that disposal of carbon dioxide is an unpriced resource because the atmosphere has no owner. The remedy to this will be some policy instrument such as pricing, taxation, or artificial markets for “emission rights.” It could be several instruments, including treaties, labeling, certificates, and subsidised research. Within this theme we study not only the efficiency of various instruments but also their income distribution effects and their political feasibility.
The natural science of the problem identifies increased concentrations of carbon dioxide, methane, and other gases as the cause of rising temperatures. The increased emissions of gases are in turn related to transport, combustion, heating, and other industrial activities but also for instance to agricultural and silvicultural practices. The technical solutions may include a range of solutions such as energy efficient pumps, lighting, insulation, and energy supply options such as wind, solar power, or carbon sequestration. The socioeconomic explanation for the problem is however that disposal of carbon dioxide is an unpriced resource because the atmosphere has no owner. The remedy to this will be some policy instrument such as pricing, taxation, or artificial markets for “emission rights.” It could be several instruments, including treaties, labeling, certificates, and subsidised research. Within this theme we study not only the efficiency of various instruments but also their income distribution effects and their political feasibility.
