Question

Comment critically: It is said that ‘no purely-incentive based environmental policy would be fully affective in resolving environmental resource-use issues unless they are a combination of command-and-control and incentive-based policies.’

Answer 1

--> Generally policy makers have two types of instruments available for changing consumption and production habits and to maintain sustainability in the society. They can use either traditional regulatory approach( command-and-control approach) that set specific standards across polluters, or they can use economic incentive or market-based policies that rely on market forces to correct for producer and consumer behavior.

--> Command and control approach is a technology or design standard, mandates specific control technologies or production processes that polluters must use to meet an emissions standard. The second, a performance-based standard, also requires that polluters meet an emissions standard, but allows the polluters to choose any available method to meet that standard. Performance-based standards that are technology-based, for example, do not specify a particular technology, but rather consider what available and affordable technologies can achieve when establishing a limit on emissions.

--> While traditional regulatory and voluntary approaches are valuable policy tools for some types of environmental problems, incentive based policies are becoming increasingly popular as tools for addressing a wide range of environmental issues, from acid rain to climate change. Market-based approaches or incentives provide continuous inducements, monetary and near-monetary, to encourage polluting entities to reduce releases of harmful pollutants. As a result, market-based approaches create an incentive for the private sector to incorporate pollution abatement into production or consumption decisions and to innovate in such a way as to continually search for the least costly method of abatement. A criticism of command-and-control policies is that firms are only encouraged to reduce to a regulated level. With market incentives, firms will reduce their emissions as long as it is financially valuable for them to do so, and this generally happens at a point where marginal abatement costs are equated across all regulated firms. Cost savings to firms also often translate into cost savings to customers who purchase products from regulated firms, resulting in lower overall social costs. So market based or incentive based policies are becoming increasingly reliant as well as affordable to ensure environmental resource use efficiency and sustainability.