Question

Why are command-and-control regulations less flexible than incentive-based systems?

Answer 1

Incentive based regulations are known to be more flexible as they provide polluters with both monetary incentives and flexibility in their implementation. Polluters may be motivated to use fuel efficient cars or pay more in taxes in the form of emission fees. Command and control regulations, on the other hand, are prescriptive in nature. Polluters are given a set of environmental goals that are needed to be followed in the prescribed manner. Those who fail to comply by the regulations are often penalized by the authorities while those meeting them are not rewarded. As such, the command and control approach leaves no room for flexibility as it provides no opportunity for self-improvement to the polluters. Any deviation from the prescribed regulation often leads to heavy penalties thereby putting pressure on the polluting parties to quickly adapt their operations to the new regulations. Such courses of actions do not have a lasting effect as the concerned parties may find it difficult to incorporate the new regulations into their existing systems, often leading to a decline in cost effectiveness.

Under a command and control regulation system, the environmental goal is required to be achieved in the method prescribed. It could be a technical regulation for increasing the blending of ethanol with petrol or ban on the cutting of trees. Incentive based regulations, on the other hand, set an environmental goal for polluters and then leaves the execution in their hands. Polluting parties are free to implement the goal in accordance with their convenience. Newer technologies may be employed in the long run, making environmental protection more cost effective. Thus, the prescriptive nature of the command and control system along with the penalties for deviations makes it less flexible than the incentive based system.