Winter 2013

The Institutional Blind Spot in Environmental Economics

Author
Dallas Burtraw
Abstract

Economic approaches are expected to achieve environmental goals at less cost than traditional regulations, but they have yet to find widespread application. One reason is the way these tools interact with existing institutions. The federalist nature of governmental authority assigns to subnational governments much of the implementation of environmental policy and primary authority for planning the infrastructure that affects environmental outcomes. The federalist structure also interacts with the choice of economic instruments; a national emissions cap erodes the additionality of actions by subnational governments. Even the flagship application of sulfur dioxide emissions trading has been outperformed by the venerable Clean Air Act, and greenhouse gas emissions in the United States are on course to be less than they would have been if Congress had frozen emissions with a cap in 2009. The widespread application of economic tools requires a stronger political theory of how they interact with governing institutions.

DALLAS BURTRAW is the Darius Gaskins Senior Fellow at Resources for the Future. His research focuses on the costs and benefits of both environmental and economic regulation in the electricity sector. His work has recently appeared in Energy Policy, Climate Change Economics, and the Journal of Environmental Economics and Management, among others.

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