Woerdman, Edwin --- "Tradeable Emission Rights" [2005] ELECD 148; in Backhaus, G. Jürgen (ed), "The Elgar Companion to Law and Economics, Second Edition" (Edward Elgar Publishing, 2005)

Book Title: The Elgar Companion to Law and Economics, Second Edition

Editor(s): Backhaus, G. Jürgen

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781845420321

Section: Chapter 24

Section Title: Tradeable Emission Rights

Author(s): Woerdman, Edwin

Number of pages: 17

Extract:

24 Tradable emission rights
Edwin Woerdman


Introduction
Traditional instruments for environmental regulation are emission standards
and taxes. An emission standard, also referred to as `command and control',
defines the maximum amount of emissions of a certain pollutant or the
maximum amount of emissions per unit of output or energy. An emission tax
sets a tax rate on emissions to achieve a predefined emission level. Although
both types of legal instruments to control environmental pollution are still
being used in various ­ but certainly not all ­ areas of environmental policy,
they have also met with increasing opposition from policy makers, managers
and scholars, with economists at the fore. Taxes and energy efficiency stan-
dards, for instance, have been criticized for being not only too costly and
rigid for firms, but also too ineffective for governments, because it is not clear
how high the tax or energy efficiency rate must be set to achieve the national
emission target. Moreover, high costs and low effectiveness endanger the
compliance of governments with internationally agreed emission levels. To
facilitate cost savings, increase flexibility and strengthen compliance, a rela-
tively new instrument is beginning to find its way into environmental law:
tradable emission rights.
Emissions trading, as it is also referred to, originates from the United
States (US), but the instrument is now also implemented in other parts of the
world such as the European Union (EU). The idea is, simply, that it is cheaper
for one polluter to reduce its emissions as required by some environmental
...