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Finance & Accounting
Pages 12 (3012 words)
Free markets can be a solution to environmental challenges, and can be more successful compared to no-market based approaches in solving majority of diverse environmental problems. …
In contrast, conventional approaches to regulating the environment characteristically force entities to implement the same pollution control strategies, irrespective of the relative costs to the entities. This can be expensive and equally counterproductive since, although, the approach succeeds in limiting emissions, the attainment of the results is in an unjustifiably pricey way (Oates, Paul and Albert 1989, p.1233).
Non-market-based approaches offer minimal or no incentive whatsoever to do better than what the law demands, or no room to develop and experiment with new technology and equipment that might yield enhanced improvement in pollution control (Hahn and Stavins 1991, p.2). The net result in this case is a drag on productivity and criticisms regarding regulatory inefficiency, all of which undermine commitment to attainment of environmental gains. This observation shapes the call for regulation based on free-market and pro-regulatory approach as it delivers more gains to the society as a whole. Economists criticize non-market-based approaches approach to regulation by citing its costliness and rigidity (Driesen 2003, p.137). From late 1980s, market based instruments for environmental regulation gained prominence such as emissions trading programs. ...
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