Developments in the Use of Economic Instruments in OECD Countries

Abstract

For the period 1987-1993, developments in the environmental policies of OECD countries with respect to the use of economic instruments are compared and the differences analyzed. The focus is on applications in the field of air pollution policies. The comparison is made on the basis of two surveys. To complete the descriptive part, a brief survey is also presented of currently discussed and recently introduced economic instruments. A description of economic instruments as such and a review of rationales for employing economic and financial incentives precede this analysis. The analysis shows that the use of economic instruments has indeed increased since 1987, but the development has not been spectacular. Possible explanations for this are presented. Also, some types of instrument have advanced more than others and the changes differ from one set of countries to another. Product charges (including air pollution-related ones) have become more widely used, especially in Scandinavian countries. Moreover, growing attention is being paid to the use of economic instruments at the international level. The incentive impacts of economic (and other) instruments appear to have received relatively little empirical attention, even though these are an important policy-relevant feature in instrument choice.