Environmental Policy in Transition Economies: Will Pollution Charges Work?

Abstract

Many economists and analysts claim that extended use of pollution charges in environmental policy will have substantial efficiency advantages in transition economies. This article challenges this view and argues instead that the proposed policy presumes the existence of an already-functioning institutional framework. By focusing on the Russian case, the article discusses a number of reasons why it is difficult to implement pollution charges in an economic system in which Communist behavioral patterns and jurisdictions are still prevalent. The article identifies a number of institutional obstacles related both to enterprise behavior and to environmental regulation and enforcement. These obstacles suggest that it is appropriate to view environmental problems in transition economies primarily as the results of institutional inertia in the economic and political systems. The article ends by discussing alternative ways of controlling pollution in Russia and stresses the importance of improving the legitimacy and basic trust for environmental legislation.