Governance by green taxes: implementing clean water policies in Europe 1970–1990

Abstract

This article analyzes the use of economic instruments for environmental policy in four European countries. The study employs data from national and international sources for an ex post evaluation of the effects of economic policy instruments in the clean water programs of Denmark, France, Germany, and The Netherlands from 1970 to 1990. It is shown that among the four countries The Netherlands were the most successful in environmental terms, regarding social costs and with respect to technological innovation. On the one hand the study confirms that economic instruments can work as rather powerful stimuli for the implementation of public policies; on the other hand it provides some unexpected findings regarding the significance of the institutional context for the design and operation of market-based instruments. It is argued that institutionalized practices of public policy making influenced the specific design of the four water pollution control programs, including the design and role of economic instruments, and that the regulatory design in turn affected the degree to which the incentives provided by the economic instruments were able to influence the behavior of the polluters. The study hence points to the significance of taking into account the institutional setting of the design and operation of market-based instruments, an observation with both theoretical and practical implications.