Environmental Markets

Abstract

Market-based (or economic incentive) control strategies have been used in a variety of environmental contexts for over 25 years. Due to political and economic theories, their use has been proliferating in more and more contexts. This chapter discusses the underlying theory of using markets or environmental incentives as a method for controlling environmental pollution or enhancing environmental amenities, substantive areas in which environmental markets are currently used or in which environmental markets can be expected, and concludes with a discussion of environmental protection, economic incentives, and markets that suggest when such schemes are useful and what limits exist to their use.

Keywords: Environmental markets, market-based control strategies, economic incentives, cap-and-trade, environmental trading systems, clean air act market-based trading systems, acid rain control strategies, Kyoto Protocol, wetlands banking, ecosystem services, ecosystem stacking, tragedy of the commons

JEL Classification: G13, G14, G18, H32, K11, K19, K20, K21, K23, K32, L10, Q20, Q24, Q25, Q26, Q28