Market-Based Instruments: An Environmental Policy Option Supportive of Free Trade
Abstract
Environmental policy and international trade are
generally perceived as inharmonious, however research
indicates that strong environmental policy need not detract
from trade-induced economic gains. Certain market-based
instruments, such as tradable permits for the rights to
pollute, are currently being explored through the Kyoto
Protocol as an environmental policy option on a global
scale. The advantages of market-based instruments include
increased efficiency, which translates to decreased costs
for both producers and consumers compared to the
traditional "command-and-control" instruments. The creation
and implementation of more efficient environmental policy
will make the simultaneous pursuit of environmental
preservation and free trade not only possible, but also
mutually supportive.