The success of the Clean Air Act's emissions trading “experiment” for sulfur dioxide has led many policy analysts to recommend that Congress summarily abandon command-and-control in favor of the “next generation” of efficiency-enhancing controls (Enterprise for the Environment 1998; Chertow and Esty 1997). Their recommendations typically assert or imply that command-and-control regimes are not only less efficient than tradeable permit systems (as well as effluent taxes) but inherently inefficient, producing more social costs than benefits (see Tietenberg 1985, p. 38; Stewart 1996, p. 587). But this is not always the case.

This chapter shows that pure public property/regulatory regimes, such as technology-based command-and-control measures, can be (and have been) efficient. Indeed, depending on institutional and technological circumstances, they can be more efficient than tradeable permit programs and other mixed property/regulatory regimes. Consequently, there is reason to be skeptical of – even to oppose – recommendations to scrap all command-and-control programs in favor of tradeable permits or effluent taxes.

Institutional and technological determinants of instrument choice for environmental protection

The Clean Air Act's “experiment” with emissions trading confirms the potential environmental and economic benefits of tradeable permitting (mixed property/regulatory regimes) over traditional command-and-control (public property/regulatory regimes). Although the volume of trading under the acid rain program has been lower than expected (see Bohi 1994), the program has produced greater than expected emissions reductions at lower than expected cost – certainly at far lower cost than some alternative regulatory regime of command-and-control.