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22 Harv. Envtl. L. Rev. 313 (1998)
The Choice of Regulatory Instruments in Environmental Policy

handle is hein.journals/helr22 and id is 319 raw text is: THE CHOICE OF REGULATORY INSTRUMENTS IN
Nathaniel 0. Keohane*
Richard L. Revesz**
Robert N. Stavins***
The design of environmental policy requires answers to two
central questions: (1) what is the desired level of environmental
protection?; and (2) what policy instruments should be used to
achieve this level of protection? With respect to the second ques-
tion, thirty years of positive political reality in the United States
has diverged strikingly from the recommendations of normative
economic theory. The purpose of this Article is to explain why.
Four gaps between normative theory and positive reality merit
particular attention. First, so-called command-and-control instru-
ments (such as design standards requiring a particular technology's
usage, or performance standards prescribing the maximum amount
of pollution that a source can emit)' are used to a significantly
greater degree than market-based or economic-incentive instru-
ments (principally pollution taxes or charges2 and systems of trade-
* Ph.D. student in Political Economy and Government, Harvard University. B.A.,
Yale University, 1993.
** Professor of Law, New York University School of Law. J.D., Yale Law School,
1983; M.S., Massachusetts Institute of Technology, 1980; B.S.E., Princeton University,
*** Professor of Public Policy, John F Kennedy School of Government, Harvard
University, and University Fellow, Resources for the Future. Ph.D., Harvard University,
1988; M.S., Cornell University; B.A., Northwestern University. Helpful comments on a
previous version of the Article were provided by: David Charny, Cary Coglianese, John
Ferejohn, Don Fullerton, Robert Hahn, James Hamilton, Robert Keohane, David King,
Lewis Kornhauser, Robert Lowry, Roger Noll, Kenneth Shepsle, and Richard Stewart.
Financial support was provided by the Dean's Research Fund, John F. Kennedy School
of Government, and the Filomen D'Agostino and Max E. Greenberg Research Fund at
the New York University School of Law. The authors alone are responsible for any
1. Performance standards could specify an absolute quantity of permissible emis-
sions (that is, a given quantity of emissions per unit of time), but more typically these
standards establish allowable emissions in proportional terms (that is, quantity of emis-
sions per unit of product output or per unit of a particular input). This Article uses the
term standard to refer somewhat generically to command-and-control approaches. Ex-
cept where stated otherwise, the Article refers to proportional performance standards.
2. The development of the notion of a corrective tax on pollution is generally

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