Budgetary Policies for Environmental Improvement
International Studies in Environmental Policy Making series
Edited by J. Peter Clinch, Kai Schlegelmilch, Rolf-Ulrich Sprenger and Ursula Triebswetter
J. Peter Clinch, Kai Schlegelmilch and Ursula Triebswetter This book takes the approach of considering the root causes of environmental degradation as government failure and market failure. Government failure may be defined as government intervention that creates perverse incentives that result in environmental damage. The failure of the market to protect the environment results from a deficiency of the price mechanism such that it does not fully reflect the value of environmental assets. In a market economy, most goods are allocated by the price mechanism. The price we pay for goods and services reflects our willingness to pay for, or the value we place on, them. However, the shared nature of many environmental assets, such as the atmosphere, means they are not owned and so do not have a price; when goods are free they tend to be overused and undersupplied. The book is divided into five parts to reflect the role of budgetary policy in correcting government failure and market failure. Part I focuses on the correction of government failure by way of removing environmentally damaging subsidies. Parts II and III examine the potential for correcting market failure by way of appropriate pricing of the environment. Following the polluter pays principle, Part II examines the prospects for altering existing taxes and charges or introducing new ones in order to change the incentives faced by individuals so that they pursue the environmentally preferred course of action. Part III examines the other side of the coin, that is to say, compensating...