Environmental Regulation in a Federal System

Environmental Regulation in a Federal System

Framing Environmental Policy in the European Union

New Horizons in Environmental Economics series

Tim Jeppesen

In this important book Tim Jeppesen investigates environmental regulation in a federal system and addresses the underlying question of whether regulation should be decided centrally, by EU institutions, or de-centrally, by individual member states. Whilst simple economic reasoning presumes that transboundary externalities require central solutions and local externalities need local solutions, the author finds that the real answer is much more complicated.

Chapter 8: Commitment and Fairness in Environmental Games

Tim Jeppesen

Subjects: economics and finance, environmental economics, environment, environmental economics, environmental governance and regulation


1. INTRODUCTION It is generally believed that the presence of transboundary externalities makes a strong case for centralized decision-making and paves the way for International Environmental Agreements (IEAs). Many economic models predict, however, that IEAs will be threatened by free-riding, perhaps thereby undermining the arguments for centralized decision-making. This chapter examines free-riding behaviour in IEAs and presents two reasons why these agreements may be less vulnerable to free-riding behaviour. In 1990, one could read that the topics of environmental and resource economics were now very cold as topics for analytical investigation, and dead as research problems (Dasgupta, 1990). Dasgupta’s somewhat provocative statement implies that not much new could be developed as regards the analytical foundation of, for instance, environmental taxes. Embedded in Dasgupta’s article, however, is also the view that the neoclassical approach to environmental economics has in many ways failed to explain even the basic problems. Dasgupta’s statement was mainly directed to the partial analysis of economic instruments in environmental policy, and the statement does not include a distinction between local and international environmental problems. If this distinction is made, it may be that Dasgupta’s statement is a bit harsh. The statement may be valid for local environmental problems, but international environmental problems are surely not ‘dead’ as research problems. This is evident if one makes even a brief review of the research topics in environmental economics in the first half of the 1990s. There are two properties that distinguish international environmental problems from local environmental problems: G Global...

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