Daniel J. Fiorino and Manjyot Ahluwalia
As environmental problems have changed, so have the range of policy tools for dealing with them. Many policy tools applied to deal with “second generation” environmental problems – such as climate change – are used to change behavior and attain policy objectives. Among them are performance standards, which define the results to be achieved without specifying the means of achieving them. For their advocates, performance standards offer a path to a more flexible, innovation-friendly, economically efficient regulation. They typically provide more transparency in the results that are achieved and allow regulated firms discretion to determine performance improvement. At the same time, they demand high monitoring, verification, and implementation capabilities from government. This chapter explores the different applications and lessons learned on the use of performance standards. While performance standards may have certain advantages over other policy tools, they may not always be the right fit for a particular environmental policy problem and often are used in combination with other policy tools, such as economic incentives and management practices. Policy research should focus on documenting the uses of performance standards and understanding how they are combined effectively with other kinds of policy tools.