Over the past couple of decades there has been an increase in the support for market-based approaches to environmental protection. Many economists and environmentalists agree that tools such as standards, charges, and permits present the greatest means of controlling polluting emissions. The real debate now is over which policy should be employed, where it will be implemented and how. While each has its own particular benefits, it is tradable emission permits that offer the greatest opportunity for efficiency in control.
There are a number of benefits to a market based system. Perhaps the greatest of these is the ability to allocate costs over all sources of emission, and encouraging the widespread development and adoption of improved pollution control technologies. As firms find it more economically beneficial to invest in research and development, the cost of control technology will decrease. This reduction will allow companies to purchase equipment previously out of their fiscal reach and improve overall emission reduction. Flexibility and freedom are the keys to success with a market-based system. Firms must be given options in regards to how and where emissions will be reduced. This freedom allows investment at a level sustainable, and absorbable, by each emitter and does not create an unfair competitive advantage for some firms within an industry. Examples of such flexibility in terms of alternatives include carbon sinks and alternate power sources (wind, solar), which serve to offset pollution emitted by a firm, rather than generating an actual reduction. Another major advantage to placing the majority of power and responsibility for cleanup into the hands of market players is experience and knowledge. Government regulators do not know the actual costs of pollution abatement to a high degree of accuracy because they do not have sufficient experience with the issue and cannot access adequate knowledge.
