oriented tools, which we discussed in the next section.

12.3 Market-Oriented Environmental Tools

LEARNING OBJECTIVES

By the end of this section, you will be able to:

• Show how pollution charges impact firm decisions

• Suggest other laws and regulations that could fall under pollution charges

• Explain the significance of marketable permits and property rights

• Evaluate which policies are most appropriate for various situations

Market-oriented environmental policies create incentives to allow firms some flexibility in reducing pollution.

The three main categories of market-oriented approaches to pollution control are pollution charges,

marketable permits, and better-defined property rights. All of these policy tools which we discuss, below,

address the shortcomings of command-and-control regulation—albeit in different ways.

Pollution Charges

A pollution charge is a tax imposed on the quantity of pollution that a firm emits. A pollution charge gives a
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