For many industrial firms and businesses the environmental problem has been not one of environmental degradation but rather one of increasing governmental constraints on their activities. Economic instruments were viewed as placing additional costs on their operations that they would prefer to avoid.

Economists who promote economic instruments have sought to enrol industry by emphasising the flexibility of economic instruments, the fact that they give firms a choice and allow them to make their own decisions. Economists juxtapose economic instruments against legislative instruments which dictate how firms should behave; hence the term applied to legislative instruments "command-and-control". Stavins and Whitehead (1992, 7) characterise economic instruments as approaches "that require less bureaucracy and governmental intrusion into business and household decisions" whilst "market-based incentives provide freedom of choice for businesses and consumers to determine the best way to reduce pollution" (10). Grabosky (1993) argues that market-based instruments are more likely to be perceived to be legitimate by industry, and therefore less likely to encounter resistance, than "command-and-control" methods because market-based instruments accord "industry greater decision-making autonomy in the resolution of its problems."

Schelling (1983, 7) maintains that "the essence of a pricing system is that it leaves the decision to pay or not to pay to whoever confronts the price." Although a government agency may set a pollution charge, the decision about whether to pay it or not is a decentralised one, that is made in the market place. This contrasts with a fine that must be paid and is a way of enforcing legal measures. He argues that under a charge system individual firms are the ones that make the decisions rather than the regulator.

As public pressure has mounted to tighten up and increase regulation this argument has been more compelling. Industry would prefer to retain the choice of discharging wastes into the environment, even if it has to pay for the privilege. Charges make the costs explicit and place a ceiling on them (Repetto et. al. 1992, 7) whereas legislation has the potential to impose clean-up costs of unknown magnitudes. Additionally, environmental taxes and charges are being promoted by economists and others as a way of replacing other charges and taxes that firms would normally have to pay anyway (Jacobs 1993, 9; Postel 1991, 31; Repetto et al, 1992).

Businesses have also come to prefer economic instruments to legislative instruments as more environmentally-conscious citizens look for someone to blame. Economic instruments remove their polluting activity from the 'criminal sphere' and legitimises it. Unlike a fine that is imposed for doing something wrong, a charge or a tax indicates that the activity is official and done with approval. Schelling (1983, 6-7) is quite adamant that this is how economic instruments should be viewed.

It is typical of fees and charges... that no moral or legal prejudice attaches to the fee itself of the action on which or for which it is paid. The behaviour is discretionary. The fee offers an option... a fee entitles one to what one has paid for...It is not levied in anger, it does not tarnish one's record...

The permission granted to go on doing that activity on a continuing basis also reinforces the perception that the activity cannot be wrong.

The environmental crisis of the 1980s brought with it calls for a new environmental ethic and changes in moral values that governed the human-nature relationship. At risk was the possibility that the profit-motive itself could be questioned and the corporations responsible for much pollution labelled as villains. Schultz (quoted in Kelman 1983, 297) identified this possibility early on when he said that what was needed for social welfare was "the identification, not of villains and heroes but of the defects in the incentive system that drive ordinary decent citizens into doing things contrary to the common good." Economic instruments make a virtue out of the profit motive and the pursuit of self-interest whereas those arguing for a new environmental ethic took the traditional approach of trying to combat self-interest through morality.

The "environmental problem" for private firms and corporations had become a problem of public image, autonomy and potentially damaging costs. Economic instruments provide these actors with an alternative to restrictive legislation and economists provide the rhetoric to make the argument for them in terms that are not obviously self-interested. Sara Diamond (1991, 54) claims 'Some farsighted corporations are finding that the best "bulwark" against "anti-corporate" environmentalism is the creation and promotion of an alternative model called "free market environmentalism"'.

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