The theory behind the use of economic instruments for pollution control has been present in economic texts for decades but it is only in recent years that governments of Western nations have come to embrace them and promote them. Governments have traditionally favoured legislative instruments (sometimes referred to pejoratively by economists as 'command and control' measures) over economic instruments for achieving environmental policy. This has been the case because economic instruments were thought to be too indirect and uncertain (aimed at altering conditions in which decisions are made rather than directly prescribing decisions), and because economists were not prominent in government administration. Governments have been concerned that additional charges would fuel inflation and might have the undesirable distributional effect of most severely hitting low-income groups. They have been concerned that the public might see charges as giving companies a 'right to pollute' which they had paid for. Similarly, businesses have preferred direct regulation because of concerns that charges would increase their costs, and also because of perceptions that they would be able to have more influence on legislation through negotiation and delay.

For several reasons, various governments have begun to reassess the use of economic instruments. The heightening awareness of global and local environmental problems during the late 1980s in many countries around the world drew attention to the inadequacies of existing political, economic and regulatory structures. There were increasing demands from environmental and citizens groups for tightened environmental standards and increased government control of private firms and corporations. Green political groups challenged traditional political parties in elections with varying degrees of success.

Most of all the growing awareness of environmental problems and the inability of existing social and political systems to deal with it threatened change. What economic instruments seek to do is reassure the public that such change is not necessary; that the existing market system can be utilised for environmental protection and there is no need to reduce the power of business and the wealthy.

White (1992, 150) argues:

Within this framework of general acceptance of the 'market', the issues of 'capitalist development' and 'ecological sustainability' have tended to congeal around the theme of environmental costs and how best to reduce these. The social relations of the market itself are not brought into question; the solution is not seen as involving a major social transformation or radical economic restructuring.

By focusing on policy measures that leave the existing market unchanged, environmental issues will continue to play second fiddle to economic interests; the logic of the system, which is based on unlimited growth, will be left unchallenged.

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