Evaluation of currently applied economic instruments OECD Market creation Emissions trading Only in the United States has emissions trading in the field of air pollution been widely applied so far. Bubbles, offsets, netting and banking have emerged as a consequence of United States air pollution control policy. Minor applications are found in Germany. Emissions trading, as applied in the United States in the field of air pollution and water pollution control, has clearly been introduced for reasons of economic efficiency. Applying for emissions trading transactions is a voluntary act, practised Arhen direct regulations force firms to search for cost-effective solutions. Evidence exists that emissions trading has worked, and is still working, accordingly. The main feature of emissions trading policy in the United States is a partial shift of decision-making about design and location of control equipment from authorities to plant operators. The possibility of deviating from strict standards and thereby saving costs, provides a clear economic incentive for industry to comply with regulations. Additional results in terms of lower-than-allowed environmental pollution have been reported in some cases, although delays of State Implementation Plans have been reported as well. Therefore, more consensus seems to exist regarding advantages of commissions trading in terms of economic efficiency than with respect to its environmental effectiveness. Substantial cost savings are reported by many authors on this subject. An important advantage of emissions trading over direct regulations is that it has facilitated continuous economic growth in dirty areas. Administrative costs of implementing individual emissions trading cases in the United States have been high. Since emissions trading requires an adjustment of complex regulations, it is complex in itself. Administrative costs can dominate other costs of trading. Furthermore, the emergence of independent brokers illustrates the high administrative burden on regulators as well as on plant operators in establishing trading transactions. With respect to tradeable water discharge rights between point sources, implementation problems have arisen from the limited extent of local authority necessitating involvement of the EPA, which caused delay. Moreover implementation of the programme appeared to be a difficult task for the local water authorities because of the number of parties involved and a lack of interest among the dischargers. Fewer implementation problems are likely to occur with systems of point/non-point source than with systems of point source trading, since only two pardes, namely the plant operator and water authorities, are involved in specific transactions. Compatibility of emissions trading systems with the "Polluter-Pays Principle" is partly secured in principle. If a firm wishes to extend its plant, emission rights must be bought, or money must be spent on emission reductions elsewhere. Market intervention Market intervention, as defined in Chapter 1, is hardly applied. The two cases reported suggest that this special form of financial assistance is able to enhance the sustained recycling of waste materials by strengthening its competiveness on the market for raw materials. Legal arrangements for ensuring liability for environmental damages or some part of their financial equivalence might provide incentives for market creation in the field of environmental damage insurance.
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