Economic theory and empirical models suggest that economic instruments should help us to meet environmental goals at lower cost. Practical experience, however, shows that the cost savings of emission trading are smaller than expected and charges usually have had small incentive impacts.

The state organisation responsible for coordinating the hydropower el- tricity system in Norway ("Samkjoringen") contacted me in 1990 about the advanced plan for deregulating the electricity system, separating gene- tion, transmission, and distribution and introducing a wholesale market for electricity. It was felt that insights about the fundamental nature of running an electricity system based on hydropower was somewhat lacking within the team of academic economists engaged to write background reports by the Oil and Energy ministry responsible for driving the reform of the el- tricity...

Economic theory and empirical models suggest that economic instruments should help us to meet environmental goals at lower cost. Practical experience, however, shows that the cost savings of emission trading are smaller than expected and charges usually have had small incentive impacts.
This book gives the first comprehensive review of economic theory, simulation models, and practical experience with the use of economic instruments. The book focuses on air pollution control. Part I examines theoretical aspects and simulation modeling in a national context. Part II surveys the practical...