Law Commons^™

Explaining Market Mechanisms, Thomas W. Merrill

Faculty Scholarship

In recent years, environmental regulation has seen a debate between supporters of traditional command-and-control regulation – a system of uniform pollution control standards – and proponents of a system of fees or permits for individual polluters known as market mechanisms. In this article, Professor Merrill considers two theories, wealth-maximization theory and distributional theory, that have been used to explain the emergence of market mechanisms in American environmental policy. He notes that (1) relatively few American environmental-enforcement programs have adopted market mechanisms; (2) those that exist overwhelmingly use grandfathered transferable permits instead of pollution taxes or auctioned permits; and (3) they …