The adoption of environmental policy innovation: Water pollution permit trading in the United States

Environmental economists have criticized 'command and control' or standard-based regulation in environmental policy making on several grounds. Critics also argue that command and control regulation imposes (i) unreasonable and exorbitant information gathering burdens and costs on government; (ii) often imposes disproportionate burdens on new pollution sources; and (iii) does not provide any incentives to polluters to develop new strategies to reduce their pollution beyond the levels required by law.; In light of these criticisms, the federal and state governments are increasingly implementing market-based approaches to address water quality problems. Instead of mandating uniform pollution reductions on a national basis, water pollution trading programs encourage polluters to reduce their pollution in the most cost-effective manner.; Despite the rosy predictions, water pollution trading programs have not been adopted and implemented in the manner advocated by environmental economists. Participation in water pollution trading has been marginal and the existing programs are not generating the actual trades that economists have predicted. Utilizing a three-prong approach (mixed method research design) this dissertation offers three stories. First, it predicts the factors influencing the adoption and implementation of water pollution permit trading programs. Second, it details the motivations, actors and driving forces for the adoption as well as factors driving actual trades to occur in seven water pollution trading programs. Finally, it offers valuable insights about barriers to actual trade transactions in water pollution trading programs. The objective is to abstract lessons from existing water pollution trading programs to offer more general conclusions that can assist in the design of future water pollution trading programs.; Empirical analyses show that (1) Administrative professionalism and institutional resources are positively associated with water pollution permit trading adoption and implementation, (2) The adoption and implementation of water pollution trading will not provide a quick panacea for the problems often associated with standard-based or direct regulation. Water pollution trading, like most standard-based strategies also require strong institutions, adequate legislation and effective monitoring and (3) the cost-effectiveness of market-based instruments cannot be understood in any useful way without considering them operating in parallel with other instruments. Approaches based on single policy and very sharp distinctions between instruments are untenable in practice in environmental policy. Attention should therefore be given to policy instrument mixes as a more pragmatic approach to innovation in environmental policy making.