The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Environmental Economics

  • Robert N. Stavins
Reference work entry


An overview is provided of the economics of environmental policy, including the setting of goals and targets, notably the Kaldor–Hicks criterion and the related method of assessment known as benefit–cost analysis. Also reviewed are the means of environmental policy, that is, the choice of specific policy instruments, featuring an examination of potential criteria for assessing alternative instruments, with focus on cost-effectiveness. The theoretical foundations and experiential highlights of individual instruments are reviewed, including conventional command-and-control mechanisms and market-based instruments.


Asymmetric information Averting behaviour Benefit–cost analysis Bequest value Coase, R. Command-and-control instruments Contingent valuation (CV) Cost- effectiveness Efficiency Environmental economics Existence value General equilibrium analysis Hedonic pricing methods Hedonic wage method Insurance premium taxes Kaldor–Hicks criterion Market-based instruments Net present value (NPV) analysis Non-use value Pareto, V. Partial equilibrium analysis Pigou, A. Pigouvian tax Pollution charges Random utility models Recreation Reservation price Revealed preference Revenue cycling Risk reduction Social discount rate Tax differentiation Tradable permits Travel cost method Use value Value of a statistical life (VSL) Willingness to accept Willingness to pay 

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Robert N. Stavins
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