International Review of Environmental and Resource Economics > Vol 4 > Issue 3–4

Transaction Costs and Environmental Policy: An Assessment Framework and Literature Review

Kerry Krutilla, School of Public and Environmental Affairs, Indiana, Rachel Krause, University-Bloomington, USA, krutilla@indiana.edu
 
Suggested Citation
Kerry Krutilla and Rachel Krause (2011), "Transaction Costs and Environmental Policy: An Assessment Framework and Literature Review", International Review of Environmental and Resource Economics: Vol. 4: No. 3–4, pp 261-354. http://dx.doi.org/10.1561/101.00000035

Published: 15 Apr 2011
© 2011 K. Krutilla and R. Krause
 
Subjects
Environmental Economics
 
Keywords
Q50Q58H23D61
Environmental policy analysisTransaction costsPolitical economyPolicy designInstrument choiceBenefit-cost analysis
 

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In this article:
1 Introduction
2 Transaction Cost Definition and Components
3 Policy Evaluation Framework
4 The Effects of Policy Design and Instrument Choices on Transaction Costs During the Policy Establishment Period
5 The Effects of Policy Design and Instrument Choices on Transaction Costs During the Implementation Period
6 The Effects of Policy Design and Instrument Choices on Transaction Costs During the Policy's Operational Period
7 The Implications of Transaction Costs for Optimizing Pollution Control, and Assessing Net-Benefits
8 Empirical Assessment of Transaction Costs
9 Conclusion
Acknowledgements
References

Abstract

This article develops a framework for environmental policy analysis based on an encompassing assessment of transaction costs. This approach emphasizes the ex ante costs of establishing environmental entitlements, and the ex post costs of administrating, monitoring, and enforcing them. The framework is used to organize a literature review which addresses policy design and instrument choice, as well as optimal environmental policy-making and benefit-cost analysis. The review also considers the empirical literature on transaction costs associated with environmental policy-making, and current practices to record some categories of transaction costs in regulatory impact assessments. The article concludes with a discussion of the implications for environmental policy analysis.

DOI:10.1561/101.00000035