Regulations and incentives to address environmental externalities.
Environmental policy encompasses laws, regulations, and actions designed to protect the environment, conserve natural resources, and promote sustainable development. It aims to address environmental externalities and ensure long-term ecological sustainability.
The main goals include reducing pollution, mitigating climate change, conserving biodiversity, promoting sustainable resource use, and balancing environmental protection with economic development.
Environmental policy employs a mix of regulatory (command-and-control) and market-based instruments, including emissions standards, carbon pricing, tradable permits, subsidies for clean technologies, and environmental impact assessments.
Many environmental issues, such as climate change and biodiversity loss, require international cooperation. Global environmental agreements and protocols play a crucial role in addressing these challenges.
Effective environmental policy often requires integration with other policy areas such as energy, transport, agriculture, and urban planning to ensure coherence and maximize impact.
Environmental policy is informed by environmental science, ecology, and environmental economics. It draws on concepts such as ecosystem services, the precautionary principle, and the polluter pays principle.
If countries adopt well-designed carbon pricing systems (e.g., carbon taxes or cap-and-trade), then they can create economy-wide incentives for emissions reduction while allowing flexibility in how these reductions are achieved. Sweden's carbon tax, introduced in 1991 and gradually increased over time, has contributed to a 25% reduction in greenhouse gas emissions between 1990 and 2018 while maintaining strong economic growth.
If governments implement a combination of renewable energy targets, feed-in tariffs, and auctions, then they can accelerate the transition to clean energy. Germany's Renewable Energy Sources Act (EEG) has been instrumental in increasing the share of renewables in electricity generation from 6% in 2000 to over 40% in 2019.
If conservation policies take a holistic, ecosystem-based approach, then they can more effectively protect biodiversity while supporting sustainable development. Costa Rica's system of payments for ecosystem services, which compensates landowners for maintaining forest cover, has helped reverse deforestation trends and protect critical habitats.
If governments require producers to be responsible for the entire lifecycle of their products, including disposal, then they can promote more sustainable product design and improve waste management. Japan's EPR system for packaging waste has achieved high recycling rates and reduced waste generation.
If environmental objectives are mainstreamed across different policy areas (e.g., energy, transport, agriculture), then overall policy coherence and environmental outcomes can be improved. The Netherlands' National Environmental Policy Plan, which set long-term sustainability goals across sectors, has been credited with significant improvements in environmental quality.