Environmental Economics

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Our Work

Getting the prices right and providing appropriate market signals can play a substantial role in driving consumer behaviour and supporting policy decisions aiming at more sustainable consumption and production. Finding workable ways of applying the user-pays and polluter-pays principles reduces the costs of negative externalities borne by society at large, and contributes to a more efficient use of resources, now a major goal of EU policy.

Aware of the increasing importance of market based instruments in policy making, alongside traditional command-and–control mechanisms, IEEP has engaged in a large number of projects investigating the use of such tools to strengthen environmental policy. These include studies on environmental taxes and charges, environmental tax (or fiscal) reform, environmentally harmful subsidies (EHS), emission trading, green public procurement (GPP) and other economic instruments.

Our key work includes the following:

In 2003-04 IEEP led the study Market Based Instruments for Environmental Policy in Europe. This was a major report for the European Environment Agency, looking at developments in the use of economic instruments in Europe. It covered taxes and charges, fines and penalties, emissions trading, deposit refund schemes, subsidies, environmental tax reform and ecological fiscal reform, liability and compensation issues.

The application of Market Based Instruments for conserving biodiversity was investigated in the context of our work on The Economics of Ecosystems and Biodiversity (TEEB) report for Policy Makers, led by Patrick ten Brink. In particular, Chapter 5 focused on rewarding benefits through payments and markets, Chapter 6 on reforming subsidies and Chapter 7 on addressing losses through regulation and pricing.

Tax reform to discourage the over-use of non-renewable resources and reduce environmental impacts has advanced in several European countries. Our most recent work on this, with a group of partners in 2008-09 was a study on tax reform in Europe over the next decades: implications for the environment, for eco-innovation and for household distribution, undertaken for the EEA. IEEP’s particular role was to study the feasibility and acceptability of a radical Environmental Tax Reform (ETR).

In a related field, IEEP led the study entitled ‘Collection of evidence on the costs and benefits of various types of mandatory measures and targets in the field of Green Public Procurement’ with a group of partners in 2007-08. This project for DG Environment explored potential options to make a form of GPP mandatory in Member States, including assessment of the potential for setting minimum technical specifications, a whole life costing approach, award criteria, requests for environmental management systems and the introduction of GPP into Structural Funds procedures.

There has also been work at the national level. For example in 2005-07 IEEP contributed to a project for the Malta Environment and Planning Authority (MEPA) on Building capacity to introduce the Polluter Pays principle through Economic Instruments to implement the EU Environmental Acquis. We focussed on the identification and assessment of suitable environmental instruments for Malta.

More about our work in this area...

Latest in Market-Based Instruments

The Economics of Ecosystems and Biodiversity for Water and Wetlands

This new IEEP-led report presents insights on the importance of wetlands in delivering ecosystem services that are needed to support human life, and also for people’s livelihoods and the world’s economies. The report shows that demonstrating and using the values of ecosystem services related to water and wetlands can lead to better informed, more cost-effective, and fairer decision- making.
The Economics of Ecosystems and Biodiversity for Water and Wetlands

This new IEEP-led report presents insights on the importance of wetlands in delivering ecosystem services that are needed to support human life, and also for people’s livelihoods and the world’s economies. The report shows that demonstrating and using the values of ecosystem services related to water and wetlands can lead to better informed, more cost-effective, and fairer decision- making.
Investments in improving the environment and in remediation of environmental damage – Comparative study of different measures funded through the use of economic environmental instruments

The effective utilisation of revenue from market based instruments is a way to achieve both environmental improvements in line with the promotion of a Green Economy, and to mitigate greenhouse gas emissions. Given the existing shortfall in climate finance, the potential to generate revenue through auctioning under the EU-ETS should not be overlooked.
What do we mean by Green Economy?

What is the Green Economy? What policy actions can contribute to achieving it? And how have EU-funded research projects supported these actions?
Green Economy in the European Union

Elements of the green economy concept are relatively well integrated in EU strategic documents - but the focus is on achieving green/sustainable growth, rather than achieving a ‘green economy’.
Guidance to identify and address incentives which are harmful to biodiversity

Developed and tested by IEEP, this guidance document is a tool to identify incentives harmful to biodiversity to help the UK draw up a reform roadmap and thus meet a commitment under the CBD.
EU waste law: the challenge of better compliance

Waste management in the EU is improving, but implementation by the Member States of EU waste legislation remains patchy. This paper makes suggestions on how better compliance could be achieved.
Feasibility of implementing a radical ETR and its acceptance

The study provides an analysis of the legal feasibility and political acceptability of a radical Environmental Tax Reform (ETR) within the broader context of EU policies. It explores the scope for using ...
Environmentally Harmful Subsidies (EHS): Identification and Assessment - Executive Summary

This study is a contribution to the European Commission’s ongoing efforts to investigate and reform environmentally harmful subsidies (EHS). The report focused on three methodologies proposed by the OECD ...
Environmentally Harmful Subsidies (EHS): Identification and Assessment - Full Report

This study is a contribution to the European Commission’s ongoing efforts to investigate and reform environmentally harmful subsidies (EHS). The report focused on three methodologies proposed by the OECD ...
Environmentally Harmful Subsidies (EHS): Identification and Assessment - VAT reduction for domestic energy consumption in the UK

This case study is part of the report 'Environmentally Harmful Subsidies (EHS): Identification and Assessment'. The study is a contribution to the European Commission’s ongoing efforts to investigate and ...
Environmentally Harmful Subsidies (EHS): Identification and Assessment - Case studies for the transport sector

This case study is part of the report 'Environmentally Harmful Subsidies (EHS): Identification and Assessment'. The study is a contribution to the European Commission’s ongoing efforts to investigate and ...
Environmentally Harmful Subsidies (EHS): Identification and Assessment - Case studies for the water sector

This case study is part of the report 'Environmentally Harmful Subsidies (EHS): Identification and Assessment'. The study is a contribution to the European Commission’s ongoing efforts to investigate and ...
IEEP's work on Environmentally Harmful Subsidies presented in Brussels

IEEP presented the draft results of the project ‘Environmentally Harmful Subsidies (EHS) – Identification and Assessment' for peer review in Brussels on 16 September 2009.The project team ...
Guidelines on the Use of Market-based Instruments to Address the Problem of Marine Litter

Policymakers who are concerned with the negative impacts of litter, solid waste and debris in their ports, bays and coastal waters have long searched for effective ways to reduce this problem. This report ...
Using Market Based Instruments for European Environment Policy

The European Environment Agency (EEA) has recently released two reports on the development of market based instruments across Europe. Both reports are mainly based on work from a team led by IEEP, which ...
Using the Market for Cost-Effective Environmental Policy - EEA Report 2006

This report is one of two recent reports from the European Environment Agency (EEA) on the development of market based instruments across Europe. Both reports are mainly based on work from a team led by ...
Market Based Instruments for Environmental Policy in Europe

This report is one of two recent reports from the European Environment Agency (EEA) on the development of market based instruments across Europe. Both reports are mainly based on work from a team led by ...
Market based instruments for environmental policy in Europe - EEA Technical Report 2005

Market based instruments are increasingly being used across Europe. The development of these instruments is covered in recent European Environment Agency (EEA) reports - Using the market for cost-effective ...
IEEP Briefing on the Eurovignette Directive and Proposed Amendment

The Briefing includes a note of a recent workshop on this legislation, which was organised by the European Federation for Transport and Environment (T&E) in Brussels on 28 November ...

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Highlights

Feasibility of implementing a radical ETR and its acceptance

The study provides an analysis of the legal feasibility and political acceptability of a radical Environmental Tax Reform (ETR) within the broader context of EU policies. It explores the scope for using ...