Barriers to the introduction of market-based instruments in climate policies: an integrated theoretical framework

Many economists propose the superiority of market-based instruments, and an increasing use of such measures in OECD countries has taken place. However, there has been (and still is) some reluctance by policymakers to use market-based instruments in climate policy. This article provides a theoretical framework to help explain this paradox. This framework combines standard environmental economics reasoning with two economic approaches: the institutional path dependence and the public choice perspectives, complemented with some insights from political science studies. Ex post empirical research using the Spanish case illustrates the accuracy and policy relevance of our approach. Analyzing the barriers to market-based measures in climate policy may allow us to draw lessons to facilitate the implementation of these instruments in the future. © 2009, Springer Japan.