Economic Instruments for Air Pollution Regulation

man sitting on a bench looking at the sky

Despite past successes in the field of air pollution regulatory policy, nitrous oxides and ammonia levels have exceeded the agreed upon upper limits in Germany since 2010. Daily average values for fine particulate matter and yearly average values for nitrogen dioxide have also exceed their agreed upon limits. Nitrogen dioxide, in particular, routinely exceeded critical levels in 2014. Furthermore, it is expected that the negative impacts of fine particulate matter will only slowly decrease. These transgressions of air pollution limits have consequences not only for the environment, but also for human health, and lead to high costs.

In Germany, the core of the emissions controls regime is the Federal Emission Control Act (BImSchG), which implements EU regulations in German law and sets forth the subsequent ordinances and administrative procedures. The goal of the BImSchG is to protect humans, animals, plants, the soil, the water, the atmosphere, and cultural and other tangible assets from harmful environmental impacts (hazard prevention) and to prevent harmful environmental impacts from arising (precautionary principle). The precautionary principle dictates that emissions are to be avoided to the extent that this is technically possible and economically tenable, or, when emissions are unavoidable, that they are to be reduced as much as current technology allows.

The existing regulatory instruments outlined here have, however, been thus far insufficient to achieve the defined goals and to keep within the set limits, and have therefore only been able to unsatisfactorily meet the environmental protection goals. Were the existing regulatory and planning law measures to be supplemented with economic instruments, however, air pollution levels could be reduced in an economically efficient and ecologically effective way. Economic instruments have the additional advantage of restricting the impacted economic actors’ freedom of choice as little as possible. For this reason, the Federal Environmental Agency has commissioned this research project to assess which economic instruments can meet these specifications. The project thus provided for the following work stages:

  • First, already existing and potentially possible local, regional, national, and international economic air pollution control measures were identified and assessed for their potential applicability in Germany.
  • The measures identified in the first stage were then classified into given categories of economic instruments (environmental taxes, subsidies, emissions trading, potential mixed instruments).
  • All measures were then described along various criteria in short action plans.
  • Beyond that, the project envisioned a detailed analysis of selected measures. For existing measures, possibilities for restructuring or expanding the measures were assessed. Furthermore, diverse impacts, obstacles, and potentials were examined with the goal of reaching an ecologically effective and economically efficient design.