The Market-Based Lead Phasedown

© 2007 by Oxford University Press. All rights reserved.This essay uses the case study of the phasedown of lead gasoline in the United States to argue that market-based instruments can be effective in meeting environmental objectives at a lower cost than uniform standards, and can do so more quickly where permit banking is allowed. The performance of the lead phasedown program is assessed along several dimensions, including its overall effectiveness, static and dynamic efficiency, revelation of costs, and distributional effects. It is argued that the program likely saved hundreds of millions of dollars over policies that would not have allowed trading and banking, and also provided incentives for the development of new technology.