Command and control instruments

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A. Role of various environment-related measures

Command and control instruments (CAC)

Command and control instruments, also referred to as standards or regulations, are the most common forms of environmental policies in both the advanced and developing countries. As the name implies, the CAC approach consists of a 'command', which sets a standard - the maximum level of permissible pollution, and a 'control', which monitors and enforces the standard. In general, there are two types of standards - ambient standards and emissions standards. Ambient standards set the minimum desired level of air or water quality, or the maximum level of a pollutant, that must be maintained. On the other hand, an emissions standard specifies the maximum level of permitted emissions.

Emissions standards can be performance-based standards or technology-based standards. Performance-based standards are the most common type. They stipulate emissions limits that each firm is allowed. Technology-based standards not only specify emissions limits, but also the "best" technology that must be used.

Advantages of Standards

Standards are a more widely understood form of environmental policy.
Standards are a pragmatic approach when there is uncertainty about the effects of pollution on the environment.
Political costs of standards are lower compared to market based instruments.

Disadvantages of Standards

An 'optimum' standard is difficult to determine, especially with non-marketable goods, such as water and air.
Under a CAC approach, firms have no incentives to reduce pollution beyond the standard.
Penalties for violating standards tend to be too low and enforcement tends to be weak.
To be effective, standards need to be revised frequently but in practice legislation tends not to keep up with the change.
Standards tend to be less cost-effective than MBIs.
The financial costs of standards may be high.
There could also be political costs if the standards are stringent and businesses are adversely affected.

Example

Malaysia: The Malaysian Oil Palm Industry

Promugation of the Malaysian Environmental Quality Act in 1974 brought the palm oil industry to revolutionize their effluent treatment in order to comply with the mandatory discharge standard. (More...)

See also

ESCAP, 1999(c). Integrating Environmental Considerations into Economic Policy Making Processes: Background readings, vol. III Institutional arrangements and mechanisms at sector level: State of the Environment in Malaysia: Palm Oil Situation (1999)