The U. S. Experience with Economic Incentives for Protecting the Environment

This report section details the use of economic incentives—specifically pollution charges, fees, and taxes—to protect the environment in the United States. It examines various instruments including water and air emission fees, solid waste disposal charges, product taxes, and specialized fees for wetlands and grazing, analyzing their roles in raising revenue and incentivizing pollution reduction.

• Environmental taxes and fees in the U.S. are categorized into pollution fees (based on pollutant quantity), user fees (for resource use), and product charges (on harmful products). While federal law defines taxes as revenue-raising and fees as cost-offsetting, the terms are often used interchangeably in practice.
• Water user fees are often designed to recover service costs rather than allocate scarce resources. While demand is generally inelastic, some studies indicate that household water demand becomes elastic in the summer, and industrial and agricultural users are more sensitive to price changes.
• National Pollution Discharge Elimination System (NPDES) permit fees for water effluent are primarily used to fund permitting programs. Their incentive to reduce pollution is limited because fees are often modest compared to control costs; for example, while some New Jersey facilities paid over $700,000 in 1993, typical large industrial effluent control costs exceed $5 million annually.
• Air emission permit fees are mandated by the 1990 Clean Air Act Amendments to recover administrative costs, with a minimum presumptive level of $25 per ton of emissions (adjusted for inflation to approximately $35 per ton). Some states, such as New Mexico, differentiate fees by pollutant harm, charging $150 per ton for air toxics versus $10 per ton for criteria pollutants.
• Variable rate 'pay-as-you-throw' solid waste programs, implemented in over 4,100 communities across 42 states, have significantly reduced landfill waste. One study of 114 variable rate cities estimated a 43.8% reduction in waste disposal when charging $1 per 32-gallon bag.
• Taxes on hazardous waste disposal have been shown to reduce landfill use. In New York, a twofold rise in hazardous waste taxes in 1985 significantly decreased the quantity of waste disposed of in the state, although it led to a corresponding increase in incineration.
• The federal tax on ozone-depleting chemicals (ODCs), introduced in 1990 to support the Montreal Protocol, is credited with accelerating the substitution and recovery of CFCs. ODC consumption fell from 318,000 metric tons in 1989 to 200,000 metric tons in 1990.
• State-level product charges, such as those on tires in 34 states, are generally too low to change buyer behavior but effectively fund scrap tire programs and the cleanup of disposal sites.
• Congestion pricing, such as the toll road on the Riverside Freeway (SR-91) in southern California, aims to reduce emissions by smoothing traffic flow. The SR-91 project used five toll levels ranging from $0.25 to $2.50 per 10-mile trip based on the time of day.
• Wetland compensation fee systems allow developers to pay fees instead of performing on-site mitigation. Florida's Mitigation Park Program, started in 1986, had purchased over 7,000 acres and received more than $17 million in deposits as of 1999.

APA

Centre for Environmental Rights (n.d.). The U. S. Experience with Economic Incentives for Protecting the Environment. https://cer.org.za/wp-content/uploads/2016/08/Annexure-4.pdf?x21779

Chicago

Centre for Environmental Rights. The U. S. Experience with Economic Incentives for Protecting the Environment. n.d. https://cer.org.za/wp-content/uploads/2016/08/Annexure-4.pdf?x21779.

Wikipedia

{{cite report |author=Centre for Environmental Rights |title=The U. S. Experience with Economic Incentives for Protecting the Environment |url=https://cer.org.za/wp-content/uploads/2016/08/Annexure-4.pdf?x21779 |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{centreforenvironmentalrightsndexperience, author = {{Centre for Environmental Rights}}, title = {{The U. S. Experience with Economic Incentives for Protecting the Environment}}, institution = {Centre for Environmental Rights}, url = {https://cer.org.za/wp-content/uploads/2016/08/Annexure-4.pdf?x21779}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }