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Faure, Michael; Niessen, Nicole --- "Towards effective environmental legislation in Indonesia?" [2006] ELECD 510; in Faure, Michael; Niessen, Nicole (eds), "Environmental Law in Development" (Edward Elgar Publishing, 2006)

Book Title: Environmental Law in Development

Editor(s): Faure, Michael; Niessen, Nicole

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781845425197

Section: Chapter 11

Section Title: Towards effective environmental legislation in Indonesia?

Author(s): Faure, Michael; Niessen, Nicole

Extract:

10. Economic instruments: suited to
developing countries?
Michael Faure, Marjan Peeters and
Andri G. Wibisana

1. INTRODUCTION
Economics has been expanding its scope for many years. It has long left the
traditional areas of markets and is increasingly applied to many aspects of
human behaviour, including environmental policy. Economists thus have for
many decades paid attention in an abundant literature to the way in which
environmental pollution could be remedied from an economic perspective. In
the chapter concerning the principles of environmental law, attention was paid
to the way in which economists generally address environmental issues.1 In
that chapter it was shown that economists traditionally view pollution prob-
lems as externalities. Hence they see the role of law as an instrument to inter-
nalize these externalities. In Wibisana's chapter it was explained that
economists traditionally distinguish between on the one hand liability rules
and on the other hand regulation as an instrument to achieve this optimal inter-
nalization of the externality caused by the pollution problem. The literature
indicating under what circumstances regulation may be better suited than
liability rules to internalizing this externality was extensively discussed in
Wibisana's contribution to this volume.
However, although in practice environmental law consists to a large extent
of regulation, economists have increasingly pointed out that this traditional
approach of imposing pollution standards via government regulation may have
several disadvantages as well. Thus, in recent years they have picked up on
Pigou's classic message of the 1920s that taxation could ...