One of the virtues of the U.S. federal system of government is the ability to allow for geographic differences in policies and experimentation across state lines. But not enough experimentation takes place, because its costs are borne locally while the benefits spread across the country.

Mr. President, we urge you to use the power of the federal purse in a "policy auction"--a competition among states and localities for federal funds to implement creative new policies, ones that all other states could learn from and emulate.

We particularly urge you to focus the auction on the use of economic incentive-based policy instruments for environmental protection; two applications would be congestion pricing experiments for roads and incentive-based instruments to encourage product stewardship and recycling.

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The possibility of doing policy experiments is one of the greatest advantages of a federal system, but despite their value, practical barriers prevent many experiments from being implemented.

Winston Harrington pursues research interests that encompass urban transportation, motor vehicles and air quality, and problems of estimating the costs of environmental policy. He has written or coauthored five books, including Choosing Environmental Policy: Comparing Instruments and Outcomes in the United States and Europe.
Chapter 9. Pay-As-You-Drive for Car Insurance

Karen L. Palmer  explores the environmental and economic consequences of electricity restructuring and studies environmental policies focused on electricity generators. She also researches the economics of recycling and product stewardship. A former visiting economist at the Federal Energy Regulatory Commission, she is coauthor of Alternating Currents: Electricity Markets and Public Policy.
Chapter 8. Cleaning Up Power Plant Emissions

Margaret Walls researches solid waste and recycling, urban land use issues, and transportation. Her work on waste and recycling includes analysis of "product stewardship" programs and the cost-effectiveness of alternative policies. In the land use area, she is currently analyzing transferable development rights programs for preserving open space.

All Policy Recommendations in New Approaches on Energy and the Environment are available for complimentary download from each chapter's webpage. (Copyright © 2004 by Resources for the Future.) Use of these chapters is for personal use only. Contents may not be duplicated or retransmitted by print, electronic, or other means without written permission of the publisher. To purchase a printed copy of the book, click on the button below.