Environmental Policy Instruments
Traditionally, public policies have focused on regulation, financial incentives, and information as the tools of government. These were developed in the past to influence the behavior of actors who contribute to environmental problems.
Regulation
In essence, regulation is an effective means to prescribe and control behavior. Some of these regulations have resulted in a considerable improvement in the quality of air, water and land since the early 1970s.
One big improvement in environmental regulation made since the 1970s is the development of performance requirements, which allow actors to determine their own course of action to meet the standard.For example, they are not required to purchase a particular piece of equipment to meet an emissions standard. They can do it another way, such as developing a technology or process that reduces emissions. The advantage of performance requirements is that actors addressed by the regulation are encouraged to innovate in order to meet the requirements.
Financial Incentives
Governments can decide to stimulate behavioral change by giving positive or negative financial incentives. These incentives can play an important role in boosting innovation and in the diffusion and adoption of innovations. For example, in Germany the widespread subsidizing of solar energy systems for private homeowners increased the large-scale adoption of photovoltaic panels.