13.2 National policy instruments, their implementation and interactions

The policy-making process of almost all governments consists of complex choices involving many stakeholders, including the potential regulated industry, suppliers, producers of complementary products, labour organizations, consumer groups and environmental organizations. The choice and design of virtually any instrument has the potential to benefit some of these stakeholders and to harm others. For example, permits allocated free to existing firms represent a valuable asset transferred from the government to industry, while auctioned permits and taxes generally impose heavier burdens on polluters. As a result, it is likely that a candidate instrument will likely face both support and opposition from the stakeholders. Voluntary measures are often favoured by industry because of their flexibility and potentially lower costs, but these are often opposed by environment groups because of their lack of accountability and enforcement. In practice, policies may be complementary or opposing; moreover, the political calculus used to choose a particular instrument differs for each government.^[4]

In formulating a domestic climate policy programme, a combination of policy instruments may work better in practice than reliance on a single instrument. Furthermore, an instrument that works well in one country may not work well in another country with different social norms and institutions. When instruments are to be compared, it is important that the different levels of stringency be taken into consideration and adjusted, for all of the instruments described herein may be set at different levels of stringency. Regulations will also undoubtedly need to be adjusted over time. All instruments must be supplemented with a workable system of monitoring and enforcement. Furthermore, instruments may interact with existing institutions and regulations in other sectors of society.