Development in international, EU and Member State policy Driven by the failure of many types of direct regulation successfully to improve environmental conditions, the movement towards employing economic instruments to “use” the market to attain better environmental results has essentially developed since the beginning of the 1990s at international, Community and Member State levels. At international level, the use of economic instruments has been championed, in particular by the OECD since the 1990s.53 An example is the Declaration of the 1992 UN Rio Conference, Principle 16 of which proclaimed, “National authorities should endeavour to promote the internalisation of environmental costs and the use of economic instruments, taking into account the approach that the polluter should, in principle, bear the cost of pollution with due regard to the public interest and without distorting international trade and investment.” This was followed by the UN Framework Convention on Climate Change in 1992, Article 4(2)(e) of which requires developed country contracting parties to “coordinate as appropriate with other such Parties, relevant economic and administrative instruments developed to achieve the objective of the Convention.” Article 4(2)(e) in turn laid the foundation for the 1997 Kyoto Protocol which, in authorizing certain greenhouse gas emissions trading arrangements, set the scene at international level for one of the most important economic instruments in use today - tradable permit systems, discussed below. At Community level, the move towards the use of economic instruments also began at the beginning of the 1990s. Thus, the Commission proposed the first international environmental tax in 1992 which, though it never got through the Council, would have levied a tax on certain fossil fuel products on the basis of carbon dioxide emissions and energy content.54 The Community’s Fifth Environmental Action Programme (EAP), “Towards Sustainability”, represented a major shift of environmental instruments into the regulatory “spotlight”. One of the principal “themes and priorities” of this EAP was 53 One of the first formal references at UN level to the benefits of economic instruments is to be found in the Ministerial Declaration of the Second World Climate Conference held in Geneva in 1990, cited in Sands, Principles of International Environmental Law (2nd ed., Cambridge, Cambridge University Press, 2003), at 154.
