1. Introduction
  Perspectives of environmental protection are possibly difficult to attain a common ground of which the use of regulatory instruments should respectively fulfill the requirements of different values, provided that each of them stands on a merely sole point of view.The economic value of environmental protection rests on the assumption that few economic activities would gain the benefits without producing any wastes; the purpose of individuals is maximizing overall benefits as well as maximizing utilities of resource; therefore they are, standing on self-interest, in the best situation for balancing their gains and losses and bargaining with each other in the free market in order to reach an optimal level of pollution---costs of pollution control not exceed the benefits of pollution control. The government intervention would be introduced only where the market fails. Present economic textbooksregard the pollution as an example of market failure where existing common property (e.g. air, river, common land), public goods (consumed without paying), externalities, or missing market. Thus, in the case of pollution, the failed market needs to be regulated by the government intervention.Over the past decades, advocating or using of economic instruments has increased rapidly. On the other hand, the traditional approach of regulatory intervention, so-called ‘command and control’ (CAC) has been the main force combating environmental pollution and existed in a considerable time. Nevertheless its deficiencies have appeared to be obvious, some of them have been cured by the legal system itself and the rests need alternative instruments to answer. To what extend the economic instruments can be used as answers? How does it work with CAC?
  
  As response, this essay will trace the historical development of CAC system in Britain, particularly the perceived failures as well as improvements arising from the inside of CAC system, and then switch to its inherent limitations which could be supplemented by, among other things, economic instruments. The final answer could be the recognized existence that the present environmental protection regime is a combination of a dominant CAC system complemented by a broad range of alternative approaches including economic instruments, self-regulations or voluntary instruments etc. Due to word limit, the latter are not in the scope of discussions.
  
  2. The nature and features of Command and Control
  A typical CAC regulation, as one form of social regulations, has a coercive nature and failure to comply may lead to the imposition of penal sanction.Among the sources of environmental law, the private law has been testified lacking sufficient competency either to internalise the externalities of pollution or to conserve the resources for the future generation.Thus the public law is deemed as dominant for protecting environment by means of passing the environmental laws usually based on CAC model. The environmental CAC regulation consists of two important factors that are standards, set by decision-makers as a ‘command’ form, and regulatory agencies, authorized to perform the supervision and ensure the enforcement of standards ultimately through the criminal law, as a ‘control’ form. The key instrument lying in standards is issuing license, for a given industrial activity, which is attached conditions in terms of prescriptions (what one must do) and proscriptions (what one must not do); firms must meet the standards when applying for licenses.According to Ogus’s spectrum, environmental standards are divided, from low to high degree of intervention, into three categories namely target, performance and specification standards.
  
  3. Development and Improvement of the CAC system: answered the failures per se
  Britain, the earliest industrialised country as well as having the longest history of industrial pollution, can boast the precursor of ‘modern’ environmental legislations. The CAC regulations could be traced back to administrative statutes in mid-nineteenth century. While CAC prevailed in the later half of twentieth-century, a ‘Britain approach’ to regulating environmental protection was explained as:
  An absence of statutory standards, minimal use of prosecution, a flexible enforcement strategy, considerable administrative discretion, decentralised implementation, close co-operation between regulators and the regulated, and restrictions on the ability of non-constituents to participate in the regulatory process.
  By focusing on the air pollution control, particularly on the perceived failures, we can find out how this traditional approach developed and improved in respects of legislation, enforcement and setting standards.
  
  In the mid-nineteenth century when the pollution had become ‘extensive and unprecedented’ and the limitation of common law in pollution control had been recognized, the early legislations were, interactive with common law, targeted towards the protection of public health rather than environmental protection, resulting in filling the gap between nuisance of private law and the protection of statutory mechanism.In terms of industrial air pollution, the Alkali Act 1863 was created to face a new evil---acid rain that caused the harm in St Helens of Lancashire was reported as ‘not having a single tree with any foliage on it’ . The reactive tendency lasted almost a century, recent examples is the Clear Air Act 1956 passed for controlling smoke in response to the Beaver Reportbefore which a London smoke lasted 5 days in December 1952, causing 4,000 additional deaths.
  
  Furthermore, although the first national public pollution control agency, the Alkali Inspectorate, was established under Alkali Act 1863, most protection of environment was carried out at a local level by a vast array of local broads or local authorities later. While laws reacted the particular type of pollutants, legislations were often authorised separate bodies to be responsible for different pollution, even overlapping emissions and powers (e.g. Alkali Inspectorate dealt with industrial noxious fume but local authorities were responsible for smoke control).The CAC system having varying standards and enforcement mechanisms failed to meet the expected goals. It is easy to be understood that in order to avoid strict air emission standards, wastes might be dumped in landfill rather than incinerated. Failures of such a fragmented approach focused on overlapping controls, lacking of public accountability, absence of viewing the environment as a whole, and uncertainty of wide discretions. These obstacles required to be overcome by, a unified enforcement system, centralising implementation and legislation. In 1976, the Royal Commission on Environmental Pollution (RCEP) recommended to set up a unified inspectorate and a holistic approach by introducing a concept as ‘best practicable environmental option’ (BPEO).As a delayed result, the uniformity emerged after ten years. Two main indicators are the establishment of, Her Majesty’s Inspectorate of Pollution (HMIP) in 1987 to draw a number of independent inspectorates together, the National Rivers Authority (NRA) in 1989 to centralise the regional authorities into a national body.On April 1st 1996, the creation of the Environment Agency (EA) under the Environment Act 1995, should be regarded as the true integrated body which took over all the functions of HMIP, NRA, and 83 local authorities.For same reasons, the centralized statute, Environmental Protection Act 1990 (EPA), eventually adopted the principle of Integrated Pollution Control（IPC）as well as the BPEO. In order to implement EC Directive 96/61 on integrated pollution prevention and control (IPPC), a new regime for IPPC for England and Wales has established by passing Pollution Prevention and Control (PPC) Act 1999 and PPC Regulation 2000, which is to ‘introduce a more integrated approach to controlling the pollution from industrial sources’.
  
  The movement of CAC towards an integrated approach could be recognized as seeking a more effective legal system for environmental protection; hence the underpinning of the criminal sanction also needs to be more effective. It is perceived that the traditional cooperative compliance style of enforcement has diluted the deterrence of the law in some cases. The impact of the ‘capture theory’ could rightly make sense of how the closeness between the polluters and regulatory agencies leads to ineffectiveness of enforcement where a strict liability should be required.Although the current legislation has increased the sums of penal fine and introduced stricter imprisonment,it is too early to say the goal of effectiveness has been reached especially in the case of other initiatives arising from the industry.
  
  From another view, the techniques of setting standards, reflected on setting objectives of specific standards, have been well developed towards a more integrated, scientific and effective approach, though this process is slow. In the field of air pollution control, the concept of ‘best practicable means’ (BPM) was adopted in Alkali Act 1874 for the purpose of replacing the rigorous previous uniform emission standards (used in Alkali Act 1863) , which finally failed to control the increase of emission caused by the growing number of plants, but BPM was proved being transformed by the Inspectorate’s interpretations. As Ogus’s comment, it was ‘randomly applied by rudimentary administrative machinery’.The Inspectorate’s approach, which is conciliatory and co-operational for applying performance standards, had existed for a century. Until 1970s, resulting from the cost/benefit analysis, critics considered that the flexible approach led to the benefits too weighted towards works, and the inspectorate’s free consultancy service was deemed as‘public pay’ rather than ‘polluter pay’ for the emission.Since then, the RCEP continued to recommend new measures, particularly for multi-media pollutants, the BPEO, alone with ‘sustainable development’. In a RCEP’s report, BPEO was defined as ‘for a given set of objectives, the option that provides the most benefit or least damage to the environment as a whole, at acceptable cost, in the long term as well as the short term’ . It is clear that the ‘at acceptable cost’ gives room to balancing the costs and benefits of pollution and/or pollution control. One has known that BPEO in conjunction with IPC is a statutory footing in Part I of EPA 1990. In section 7 of EPA 1990, the condition of an authorization for IPC is the ‘best available techniques not entailing excessive cost’ (BATNEEC) should be used in licensing systems. An aim of BATNEEC is to promote technical innovations. The Environment Act 1995 goes further. It sets out National Air Quality Strategy, in response to road traffic pollution, which seeks to map, as far as possible, the future ambient air quality policy in the medium term.
  
  Although EPA 1990 represents a clear departure from the traditional medium-by-medium approach, it was argued very difficult to implement in practice. The ENDS Reports 1993, 1995 revealed that the HMIP failed to force operators to address fundamental requirements of the EPA 1990 because of the difficulties resting on information delivering, lacks of transparency and absent legal definition of BPEO.Problems appear to continue. Another report published in May 2000 cited the comments on the works of the EA, the inheritor of HMIP, ‘still has many improvements to make before it can be considered to be an effective, fair and independent regulator’.Regardless of those comments, we should understand that the shift, from traditional approach towards formalized standards, centralized regulations and integrated enforcement, has become a readiness to meet the new environmental challenge in an international level, the compliance of the EC law or international protocols and the acceptability of alternative instruments.
  
  4. Alternative instruments: the needs for answers from the outside of CAC
  We have seen that the CAC system has been well improved through self-remolding, reached a more effective level on aspects of legislation and enforcement. The history has proved the great achievement of the CAC system in either clear air or sanitary drinking water. While examining the features of CAC, we could find some problems seem to be left open for the answers from the outside of CAC. Elements of a CAC model appear that issuing license as permitting pollution (under the given conditions), setting standards as seeking an optimal pollution level, enforcing through the criminal punishment as penalizing the behavior of lawbreaking more than remedying the environmental damages. Hence the pollution still remains around the permitted level.
  
  Firstly, if a firm has met the CAC standards, it would unwillingly spend one more penny on the further abatement of pollution. In other words, the abatement of pollution likely relies on the development of techniques but firms prefer the cheapest techniques, which could only fulfill the conditions of BATNEEC, rather than the most effective techniques for further abatements. The CAC system leaves no incentive for firms to develop the newer technology and participate to the benefits of further abatements.Secondly, where newer techniques favoring abatements emerge, the statutory standards in the CAC system, with an inherent nature of stability of law, are impossible to be changed quickly to cater for the changing of situations. Some firms would like to choose the new techniques for long-term investments, but they get no benefit from the further abatements beyond the standard. The inflexibility of CAC leaves rooms for ‘free-riding’ to other firms in the case of a target standard could be met through their opponents’ endeavors without any efforts by themselves. Thirdly, the numerous costs of administrations and prosecutions could not be automatically compensated by CAC. Although the criminal fines could remedy the costs in some cases, these remedies only occur where the state wins the case, and the certain sum of fine, merely resulting from the separate cases, could not cover the whole amount of costs. Moreover, under a licensed pollution, there is no access to the compensation of those costs. In effect, these costs are imposed on the entire taxpayers. Fourthly, while CAC permits a firm to pollute under the give conditions, the pollutants lead the public to bear the suffering of environmental damages namely the social costs of environmental depravation. The CAC has powers to limit, suspend and arrest polluting activity or even force firms to clean up in order to maintain the pollution at a permitted level. During a certain time, neither the CAC has power to abate the licensed pollution, nor should the firms necessarily be diligent in investment to obtain a better environment beyond the permitted level. Here, the negative externalities of pollution remain permanently unsolved.
  
  After discussed the perceived failures of CAC, the brief criticisms should be borne in mind that the CAC is neither efficient in economic terms, nor effective in changing people’s behaviors in favor of both improving environment and growing economy, and it takes insufficient account of public perceptions of pollution and allow too little public participation.Accordingly, more sophisticated but democratic methods, alternative instruments, are required.
  
  5. Economic instrument: to what extent the failures of CAC could be answered
  The categories of economic instruments are the charges, taxes, subsidies, deposit/refund schemes and tradable emission rights (Analysis will focus charges/taxes and tradable emission rights). Thankfully, the economists’ fruits, such as ‘Pigovian Tax’,‘Pareto Optimal Allocation’,and ‘Coase Theorem’ , could be theoretically justifiable for enacting pollution-control regulations that embody somewhat economic methods. An example could explain how the emission tax (Pigovian Tax) works in an efficient way to abate pollution: For any given amount of abatement, firm A has a higher cost (￡100) of a further unit of abatement than firm B (￡50), when they are both mandated to reduce emission by 90 units. Inefficiency occurs because A’s marginal cost is twice of B’s. If A could cut its abatement by one unit, saving ￡100, while B increases its abatement by one unit, adding ￡50, total abatement would be unchanged but costs would fall by ￡50. Figures may appear that both marginal costs of A and B could be at ￡80 per unit of abatement while A descent the abatement to 60 units and B increase the abatement to 120 units. Then a emission tax, ￡80 per unit of emission, would be imposed in order that each firm has the same marginal cost of the last unit of abatement undertaken. This is the efficient way of abating 180 units of pollution since the two firms have the same abatement costs at the margin, thus minimizing the total costs of reducing the given amount of pollution.
  
  This example makes advantages of emission tax very clear. As far as I can see, several advantages begin to appear. Taking account of differences in abatement costs among firms, the low-cost firms could reduce the higher tax burden by abating pollution; high-cost firms prefer paying tax to expending more on abatement, hence keeping their products competitive in a uniform market. Furthermore, the profit motive will push all firms to find the most efficient abatement techniques for purpose of minimizing their tax bill, while government could relax concerns to direct what technology should be used in pollution control. To this extent, the emission tax creates more incentives than CAC either on development of environmental technology or public participation. Another function of emission tax is that the taxation, in some cases, could change the people’s behaviours in favour of environment. The differential between the duties levied on leaded and unleaded petrol is a vaunted example of an effective tax in Britain.Since the mid-1970s, petrol consumption has increased by about 50% while lead emissions have decreased by about 75%.
  Since measuring emission is more difficult than valuing the administrative costs, charges are likely more feasible than emission taxes for recovering these costs. For example, in relation to water pollution, a scheme of annual charges introduced in 1991 is an attempt to recoup the approximate cost to the NRA (and subsequently the EA) of granting and monitoring an authorisation.While a charge scheme is designed to reflect the whole environmental costs of emission, this term is as the same meaning of tax. Whatever the tax or charge, the overall emission reduction is achieved at lowest total costs through this cost-effective allocation. Taxes and charges would also raise the general revenue for government. The receipt of revenue offers scopes to fund additional public expenditure or to reduce overweight taxes elsewhere (e.g. Climate Change Levy is with offsetting the employers' National Insurance Contributions ), provided it is earmarked for environmental subsidies, further improvement of environment, beyond those arising from tax effects, could be achieved. So far, we can see that both taxes and charges will fulfil the requirement of ‘polluter pays principle’. Comparing with CAC, the latter, by setting standards, forces polluters to pay costs for process design or pollution abatement equipments, however the polluters unlikely pay the damage cost of emission within their permit level, but taxes or charges can internalise the externalities of pollution because every unit of emission would be charged. Even in case of the taxes passed ultimately on to the consumer, the taxes have a function to reduce the consumption of these polluting products, so consumers in this ground are equalled to polluters.
  Tradable emission rights are created through two methods as grandfathering or auction in terms of that the resources are valuable. Again the above example, the government wishes to cut pollution by 180 units, so it gives each firm a pollution permit, which is with 90 units less than its existing level. If an emission trading market were created, the price (e.g. ￡80 per unit) of a permit would be automatically fixed through a means of bargaining on market (as the dogma of Coase Theorem ). Firm B would abate the emission as far as possible so as to get profits by selling its surplus abatement units while firm A would save money by buying the permits from market. Both firms get more money in their pockets. Revenues from auction could be put into the public purse. As Pareto says ‘everyone is better off’ , the cost-effectiveness is maximized. The tradable emission rights have a more advantage than emission taxes. Because of the market price of permit, the government would only decide how many permits to be issued, then the requirements of information are less than for discretions of tax rate.
  The economic instruments are of course not flawless. First of all, using pollution taxes or trading can get a cheapest approach to pollution control but cannot reduce the total quantity of pollution. As regards subsidies, why should public pay for polluters? In the international market, the domestic products, which prices comprise the imposed pollution taxes or costs of emission rights arising from auction, could be less competitive than those non-levy or non-bidding-cost products from other countries. Fairness could be also problematic in the emission-trading regime since the grandfathered tradable rights constitute a barrier to entry for new firms.In respect of effectiveness, supposing that firms’ disregards of low emission taxes lead to more pollution or avoidances of high taxes on a specific emission lead to developing techniques to transfer pollutants into another medium, can we say that the IPC standards or even in some cases the ‘end of pipe’ standards are less effective? Under the BATNEEC conditions, now that a performance standard leaving firm free to choose the technology to achieve the relevant emission standards could promote the innovation, why should the government transfer their political power to the market force? For a long-term IPC objective, particularly for the potential polluting substances, are the market mechanisms capable of handling the precautionary principle? Charges/taxes and permit prices usually rely on measurement of environmental damages or values of environmental ‘goods’, but how to measure the costs of aesthetic requirements for beautiful scenes, and how to value the public health or biologic diversity? The pure economic mechanisms likewise cause many problems to be answered.
  6. Conclusion
  The environmental quality objectives are exclusively regulated by the legal system. The setting of these objectives requires a careful analysis of different effects and components, inter alia not only environmental but also economic and social factors. Regulations don’t necessarily reject economic instruments as well as the market mechanisms cannot exist without underpinning of regulatory powers. The emission taxes need to be collected by the administrative machinery; the tradable permits need to be set down in the statutory standards. Setting and implement of standards call for public initiatives or participations and cost-effective approaches. Insofar as these synergetic effects, the CAC regulations and the economic instruments could not be neatly distinguished from each other. The most significant advantage of economic instruments is the legitimacy of cost-effectiveness as a result of the analysis above. If a wider range of values is considered, then the CAC begin to look unfairly maligned.An argument resulting from the research of differentiations among technical prescriptions (specification standards), emission standards (performance standards) and quality standards (target standards) suggests that if the options of using standards in a proper place, it gives no reason to complain about inefficiency of CAC. A best environmental legal framework should be a combination of the traditional CAC approaches, economic mechanisms, self-regulations or voluntary mechanisms, provided that a set of criteria could be considered, such as cost-effectiveness, availability in practice, economical efficiency of market instruments, suitability, the optimal allocation of environmental resources and etc.
  The current legal framework on air and atmospheric pollution control in the UK is a very example of using the CAC regulations in conjunction, inter alia, with supplements of economic and voluntary instruments:
   National bodies and local authorities have powers and responsibilities in relation to the National Air Quality Strategy established by Pt Ⅳ of the Environment Act 1995.
   Integrated pollution control: the most complex industrial processes are regulated under the IPC regime in the EPA 1990 or PPC regime in the PPC Act 1999.
   Local air pollution control: local authorities regulate less complex processes generating air pollution under the EPA 1990 as well as have powers regarding smoke pollution under Clean Air Act 1993.
   Climate Change Levy introduced on April 1, 2000 are intended to promote energy efficiency and stimulate investment in new technologies but the levy combined with an offsetting scheme will not increase the tax burden on industry as a whole.
   A voluntary Emission Trading Scheme launched on August 14, 2001 allows the companies with greenhouse gases emission targets to buy and sell emission allowances.
   Kyoto Mechanisms was introduced by Kyoto Protocol, which set out three approaches including Joint Implementation, Clean Development Mechanism and International Emissions Trading to be potentially used to meet the agreed reduction targets.
   Other voluntary mechanisms (e.g. ISO 14001, EMAS, MACC2)are frequently adopted by companies in favour of raising their public images as well as the further environmental targets.
  
  Merits of each kind of instruments would be utilized respectively in such a pragmatic system. While we have recognized that the air pollution does not respect the boundaries and a wider rang of approaches should be taking account of to meet the new environmental targets (e.g. the Kyoto targets agreed for the abatements of greenhouse gases emission), we should not perpetually fix our eyes on those failures; in converse, we likely need to figure out all their advantages and find out the best way to create a perfectly practicable system for the sustainable development of environment and sustainable growth of economy in a national as well as a international level.
  
  

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