From high regulatory state to social and ecological market economy? New environmental policy instruments in Germany

Demands for wider use of 'new' environmental policy instruments (NEPIs), namely market-based instruments (such as eco-taxes and tradable permits), voluntary agreements and informational devices (such as eco-labels and eco-audits) have increased significantly in Germany in recent years. Germany has also been urged to make wider use of market-based instruments by external actors (such as the Organisation for Economic Cooperation and Development and the World Bank). However, the uptake of 'new' policy instruments in Germany has remained uneven despite considerable NEPI innovation. German environmental policy has shown a high uptake of VAs and eco-labels. However, it has made only moderate use of eco-taxes although they have increased significantly with the introduction of the ecological tax reform in 1999. Tradable permits have not yet been tested on the national level although some states (Länder) set up pilot projects to gain practical experience ahead of the EU's tradable permit scheme. Overall, NEPIs have been used mainly to supplement traditional regulatory instruments which still dominate German environmental policy. Germany's transformation from a 'high regulatory' state (which makes wide use of traditional regulation and VAs) towards an ecological market economy (which relies primarily on market-based instruments) has therefore been a slow one.