Green Prices

"Getting the prices right" is
a good starting point but is not sufficient for achieving
environmentally efficient outcomes. Other policy
interventions are often necessary to complement pricing
policies. Moreover, when pricing is not at all feasible,
regulatory and command-and-control policies must be used
instead. This paper focuses on three interrelated themes at
the core of the pricing problem. First, there is the
incorporation of non-marketed activities with environmental
consequences into aggregate measures of economic
performance: the so-called "green-GDP." Second,
there is the problem regarding the reliable estimation of
the valuation of the shadow prices that properly reflect
environmental externalities. Third, there is the issue of
full-cost pricing that requires the pricing of environmental
externalities for guiding both individual and public decision-making.