Design of Economic Instruments and Participatory Institutions for Environmental Management in India

This paper examines the possibilities of using economic instruments, especially pollution taxes and bargaining approaches resulting in people’s participation for environmental management in India. It tries to provide an intuitive description of methods of designing economic instruments and bargaining approaches for environmental management. The bargaining methods providing incentives for all stakeholders of an environmental resource to participate in its management result in decentralized solutions and savings in the transaction costs. A case study describes the estimation of pollution taxes for controlling air pollution in thermal power generation in India. The discussion of how bargaining methods are already in force in India shows their usefulness in controlling industrial pollution.