European Union Agri-Environmental Policy and the Polluter Pays-Principle

Agricultural production is often associated with significant environmental damage. While the Common Agricultural Policy (CAP) continues to be dominated by regulatory measures and subsidies, environmental taxes and emissions trading systems have so far played only a minor role, despite their efficiency advantages in internalising external costs. The article discusses the specific characteristics of agricultural environmental problems, compares market-based and regulatory policy instruments, and examines institutional and political factors shaping the political feasibility of environmental taxes and emissions trading in the agricultural sector. It also explores the conditions under which an application of the Polluter pays-Principle in agri-environmental policy could become politically feasible.