Reconsider policy allocation strategies: A review of environmental policy instruments and application of the CGE model.

How to choose environmental policy instruments within a clearly defined scope of the market mechanism and government intervention will profoundly affect the policy effectiveness. Through a systematic review of 111 representative literature, this paper traces the theoretical development of environmental policy instruments, empirical analyses based on the CGE (Computable General Equilibrium) model, and globally practical experience. We find that the reflections on environmental policy instruments have shifted from command-based to market-based, from trade-offs between quantity-based and price-based instruments within the scope of market-based instruments to combining both, and finally a reasonable allocation of both command-based and market-based instruments.