Abstract
This paper presents a framework for comparing empirically the effects of alternative environmental policy instruments on the diffusion of new technology. The authors suggest that "market-based" and "command-and-control" approaches can be quantitatively compared by estimating the economic penalty that firms, through their actions, reveal to be associated with violation of command-and-control standards. In the context of concerns about global climate change, the authors apply this approach to an empirical examination of the likely effects of Pigouvian taxes, technology adoption subsidies, and technology standards. In particular, they employ state-level data on the diffusion of thermal insulation in new home construction between 1979 and 1988, comparing the effects of energy prices, insulation costs, and state-level building codes.