Markets

Achieving this goal can be done either by a direct internalization of those costs, via a taxation mechanism, or by creating a scarcity in the rights to cause environmental damage. Environmental markets arise from the latter strategy. Ronald Coase (1960) was the first to argue that externality problems were best understood as a problem of imperfect property rights, and that assigning such rights was the best means to internalize external costs. Dales (1968) extended this argument to argue for the establishment of emissions trading systems to manage environmental problems (for a fuller history see Gormon and Solomon 2002).