Why is it that market instruments have not been used to their full potential in environmental policy? Using a public choice perspective, this book critically analyses the political economy of environmental policy with special emphasis on the role of powerful interest groups which have blocked the introduction of market instruments. Drawing on new case studies of market instruments, Dr Dijkstra examines the attitudes of interest groups and how they influence environmental policy. He discusses the preferences of shareholders and workers in the polluting industry, the environmental movement and the environmental bureaucracy. He then investigates the circumstances under which market instruments will have low or no probability of being accepted, assuming that they are welfare-maximizing. The Political Economy of Environmental Policy will be of interest to environmental and ecological economists, policymakers, political scientists and public choice scholars.