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Abstract
This paper explores how economic policy instruments might contribute to reconciling agricultural and environmental policies, in accordance with the Polluter Pays Principle. It is suggested that this principle implies rewards for environmental improvements, as well as payments for environmental damage. It is argued that changes in property rights, and an ecological perspective on agricultural production, are essential to the elimination of the apparent inconsistency between ecological efficiency and economic efficiency. While the valuation of external effects is problematic, economic policy instruments are seen as having an important and increasing role in environmental management and as contributing to the integration of agricultural and environmental policies.