Economic incentive instruments such as pollution taxes, subsidies, and tradable emission rights are the major pollution prevention measures that have often been adopted by governments. The study provides an evaluation of the effectiveness of various economic instruments and contradicts the view that economic incentives are clearly preferable to conventional command-and-control measures. It is argued that both design deficiencies and pervasive constraints on monitoring and enforcement impede the effectiveness of economic instruments. The latter are difficult to rectify, at least in the medium term. This study concludes by proposing a contingent perspective on choosing the measures for environmental regulation.