Although there is a huge demand for accurate analysis of environmental policy outcomes in both the academic and policy-making communities, there is currently very little theoretical research on this issue. This ambitious book redresses the balance by constructing a new theoretical framework at the crossroads between economics and political science to account for the effectiveness of environmental governance. Drawing on insights from new institutional economics, environmental economics, collective action theory and social capital theory, the author analyses how policy outcomes are influenced by institutional factors that constrain and empower the target groups of environmental regulation. This is the first attempt towards a general theoretical treatise of voluntary environmental agreements, based on a dual institutionalist approach that allows for comparisons between environmental taxes and agreements. The author systematically compares the performance of the radically different CO2 policy strategies of Austria, Denmark and the Netherlands - non-intervention, earmarked CO2 taxes and energy agreements. From this unique cross-national study, it is concluded that CO2 taxes are generally more effective than voluntary energy agreements which, if practised in specific institutional settings, will outperform laissez-faire policy alternatives. This book will be required reading for environmental economists, political scientists and climate change researchers. It will also provide policymakers with useful empirical evidence and advice on how to design voluntary environmental agreements and green taxes to maximize environmental benefits.