The welfare-reducing promotion of financial instruments* Paper for the World Congress of Environmental and Resource Economists Venice, June 25-27, 1998 Bouwe R. Dijkstra Department of Economics Faculty of Law University of Groningen PO Box 716 9700 AS Groningen The Netherlands e-mail: b.r.dijkstra@rechten.rug.nl * This paper will appear in the European Journal of Political Economy under the title: "A two-stage rent-seeking contest for instrument choice and revenue division, applied to environmental policy". A previous version of this paper was presented at the Public Choice Conference on 10-13 March 1996 in Israel. I thank Arye Hillman, Andries Nentjes, Casper de Vries, Georg von Wangenheim and three anonymous referees for valuable comments.