The sudden collapse of the centrally planned economies of Central andEastern Europe (CEE) and the former Soviet Union (FSU), has createdeconomic and environmental disequilibria of historically unprecedenteddimensions throughout the region, as well as a process of gradual transitionfrom plan to market. This historical ‘experiment’ provides a uniqueopportunity to study economyÐenvironment interactions and the adjustmentprocess towards a new equilibrium, as well as the implications forconventional and novel policy instruments under transitional conditions.The changes that have taken place have been so many and so large thatthey defy many of the tools of marginal analysis. Privatization, industrialrestructuring, market competition, price reform, and trade liberalizationamong others have suddenly been introduced where none existed andhave so radically altered the fundamentals of these economies that theycould be considered as new economies rather than simply reformedeconomies. However, underlying these radical changes, are many legaciesof the centrally planned economy that persist or change only gradually.Furthermore, not all countries in CEE and the FSU have reformed theireconomies at the same pace. The northern tier countries of CEE movedfaster than the southern tier and the latter faster than most FSU republics.