EES 108 Class 14

EES 108 Class 14 - Diminishing returns 1st 90% of pollution...

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Diminishing returns 1 st  90% of pollution Reduce from 100% to 10% Most of the health benefits Next 9% Reduce from 10% to 1% Typically more expensive than 1 st  90% Smaller health benefits Next 0.9% Reduce from 1% to 0.1% Typically much more expensive than 1 st  99% At some point the cost becomes astronomical and health  benefits are almost zero Love Canal: Much of cost was to get soil clean enough for a toddler to eat dirt every  day with no harm Much cheaper to stop at safe level for industrial, but not residential use “Tunnel vision”
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Problem of regulation Regulatory costs cause harm too Opportunity costs $15 million   1 life
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Finding best balance Define “best” Utility (cost-benefit) Preference Rights Implementation Market • Pollution taxes Emission trading Nonmarket  (government) Command &  control John Rawls (1921-2002) Jeremy Bentham (1748-1832)
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Problems with  Costs and Benefits Comparing costs ($) to benefits  (human lives, health) Predicting costs and benefits accurately Balancing calculations of total costs and benefits against  fairness of distribution? Do some people pay most costs  while others get most benefits?
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Systematic studies of  cost-benefit analysis The regulations criticized most often were never  implemented Agencies rejected them quickly on cost-benefit grounds Sample of 28 regulations studied in depth: 14: actual costs < 75% of estimates 11: actual costs = 75%-125% of estimates   3: actual costs > 125% of estimates 2003 OMB accounting: Clean air act benefits are >6 times costs Costs $  18-  20 billion • Benefits $118-177 billion
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Clean Air Act Major act: 1970 Primary federal role in managing air pollution Define legal categories:  Hazardous  &  criteria
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EES 108 Class 14 - Diminishing returns 1st 90% of pollution...

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