Chapter 14 5_16_07 - Chapter 14 Enforcement and Political...

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Chapter 14. Enforcement and Political Economy Pollution policy in theory can be very different from pollution policy in reality. While the sources in the previous chapters responded completely to the regulations that they faced, in reality they may not always comply. While the regulators in previous chapters sought to maximize net benefits to society, in reality they face political forces that influence their behavior away from efficiency goals. This chapter will examine: Decisions by sources on whether, or how much, to comply with environmental policies, and options for regulators to influence compliance. Factors that influence regulatory behavior beyond the public good. Enforcing Pollution Reductions from Diesel Truck Engines On October 23, 1998, manufacturers of diesel truck engines agreed to pay $1.1 billion for environmental improvements and fines. The companies were accused of manufacturing the engines so that they would meet federal standards in the laboratory although, on the road at highway speeds, nitrogen oxides (NOx) emissions would increase above the standards. The extra pollution emitted by the trucks was thought to be about as much NO x as would be emitted by 65 million cars, or 6% of total NOx emissions from factories, automobiles, and power plants combined. Complying with the U.S. Environmental Protection Agency (EPA) standard would reduce fuel economy and thus increase costs for truckers. These cost savings presented the engine manufacturers with an incentive to violate the standard: truckers would prefer engines with less expensive costs of operation. It is less clear whether the truck manufacturers ultimately did benefit from these engines, though, when the penalty was added into the calculation.
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Compliance in Practice Let’s start with the process of compliance in practice before we move into the economics of enforcement. An effective program for assuring compliance with environmental regulations has at least three parts: monitoring, enforcement action, and penalties. Monitoring, the act of looking for violations, takes many forms and has varying degrees of effectiveness. Large coal-fired electricity plants have continuous emissions monitoring devices that measure all the pollution that they generate. If a source finds itself out of compliance with its permits, it is obligated to report its emissions. Continuous emissions monitoring is very expensive, though, and used only for large facilities. For small sources, such as dry cleaners (many of which use perchloroethylene, a toxic substance that can contribute to air or water pollution), detecting violations of requirements requires visiting the offending shop. Car emissions are very difficult to measure while cars are in use; instead, states with serious air pollution problems require cars to have smog tests before they can be registered. (These tests measure emissions of pollutants per mile, not total emissions.) For water pollution, sewage treatment plants monitor for toxics (such as lab chemicals that don’t belong in the drain) from companies
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This note was uploaded on 03/03/2009 for the course ECON 370 taught by Professor Helfand during the Winter '08 term at University of Michigan.

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Chapter 14 5_16_07 - Chapter 14 Enforcement and Political...

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