lect04-22-10

lect04-22-10 - Policies for Pollution Control pollution...

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Unformatted text preview: Policies for Pollution Control pollution control may be achieved through regulatory policies, such as standards, taxes, and permits costs of controlling pollution tend to vary across polluters achieving pollution control at lowest possible social cost typically requires non-uniform emission control using non-uniform standards is possible, but may be difficult in practice economists prefer to `put a price on pollution' by using emission taxes or tradable emission permits Allocation of Pollution Control Across Firms Two Firm Example: Emission Tax t = 11 $ MC $ MC B 11 11 0 17 QA Emissions Reduced 0 3 QB Desired (Q + Q ) = 20 units A B For lowest overall cost of control: MC = MC , QA = 17 units QB = B Allocation of Pollution Control Across Firms Two Firm Example: Emission Permits $ Number of Permits = 40 Permit Price = 11 MC $ MC B 11 11 0 17 QA Emissions Reduced 0 3 QB Desired Total Emission = 40 Desired (Q + Q ) = 20 units A B B For lowest overall cost of control: MC = MC , QA = 17 units QB = Non-Market Valuation market prices do not exist for many environmental and natural resources economists use non-market valuation techniques to infer prices for such resources three commonly used non-market valuation techniques are: travel cost method property value method contingent valuation method ...
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