Lecture 17

Lecture 17 - 11/2/10 Example: Clean Air Act Amendments of...

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11/2/10 1 Lecture 17 Externalities and Suflur Dioxide Emissions Cap/Trade Program Example: Clean Air Act Amendments of 1990 Approach: • Companies issued permits to emit SO2 • One permit allows to emit one ton of SO2 per year • Total permits issued achieves policy goal • Companies could buy or sell permits from each other First application: Dealing with sulfur dioxide air pollution • Clean Air Act Amendments of 1990 issued permits to emit SO2 • Companies were allowed to buy additional permits if needed or sell extra • Goal was to achieve target reduction in air pollution at lowest cost Results: • pollution reduced well below goal • Cost was 30% lower than original EPA plan Conclusion: allowing tradable permits allowed U.S. to achieve target level of overall reduction at minimal total cost Potential benefits of reducing SO2 emissions: • increased life expectancy • reduced illness • improved crop and timber yields • aesthetic value of visibility (first two account for 94% of estimated benefits)
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This note was uploaded on 11/07/2010 for the course ECON ECON 2 taught by Professor Hamilton during the Fall '09 term at UCSD.

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Lecture 17 - 11/2/10 Example: Clean Air Act Amendments of...

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