ch17 - Chapter 17 Economics of Environmental Protection...

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Pollution control policies Pollution control policies Efficient pollution reduction requires that the MC of abatement is equalized across firms. Direct controls require equal pollution reduction per firm is inefficient if abatement costs differ Emission taxes (t)… induce firms to abate so that their marginal benefit of abatement (equal to the tax t) equals the marginal cost of abatement (MC) are efficient because t = MC for each firm implies that MC’s are equalized across firms. Tradeable pollution permits give each firm an allocation of permits allow firms to buy/sell permits if they wish to increase/decrease pollution induce firms to abate so that their marginal benefit of abatement (equal to the permit price p) equals the marginal cost of abatement (MC) are efficient because p = MC for each firm implies that MC’s are equalized across firms. Maria Gallego
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This note was uploaded on 01/17/2012 for the course ECONOMICS 120 taught by Professor Mesta during the Fall '10 term at Wilfred Laurier University .

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ch17 - Chapter 17 Economics of Environmental Protection...

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