NR 326 Final Exam
Pollution (EconDef)
when the residual assimilation services of the environment are free and unpriced
Pollution (Envm Def)
- waste assimilating capacity of the environment exceeded
-pollution will not be reduced voluntary; requires coercion or and incentive for polluter to
abate
Types of Pollution
Point Source: a single, identifiable, localized source of air, water, thermal, noise or light
pollution (can be modeled as a point)
Non-point: pollution that cannot be traced back to a single origin or source such as run
off water from urban areas and failed septic systems
Pollution Vocabulary
comply
abate
emissions (air) - Criteria Air Pollutants . ( Sox, Nox, PM, CO, Lead, O3)
effluent (water) - BMP
Point Sources (how to minimize them)
1. Emission Standards - laws w/ fines for violation
2. Emission Charges - laws w/ charges
3. Taxes (Pigouvian Tax) - tax laws
4. Tradable Emission Point
NonPoint Source
1. Cost-sharing
2.Mandated or Voluntary BMPs (best management practice)
Emission Standards
a legal limit on the amount of pollutant a single source is allowed to emit
Command and Control Approach
-pass the law and people will comply
-lacking info on control (abatement) costs, regulatory agencies simply assigns each
source an equal amount of pollution reduction-- not cost effective
-Pros: simplicity, appealing politically
-Cons: fines come after the pollution , never enough police to catch the violators, always
involves litigation where lawyers are the winners and not the environment
Emission Charge
a fee collected by the government levied of each unit of regulated pollutant emitted by
source
essentially as long as it costs you less to abate then it would to pay that charge you
abate
Pigouvian Tax
, tax levied to abate pollution using the market
ie. CA gas tax
Steps:
1. Establish tax that adds to the firms marginal costs of production that creates pollution
(Marginal Private Cost)
2. Faced with higher Marginal Cost firms have and incentive to reduce output thereby
reducing pollution more effectively than with command and control
3.Total tax revenue to "state". revenue can be used by state to mitigate remaining
pollution
4. Problem! Iack of information on how to set tax to efficient level ie. no knowledge of
MSC, tax revenues usually diverted to cover govt.
Coasian Market Solution:
given a complete property rights, trade among involved parties will eliminate Pareto-
relevant externalities
The "Cap & Trade " Concept
Permit - the right to emit x units of pollutant with and expiration date ( Not abatement,
right to pollute)
Total # of permits based of regulatory "cap" without effort to allocate among emitters
Annual auctions of new EPA permits & spot transactions of existing permits
Firms with lower MC for abatement will sell permits and abate more as long as price >
MC
Types of Impacts
Direct, Intermediate and Final
Direct Impact
generated directly by the activities of a sector. Those high direct impacts are candidates
for direct regulation
Intermediate Impacts
combine direct impacts with upstream impacts generated by sectors demand for goods
and services. Those with high intermediate impacts are candidates for "supply chain
engagement" r
Final Consumption
the portion of intermediate impacts associated with goods and services sold to
consumers
Rents
is there work involved in generating this income ?
income you get from the mere act of owning something. return to the ownership
landowners play no role in setting rents; he simply appropriates the additional
production his more productive site provides compared to marginal sites
landowners cant pass taxes or other regulatory costs to the purchase
3 Types of Rent
Pollution (EconDef)
when the residual assimilation services of the environment are free and unpriced
Pollution (Envm Def)
- waste assimilating capacity of the environment exceeded
-pollution will not be reduced voluntary; requires coercion or and incentive for polluter to
abate
Types of Pollution
Point Source: a single, identifiable, localized source of air, water, thermal, noise or light
pollution (can be modeled as a point)
Non-point: pollution that cannot be traced back to a single origin or source such as run
off water from urban areas and failed septic systems
Pollution Vocabulary
comply
abate
emissions (air) - Criteria Air Pollutants . ( Sox, Nox, PM, CO, Lead, O3)
effluent (water) - BMP
Point Sources (how to minimize them)
1. Emission Standards - laws w/ fines for violation
2. Emission Charges - laws w/ charges
3. Taxes (Pigouvian Tax) - tax laws
4. Tradable Emission Point
NonPoint Source
1. Cost-sharing
2.Mandated or Voluntary BMPs (best management practice)
Emission Standards
a legal limit on the amount of pollutant a single source is allowed to emit
Command and Control Approach
-pass the law and people will comply
-lacking info on control (abatement) costs, regulatory agencies simply assigns each
source an equal amount of pollution reduction-- not cost effective
-Pros: simplicity, appealing politically
-Cons: fines come after the pollution , never enough police to catch the violators, always
involves litigation where lawyers are the winners and not the environment
Emission Charge
a fee collected by the government levied of each unit of regulated pollutant emitted by
source
essentially as long as it costs you less to abate then it would to pay that charge you
abate
Pigouvian Tax
, tax levied to abate pollution using the market
ie. CA gas tax
Steps:
1. Establish tax that adds to the firms marginal costs of production that creates pollution
(Marginal Private Cost)
2. Faced with higher Marginal Cost firms have and incentive to reduce output thereby
reducing pollution more effectively than with command and control
3.Total tax revenue to "state". revenue can be used by state to mitigate remaining
pollution
4. Problem! Iack of information on how to set tax to efficient level ie. no knowledge of
MSC, tax revenues usually diverted to cover govt.
Coasian Market Solution:
given a complete property rights, trade among involved parties will eliminate Pareto-
relevant externalities
The "Cap & Trade " Concept
Permit - the right to emit x units of pollutant with and expiration date ( Not abatement,
right to pollute)
Total # of permits based of regulatory "cap" without effort to allocate among emitters
Annual auctions of new EPA permits & spot transactions of existing permits
Firms with lower MC for abatement will sell permits and abate more as long as price >
MC
Types of Impacts
Direct, Intermediate and Final
Direct Impact
generated directly by the activities of a sector. Those high direct impacts are candidates
for direct regulation
Intermediate Impacts
combine direct impacts with upstream impacts generated by sectors demand for goods
and services. Those with high intermediate impacts are candidates for "supply chain
engagement" r
Final Consumption
the portion of intermediate impacts associated with goods and services sold to
consumers
Rents
is there work involved in generating this income ?
income you get from the mere act of owning something. return to the ownership
landowners play no role in setting rents; he simply appropriates the additional
production his more productive site provides compared to marginal sites
landowners cant pass taxes or other regulatory costs to the purchase
3 Types of Rent
