ECS2606
ASSIGNMENT 2
Unique number 583488
DUE: 20 September 2024
, 1. Incentive-Based Policies in Environmental Economics
In environmental economics, incentive-based policies are known to induce the
desired level of reduction in pollution by businesses and individuals. Rather than
direct enforcement, businesses can be influenced by implicit directions through
economic means. The major types of incentive-based policies are:
Pigouvian Taxes: Taxes on activities that yield unfavorable externalities, including
pollution. These are precisely the sorts of taxes that internalize their external costs,
making pollution more costly and hence cleaner.
Cap-and-Trade (Tradable Permits): A government program that sets a maximum
quantity of emissions for a given industry, group of companies, or even an entire
country. Its key objectives are to create tradable permits to polluters, assigning them
fixed quantities, which indicate how much they can pollute, and firms can trade
among themselves—I am giving my neighbor this much pollution. Now, my neighbor
emits half, so we've both halved our emission. He has half his pollution to provide.
Subsidies for Green Technologies: The government provides subsidies to firms
investing in the area of green technologies. In this way, green technologies become
relatively cheaper to adopt, increasing innovation in sustainable behavior.
Deposit-Refund Systems: While purchasing a product that is potentially not good for
the environment, the government imposes a deposit. Refund on returning the used
product for proper disposal or recycling encourages responsible behavior.
Flexible Performance Standards: Setting environmental performance standards,
namely emission standards, but allowing at the same time flexibility to the firms
concerning specifically how such standards are met. For instance, firms may
purchase offsets if it is not possible to meet standards directly.
Green Certification Programs: Firms are given pre-determined environmental
performance standards and when they meet them, they are provided with
certifications or labels. Such certifications are likely to enhance the demand for the
firm's products from consumers.
2. Efficiency of Emission Standards in Rural vs. Urban Areas
The efficiency in making a single emission standard ranges from that in the rural
area to the urban, due to the existence of differences in population density,
ASSIGNMENT 2
Unique number 583488
DUE: 20 September 2024
, 1. Incentive-Based Policies in Environmental Economics
In environmental economics, incentive-based policies are known to induce the
desired level of reduction in pollution by businesses and individuals. Rather than
direct enforcement, businesses can be influenced by implicit directions through
economic means. The major types of incentive-based policies are:
Pigouvian Taxes: Taxes on activities that yield unfavorable externalities, including
pollution. These are precisely the sorts of taxes that internalize their external costs,
making pollution more costly and hence cleaner.
Cap-and-Trade (Tradable Permits): A government program that sets a maximum
quantity of emissions for a given industry, group of companies, or even an entire
country. Its key objectives are to create tradable permits to polluters, assigning them
fixed quantities, which indicate how much they can pollute, and firms can trade
among themselves—I am giving my neighbor this much pollution. Now, my neighbor
emits half, so we've both halved our emission. He has half his pollution to provide.
Subsidies for Green Technologies: The government provides subsidies to firms
investing in the area of green technologies. In this way, green technologies become
relatively cheaper to adopt, increasing innovation in sustainable behavior.
Deposit-Refund Systems: While purchasing a product that is potentially not good for
the environment, the government imposes a deposit. Refund on returning the used
product for proper disposal or recycling encourages responsible behavior.
Flexible Performance Standards: Setting environmental performance standards,
namely emission standards, but allowing at the same time flexibility to the firms
concerning specifically how such standards are met. For instance, firms may
purchase offsets if it is not possible to meet standards directly.
Green Certification Programs: Firms are given pre-determined environmental
performance standards and when they meet them, they are provided with
certifications or labels. Such certifications are likely to enhance the demand for the
firm's products from consumers.
2. Efficiency of Emission Standards in Rural vs. Urban Areas
The efficiency in making a single emission standard ranges from that in the rural
area to the urban, due to the existence of differences in population density,
