Environmental Economics, 2024 Release
Instructor’s Manual with
Answers to Discussion
Questions
FOR
ENVIRONMENTAL
ECONOMICS An Introduction
2024 Release
Barry C. Field, Martha K. Field
Part 1: Chapter 11-21
Part 2: Chapter 1-10
All Chapters Arranged Reverse.
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
,Part 1: Chapter 11-21
Environmental Economics, 2024 Release
Chapter 11
Command-and-Control strategies: The Case of Standards
Updates for 2024 Release
Chapter 11 includes an updated example for ambient standards and updated data
and content for the exhibit on snowmobile regulations for Yellowstone National Park.
Chapter 11 questions for further discussion remain unchanged.
Objectives
A primary goal of this chapter is to show students that the use of standards, while
deceptively simple and apparently straightforward in application, is more difficult to
manage and problematic in terms of results than is often thought. The chapter stresses
that standards have weaknesses in terms of short- and long-run cost-effectiveness, but
that they have advantages in terms of monitoring and enforcement.
Main Points
The first section simply introduces the three main types of environmental
standards—ambient, emissions, and technology (also called design or engineering
standards). The rest of the chapter deals with various aspects of the economics of
standards. The first issue is the level of the standard, discussed in relation to an ambient
standard as in Figure 11.1. There are two important facets to this problem. The first is the
general one of where to set the standards in relation to marginal benefits and marginal
abatement costs. This is, of course, the balancing issue, which the students should now
have an easy time with because of the earlier material, especially the standard pollution-
control model of Chapter 5.
The second part of the question is the one about whether regulators should set
uniform standards or not. If standards are to be set in accordance with some notion of
marginal abatement costs and marginal damages, this would imply that they should be set
at different levels when these circumstances differ. We will run into this many times in
later chapters when we discuss the implications of setting uniform standards in
heterogeneous economic circumstances. Of course, this is the central issue in assessing
the cost-effectiveness of standards.
There is a section on the long-run impacts of standards, especially the questions of
the incentives the standards provide for engaging in R&D to reduce marginal abatement
47
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
,Environmental Economics, 2024 Release
costs. Of course, this presents an overly simple image of the pollution-control industry,
and class discussion might usefully point out that there is in fact a pollution-control
industry that specializes in residents handling equipment and methods. The incentives for
innovation on the part of polluters are translated in part to a demand for new products by
the pollution-control industry.
The other major topic covered in the chapter is enforcement, a problem that is not
given sufficient weight in many economic analyses, though that seems to be changing. It
is important to help sensitize students to the fact that it is necessary to think explicitly
about enforcement; that standards, like any laws, have to be enforced. Figure 11.5 shows
a simple enforcement model, in which the concept of the marginal penalty function is
introduced. The discussion also introduces the distinction between initial compliance and
continued compliance.
Teaching Ideas
Belief in the efficacy of publicly prescribed standards to bring about changes in
behavior is deep in the bones of most students. They are surrounded by standards: speed
limits, age limits for alcohol consumption, regulations on cannabis distribution,
automobile license requirements, housing codes, and so on. They are part of a culture that
sees law as basically a matter of setting and enforcing standards, and they usually accept
without question the basic idea that, if actual behavior is not conforming to standards, it
must be because enforcement is not sufficiently vigorous.
There are perhaps two central messages to get across here. One is to take
advantage of the situation and shift the discussion to the economics of enforcement; this
will be a new idea for most students and can be a very valuable lesson. The other is that
for many situations there are some better alternatives to standards, especially the
incentive-based strategies.
It is useful to pursue with students the basic trade-off question in enforcement—
the allocation of resources to enforcement up to the point where their marginal cost is
balanced by the marginal gains. In an earlier chapter (Chapter 9), we introduced
enforcement costs by simply adding them to standard abatement costs to get what might
be called aggregate marginal abatement costs. A more direct way might be to use a graph
like the following:
48
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
, Environmental Economics, 2024 Release
MD 1
MC 1
MD a
2
MC 2
b
c d
0 c1 c 2 100
Degree of compliance
Here the horizontal axis shows the degree of compliance, that is, actual compliance in
proportion to theoretically complete compliance. This may be a new idea for many
students because they are used to thinking of compliance as binomial, either yes or no.
Speaking of compliance in continuous terms will be an innovation. The MC curves show
the marginal costs of achieving increased compliance; their location depends on
enforcement technology and on the particular standard employed. For example, MC2
refers to a less stringent standard that sources will have an easier time meeting, and
therefore the marginal costs of achieving compliance are lower than for the standard
pertinent to MC1.
The MD functions show a reduction in damages resulting from increased
compliance. MD1 refers to the stricter standard and MD2 to the less stringent standard.
One can then discuss the efficient levels of enforcement and examine the net benefits of
enforcement. The case shown in the figure is one where the net benefits of the less
stringent standard (the area b + c + d) are possibly higher than those of the more stringent
standard (a + b).
Uniform standards are discussed primarily in terms of the equimarginal principle
and the added costs they imply when marginal abatement costs differ. We have not
stressed enough, perhaps, the savings in implementation costs that uniform standards
might entail, relative to policy approaches that treat sources differently. Most of the
argument for uniform standards is based on two ideas: equity, through treating everyone
alike, and “leveling the economic playing field,” through requiring that every source meet
the same environmental requirements. When marginal abatement costs differ among
sources, however, these two ideas don’t necessarily imply equal standards.
There is an ambiguity in the marginal abatement cost concept that good students
will identify. Some differences among marginal abatement costs are legitimate and others
are not. If you are dealing with sources in two different industries, but emitting a
49
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Instructor’s Manual with
Answers to Discussion
Questions
FOR
ENVIRONMENTAL
ECONOMICS An Introduction
2024 Release
Barry C. Field, Martha K. Field
Part 1: Chapter 11-21
Part 2: Chapter 1-10
All Chapters Arranged Reverse.
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
,Part 1: Chapter 11-21
Environmental Economics, 2024 Release
Chapter 11
Command-and-Control strategies: The Case of Standards
Updates for 2024 Release
Chapter 11 includes an updated example for ambient standards and updated data
and content for the exhibit on snowmobile regulations for Yellowstone National Park.
Chapter 11 questions for further discussion remain unchanged.
Objectives
A primary goal of this chapter is to show students that the use of standards, while
deceptively simple and apparently straightforward in application, is more difficult to
manage and problematic in terms of results than is often thought. The chapter stresses
that standards have weaknesses in terms of short- and long-run cost-effectiveness, but
that they have advantages in terms of monitoring and enforcement.
Main Points
The first section simply introduces the three main types of environmental
standards—ambient, emissions, and technology (also called design or engineering
standards). The rest of the chapter deals with various aspects of the economics of
standards. The first issue is the level of the standard, discussed in relation to an ambient
standard as in Figure 11.1. There are two important facets to this problem. The first is the
general one of where to set the standards in relation to marginal benefits and marginal
abatement costs. This is, of course, the balancing issue, which the students should now
have an easy time with because of the earlier material, especially the standard pollution-
control model of Chapter 5.
The second part of the question is the one about whether regulators should set
uniform standards or not. If standards are to be set in accordance with some notion of
marginal abatement costs and marginal damages, this would imply that they should be set
at different levels when these circumstances differ. We will run into this many times in
later chapters when we discuss the implications of setting uniform standards in
heterogeneous economic circumstances. Of course, this is the central issue in assessing
the cost-effectiveness of standards.
There is a section on the long-run impacts of standards, especially the questions of
the incentives the standards provide for engaging in R&D to reduce marginal abatement
47
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
,Environmental Economics, 2024 Release
costs. Of course, this presents an overly simple image of the pollution-control industry,
and class discussion might usefully point out that there is in fact a pollution-control
industry that specializes in residents handling equipment and methods. The incentives for
innovation on the part of polluters are translated in part to a demand for new products by
the pollution-control industry.
The other major topic covered in the chapter is enforcement, a problem that is not
given sufficient weight in many economic analyses, though that seems to be changing. It
is important to help sensitize students to the fact that it is necessary to think explicitly
about enforcement; that standards, like any laws, have to be enforced. Figure 11.5 shows
a simple enforcement model, in which the concept of the marginal penalty function is
introduced. The discussion also introduces the distinction between initial compliance and
continued compliance.
Teaching Ideas
Belief in the efficacy of publicly prescribed standards to bring about changes in
behavior is deep in the bones of most students. They are surrounded by standards: speed
limits, age limits for alcohol consumption, regulations on cannabis distribution,
automobile license requirements, housing codes, and so on. They are part of a culture that
sees law as basically a matter of setting and enforcing standards, and they usually accept
without question the basic idea that, if actual behavior is not conforming to standards, it
must be because enforcement is not sufficiently vigorous.
There are perhaps two central messages to get across here. One is to take
advantage of the situation and shift the discussion to the economics of enforcement; this
will be a new idea for most students and can be a very valuable lesson. The other is that
for many situations there are some better alternatives to standards, especially the
incentive-based strategies.
It is useful to pursue with students the basic trade-off question in enforcement—
the allocation of resources to enforcement up to the point where their marginal cost is
balanced by the marginal gains. In an earlier chapter (Chapter 9), we introduced
enforcement costs by simply adding them to standard abatement costs to get what might
be called aggregate marginal abatement costs. A more direct way might be to use a graph
like the following:
48
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
, Environmental Economics, 2024 Release
MD 1
MC 1
MD a
2
MC 2
b
c d
0 c1 c 2 100
Degree of compliance
Here the horizontal axis shows the degree of compliance, that is, actual compliance in
proportion to theoretically complete compliance. This may be a new idea for many
students because they are used to thinking of compliance as binomial, either yes or no.
Speaking of compliance in continuous terms will be an innovation. The MC curves show
the marginal costs of achieving increased compliance; their location depends on
enforcement technology and on the particular standard employed. For example, MC2
refers to a less stringent standard that sources will have an easier time meeting, and
therefore the marginal costs of achieving compliance are lower than for the standard
pertinent to MC1.
The MD functions show a reduction in damages resulting from increased
compliance. MD1 refers to the stricter standard and MD2 to the less stringent standard.
One can then discuss the efficient levels of enforcement and examine the net benefits of
enforcement. The case shown in the figure is one where the net benefits of the less
stringent standard (the area b + c + d) are possibly higher than those of the more stringent
standard (a + b).
Uniform standards are discussed primarily in terms of the equimarginal principle
and the added costs they imply when marginal abatement costs differ. We have not
stressed enough, perhaps, the savings in implementation costs that uniform standards
might entail, relative to policy approaches that treat sources differently. Most of the
argument for uniform standards is based on two ideas: equity, through treating everyone
alike, and “leveling the economic playing field,” through requiring that every source meet
the same environmental requirements. When marginal abatement costs differ among
sources, however, these two ideas don’t necessarily imply equal standards.
There is an ambiguity in the marginal abatement cost concept that good students
will identify. Some differences among marginal abatement costs are legitimate and others
are not. If you are dealing with sources in two different industries, but emitting a
49
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
