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Notes for Chapter 11. ECON 2390. Ideally, standards should reflect a social efficient balance of MD and MAC What are the losses incurred when standards deviate from the socially efficient position (Hint – go back to the total costs associated with the polluter and pollutee). Possible benefits

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Ideally, standards should reflect a social efficient balance of MD and MAC

What are the losses incurred when standards deviate from the socially efficient position (Hint – go back to the total costs associated with the polluter and pollutee)


Standards

Possible benefits of MD and MAC

Conceptually simple

Can be targeted

Seems to offer immediate relief

Associates limits in the entity that causes the pollution (assigns blame)

Defines legal/illegal behaviour

Possible Costs

Requires careful and costly drafting to target harms (lobbying)

Enforcement costs

Hard to define right level (different from 1)

May have unintended consequences (industry relocation)

Standards


Types of standards
Types of standards of MD and MAC

  • Ambient

    • Specifies level (average concentrations)

  • Emission

    • Point source control

    • A form of performance standard

  • Emissions and ambient standards are quite different

  • The nature of the pollutant and the context determines which will work best.


  • The Canadian EnerGuide Label of MD and MAC

  • Average annual energy consumption of the appliance in kilowatt hours (kWh)

  • Energy efficiency of the appliance relative to similar models

  • Annual energy consumption range for models of this type and size

  • Type and size of the model

  • Model number

Australian Labelling


The international ENERGY STAR symbol, displayed alone or as part of the EnerGuide label, identifies major electrical appliances that meet or exceed technical specifications designed to ensure that theyare among the most energy efficient in their class, without compromising performance.

Consumer Reports on Energy Star

http://www.consumerreports.org/cro/home-garden/resource-center/energy-star-has-lost-some-luster/overview/energy-star-ov.htm


Figure : part of the EnerGuide label, identifies major electrical appliances that meet or exceed technical specifications designed to ensure that theyare among the most energy efficient in their class, without compromising performance. Typical steps in developing and administering labelling and standards programs

Source: Wiel, S., & McMahon, J. (2005). Energy-efficiency labels and standards: A guidebook for appliances, equipment, and lighting (2nd edition). Washington, D.C.: Collaborative Labeling and Appliance Standards Program (CLASP). Retrieved from http://clasponline.org/clasp.online.resource.php?sbo=289


The leap frog model of voluntary labelling
The leap-frog model of voluntary labelling part of the EnerGuide label, identifies major electrical appliances that meet or exceed technical specifications designed to ensure that theyare among the most energy efficient in their class, without compromising performance.

Shift

Shift

Figure : Effect of voluntary and regulatory measures on markets for appliances and equipment

Source: Wiel, S., & McMahon, J. (2003). Governments should implement energy-efficiency standards and labels—cautiously. Energy Policy, 31(13), 1403–1415.


Incentive effects of new standards
Incentive effects of new standards part of the EnerGuide label, identifies major electrical appliances that meet or exceed technical specifications designed to ensure that theyare among the most energy efficient in their class, without compromising performance.

  • The key to interpreting this chart is to always understand that the area under a marginal curve is total (damages experienced or abatement costs).

  • One can examine incentives by looking are differences in areas (labelled a – e).

  • The socially efficient point under MAC1 is at 20. The total abatement costs are a+b, and the total damages are d+c+f.

  • If the MAC falls to MAC2, the socially efficient point falls. Total damages decline to f, and the tot abatement costs become c+b.

  • The affected party benefits since total damages decline, while it is not clear whether the polluter benefits – it depends on the net change in total abatement costs.

    (a+b) – (c+b) = a-c


Compliance enforcement
Compliance - enforcement part of the EnerGuide label, identifies major electrical appliances that meet or exceed technical specifications designed to ensure that theyare among the most energy efficient in their class, without compromising performance.

  • The key point is that enforcing compliance always raises abatement costs.

  • Compliance costs tend to increase the socially optimal level of emissions.

  • Make sure you understand how the total costs are affected by compliance.


Looking forward to chapter 12
Looking forward to Chapter 12 part of the EnerGuide label, identifies major electrical appliances that meet or exceed technical specifications designed to ensure that theyare among the most energy efficient in their class, without compromising performance.


An interesting relation between sales of suvs and price of gas
An interesting relation between sales of SUVs and price of gas

Small price reduction triggers sharp increase in sales

Notice how the sales and price move closely and inversely

Figure 2: U.S. passenger new vehicle shares and the real price of gasoline, 2004–2006

Prices are expressed in 2007 U.S. dollars per gallon (right axis), while vehicle shares are expressed in percentages (left axis).

Source: Congress of the U.S. Congressional Budget Office (2008, fig. 2-2)


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