Economics of pollution control
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Economics of Pollution Control. CH. 14 Part II. Market Allocation of Pollution. When firms create products, rarely does the process of converting raw material into outputs use 100 percent of the mass. Some of the mass, called a residual, is left over.

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Market allocation of pollution
Market Allocation of Pollution

  • When firms create products, rarely does the process of converting raw material into outputs use 100 percent of the mass.

  • Some of the mass, called a residual, is left over.







  • In the case of stock pollutants: Uncontrolled markets would lead to an excessive production of the product that generates the pollution

  • Too few resources committed to pollution control, and an inefficiently large amount of the stock pollutant in the environment.

  • The burden on future generations would be inefficiently large.



  • For private property resources, the market forces provide automatic signals of impending scarcity.

  • When private property and open-access resources (fisheries) sell in the same market, the private property owner tends to improve the excesses of those who utilize open-access properties.





Efficient policy responses
Efficient Policy Responses efficient level of pollution control, but also it penalizes those firms that might attempt to control an efficient amount.

  • Efficiency is achieved when the marginal cost of control is equal to the marginal damage caused by the pollution.




  • An alternative approach where marginal control cost equaled the marginal damage, efficiency would have been achieved for that emitter.would be to internalize the marginal damage caused by each unit of emissions by means of a tax or charge on each unit of emissions (Read Example 14.1).


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