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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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)
Can be targeted
Seems to offer immediate relief
Associates limits in the entity that causes the pollution (assigns blame)
Defines legal/illegal behaviour
Requires careful and costly drafting to target harms (lobbying)
Hard to define right level (different from 1)
May have unintended consequences (industry relocation)Standards
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
Figure : 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
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.
(a+b) – (c+b) = a-c
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)