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Economics 350 EPA Water pollution Optimal pollution Environmental Economics Air pollution Abatement costs Solid municipal waste Cost-benefit analysis Hazardous wastes Tradable discharge permits Global warming Command and control Endangered species Emission taxes Organic wastes

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Economics 350

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economics 350

Economics 350


Water pollution

Optimal pollution

Environmental Economics

Air pollution

Abatement costs

Solid municipal waste

Cost-benefit analysis

Hazardous wastes

Tradable discharge permits

Global warming

Command and control

Endangered species

Emission taxes

types of water pollutants
Organic wastes

Sewage, residuals from factories, pesticides, oil, detergent

Inorganic substances

Toxic metals, salts, acids, nitrates


Radioactivity, heat

Infectious agents

Bacteria, viruses

Point source vs. Non-point source

Continuous vs episodic

Persistent vs degradable

Types of Water Pollutants
biochemical oxygen demand bod




Time or Distance


Biochemical Oxygen Demand (BOD)
  • High levels of DO (dissolved oxygen) are good
  • DO used up in degradation process
  • BOD: amount of oxygen required to decompose organic material
water pollution policy
Initial burden was on states/localities

EPA established in 1970

Federally set TBES

State/local enforcement

Municipal treatment subsidies

Refuse Act (1899)

Water Pollution Control Act (1948, 1956, 1972)

Introduced TBES in 1972; moved away from AQ standards

Loan subsidies for construction of water treatment facilities

Zero discharge goal by 1985

Clean Water Act (1977)

Fishable-swimmable goal

Focus on toxic effluents

Water Quality Act (1965, 1987)

Converted water treatment subsidies to revolving loan fund

Focus on non-point sources

Water Pollution Policy
technology based effluent standards
Technology-Based Effluent Standards
  • Effluent standard set at the level of emissions a source would produce if it used particular technologies
    • Best Practicable Technology (BPT) by 1977
    • Best Available Technology (BAT) by 1983
    • Best Conventional Technology (BCT) after 1984
estimated total costs and emissions from sugar beet plants using alternative abatement technology
Estimated Total Costs and Emissions from Sugar-Beet Plants Using Alternative Abatement Technology

BPT = ?

BAT = ?

BCT = ?

efficiency and cost effectiveness of tbes
Efficiency and Cost Effectiveness of TBES
  • Efficiency conditions not met
    • Equimarginal principle not satisfied
    • Marginal damages not considered
  • Two Questions:
      • How much has the nation’s water quality been improved as a result of the system?
      • How much more improvement could have been obtained with a more cost-effective approach?

600 subcategories of water-polluting industries

rivers and streams supporting recreational uses with and without cwa
Rivers and Streams Supporting Recreational Uses: With and Without CWA

632,552 Miles Analyzed during the mid-1990s

If all point-source

emissions are eliminated

tbess and incentives
TBESs and Incentives
  • Weak incentives to adopt cleaner technology
  • Creates bias toward “end-of-the-pipe” techniques
    • Ignores input reduction
    • Ignores output reduction
    • Ignores recycling technology
  • Discharge permits
  • Initial compliance vs continued compliance
municipal wastewater treatment subsidies
Municipal Wastewater Treatment Subsidies
  • Federal subsidies to build plants
  • Degree of Treatment
    • Primary: use physical steps (removes 35-40% BOD)
    • Secondary: use biological means (removes another 45-55% BOD)
    • Tertiary: use chemical process (removes most the rest)
  • WPCA (1972) mandated at least secondary by 1983
municipal wastewater treatment subsidies13
Municipal Wastewater Treatment Subsidies
  • How are grants allocated?
    • Needs survey: existing population, problem areas
    • Political pork
  • Incentives?
    • Excess capacity: construction grants but no operating costs grants
    • Economic development?
    • No incentive to seek out more efficient tech for cities
  • Water Quality Act (1987)
    • Replaced direct grants with State Revolving Fund program (“loans”)
water policy innovations
Water Policy Innovations
  • Focus on Non-point sources
    • Design standards
      • No agricultural cultivation on steep slopes
      • Designs on urban storm sewers
      • Home builders must control run-off
    • Tax materials/activities leading to NPS
      • Fertilizers, chemicals
  • Total Maximum Daily Load program
    • Emission limits if TBES don’t achieve ambient standards
  • Tradable Discharge Permits
    • Fox River, Chesapeake Bay, Long Island Sound, Dillon Reservoir
    • Problems
      • Thin markets
      • Trading ratios

EPA estimates 50%+ of water violations due to NPS


Ozone: filters out ultraviolet radiation

Other gases provide for “greenhouse” effect

78% Nitrogen

21% Oxygen

federal air pollution control laws
Federal Air Pollution Control Laws
  • Early law was local in nature; focus on “nuisance laws”
  • Air Quality Act (1967)
    • Required states to established ambient standards for “criteria pollutants”
    • expanded grants to states for air pollution control plans
  • Clean Air Act (1963, 1966, 1970, 1977, 1990)
    • Established uniform NAAQS
    • Established TBES
    • Stationary vs mobile sources
    • SO2 tradable discharge permits
criteria pollutants
Criteria Pollutants
  • Particulate Matter
    • Health: breathing symptoms; aggravation of existing respiratory and cardiovascular disease; impairment of the body’s immune systems; damage to lung tissue; premature mortality
    • Welfare: damage to materials, soiling; visibility impairment
  • Sulfur Dioxide
    • Health: adverse effects on breathing; respiratory illness; alterations to lung’s defenses, aggravation of existing respiratory and cardiovascular disease
    • Welfare: foliar damage on trees and crops; contribution to acid rain; accelerated corrosion of buildings
  • Carbon Monoxide
    • Health: exposure to elevated levels causes impairment of visual perception, work capacity, manual dexterity, learning ability and performance of complex tasks; individuals with existing cardiovascular disease are at greater risk
  • Nitrogen Dioxide
    • Health: lung irritation, reduced resistance to respiratory infection; continued or frequent exposure may cause higher incidence of acute respiratory disease in children
    • Welfare: contributes to ozone formation and acid rain
  • Ozone
    • Health: reduced lung functioning; damage to lung tissue, increased sensitivity of the lung to other irritants
    • Welfare: reduction in crop yields; foliar damage to crops and trees, damage to ecosystem
  • Lead
    • Health: damage to kidneys, liver, nervous system, and blood forming organs; changes in fundamental enzymatic, energy transfer, and homeostatic mechanisms in the body; excessive exposure can cause neurological problems such as seizures, mental retardation, and/or behavioral problems
national primary and secondary ambient air quality standards naaqs 2005
National Primary and Secondary Ambient Air-Quality Standards (NAAQS), 2005

Source: Table 15.4, Field and Field (4e), p308

stationary source control
Stationary Source Control
  • State Implementation Plans (SIPs)
    • AQCR: 247 regions
    • Growth management regulations and TBES
  • TBES
    • Non-Attainment Areas
      • Existing Sources: RACT (Reasonably Available Control Technology)
      • New Sources: LAER (Lowest Achievable Emission Rate)
    • Prevention of Significant Deterioration (PSD) Areas
      • Existing Sources: None
      • New Sources: BACT (Best Available Control Technology)

Note: New Source Bias

        • Creates incentives to hold onto older, dirtier, factories
        • Creates incentives for older factories to produce to capacity whereas newer factories may have excess capacity

Cost-Effectiveness of TBES ?

comparison of cac control cost with least cost programs
Comparison of CAC Control Cost with Least Cost Programs

Source: Table 15.6, Field and Field (4e), p311

cap and trade cap program
Cap-and-Trade (CAP) Program
  • 1990 CAA: reduce SO2 emissions by 40% from 1990 levels
  • Phase I: 1995 – 2000
    • 110 power plants in 21 eastern/midwestern states
    • # permits = (Avg Btu of fuel used) x (2.5 lbs SO2/million Btus)
  • Phase II: 2000 – present
    • Covers all power plants in US (approx. 1000)
    • # permits = (Avg Btu of fuel used) x (1.2 lbs SO2/million Btus)
    • Overall cap of 8.95 million permits
  • Trading Rules
    • CBOT
    • Participants: corporations, individuals, green groups, speculators
    • EPA tracks all trades, monitors emissions
    • $2581 fine for excess SO2
clean air markets in action
Clean Air Markets in Action
  • Affected Sources
  • Allowance Prices
    • Spot Auction
    • 7-year Advance Auction
  • Trends in SO2 Emissions
  • Geographic mean centers of trading
mobile source emissions
Mobile Source Emissions
  • Federal focus has been on emissions per mile
  • Equimarginal principle suggests all RHS factors should be balanced
  • New Car Emission Standards
    • VOC, NOx, CO, PM
    • “Technology forcing”
    • Inspection and Maintenance programs
  • Technology Standards
    • Reformulated fuels
    • Alternative fuels: methanol, natural gas, hydrogen
    • Clean cars: electric vehicles, hybrids

Number of


Average Miles



per Mile






Massachusetts v US EPA: Supreme Court rules 5-4 that CO2 is a pollutant and the EPA is responsible for its regulation


Stationary and Mobile Sources of Criteria Pollutants in the US

Source: Table 15.1, Field and Field (4e), p302


Estimated Impacts of 1990 Clean Air Act

Source: Table 15.2, Field and Field (4e), p302

blasts from the past
Blasts from the past…
  • Silent Spring (1962)
    • Rachel Carson’s call to action
    • DDT banned in 1972
      • Possible cause behind thinning eggshells in certain birds
      • Malaria prevention
          • Malathion is 2x expensive and must be sprayed 2x as often
  • Love Canal (1978)
    • 1920-1940: city used property as dump site (including US Army)
    • 1942-1953: Hooker Chemical
    • 1953-1978: Board of Education & Housing
      • 800 families relocated/reimbursed for homes
  • Times Beach (1982)
    • Dioxin used for dust control
    • 2800 people were bought out
  • Bhopal (1984)
    • Union Carbide accident (methyl isocyanate)
    • 3,800 to 15,000 dead
  • Chernobyl (1986)
    • Radiation leak
    • 50+ dead; 336,000 relocated
  • Chemicals
  • Heavy metals
  • Radioactive materials

Note: Monitoring and Control Problems

    • Chemicals are everywhere
    • Level of danger
    • Used in relatively small amounts
    • Long time gap between exposure and impact
examples of federal laws
Examples of Federal Laws
  • Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA; 1972)
    • Chemical registration
      • Controls on where and how chemicals are used
      • Enforcement through inspections, fines, product recalls
  • Food, Drug, and Cosmetic Act (FDCA; 1938)
    • Legal prohibition of products that fail to meet certain criteria
      • Adulterated
      • Mislabeled
  • Occupational Safety and Health Act (OSHA; 1970)
    • Regulated workplace safety
chemicals in production and consumer products
Chemicals in Production and Consumer Products
  • Delaney Clause: banned all food additives that were shown to cause cancer in lab animals
    • 1996 law changed standard to “reasonable certainty that no harm will result”
    • “Balancing” approach
      • Compare control costs versus damages

Marginal Control Cost


Exposure Level


uniform standards
Uniform Standards
  • Uniform standards at r2 would be inefficient for workplace 1
  • Non-uniform standards would result in different MD at each workplace
    • Firm 1 would have to pay higher wages
    • Competition would encourage firms to reduce their risks (and thereby lower their wage rates)








Risks of workplace exposure

policies approaches for toxic emissions and hazardous wastes
Policies Approaches for Toxic Emissions and Hazardous Wastes
  • Federal focus on TBES
    • “MACT”
  • Waste Reduction
    • Recycling residuals
    • Shifting input usages (non-toxic inputs)
    • Changing product design
  • Other approaches
    • Liability and compensation laws
    • Insurance market
    • Taxes
    • Deposit refunds
    • Right-to-know laws (TRI & public pressure)
examples of federal laws cont d
Examples of Federal Laws, cont’d
  • Resource Conservation and Recovery Act (RCRA; 1976)
    • Manifest system
    • Standards for treatment, storage, disposal
    • Permit system for landfills/incinerators
  • Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA; 1980)
    • National Priority List
    • Superfund: financed by payments from responsible parties
    • Joint and several liability

1432 Superfund sites

(882 have been removed)

Hamilton and Viscusi (1999)

$100m per cancer case averted

state local issues

State & Local Issues

Municipal Wastes

Land Use Control

environmental federalism
Environmental Federalism
  • “States as laboratories”
    • Fed policy may pre-empt state actions
    • State regulations must be at least as strict as Fed regulations
    • State policy can not discriminate against interstate trade
  • Centralized or decentralized approach?
    • Depends on extent of emissions mixing
  • Race to the Bottom?
municipal solid waste
Disposal Options





Municipal Solid Waste

Media switching?


Municipal Solid Waste

Source: Municipal Solid Wastes in the US: 2005 Facts and Figures. Available at


Municipal Solid Waste

Source: Municipal Solid Wastes in the US: 2005 Facts and Figures. Available at

municipal solid waste42
Disposal Options





Technical Options for Reducing MSW

TM = VM + RM

VM = TM – RM = TM(1-r)

Reduce TM

Reduce economic activity

Reduce materials intensity

Increase Recycling

Municipal Solid Waste

Media switching?

TM = total materials used

VM = virgin materials used

RM = recycled materials used

r = RM/TM “rate of reuse”

economics of recycling
Economics of Recycling
  • Producer and Consumer Decisions
  • Private costs versus social costs
producer decisions
Producer Decisions



Increase reuse ratio?

  • Raise q1, hold q0


Public curbside collection

  • Reduce q0, hold q1

PV + t

Reduce overall demand


  • do both!

Increase PV thru tax






With S1: q1 units will be recycled; reuse ratio = q1/q0

Minimum content standards?

 Taxes or TDP?

Cost Effectiveness?

consumer decisions
Consumer Decisions
  • Which goods to buy? In what quantities?
  • Should I recycle?
  • Worksheet on Landfill vs Recycling
    • Mandatory recycling
    • Disposal taxes
    • Deposit Refund











land use control policies
Development vs Preservation


Coastal lands

Critical habitats

Scenic lands

Transportation patterns




Liquor stores

Public Action

Land purchases by environmental group


Develop with restrictions

14th Amendment “Takings Clause”

May not take private property for a public use without just compensation

Land-Use Control Policies
global environmental issues

Global Environmental Issues

Ozone Depletion

Global Warming


ozone depletion
Ozone Depletion
  • Physical Problem
      • surface ozone produced when hydrocarbons and nitrogen oxides mix under sunlight
      • stratospheric ozone: 7-10 miles above earth; maintains earth's radiation balance
      • late 1970s evidence started coming in about depletion; 1985 hole over Antarctica
  • Causes?
      • CFCs: refrigerants, propellants, polystyrene
      • halons: fire suppressants
  • Damages?
      • increase in ultraviolet radiation
      • health impacts: skin cancer, eye disease
      • agricultural losses: damaged crops
ozone policy
Ozone Policy
  • CFC ban on aerosols by US in 1978
  • Montreal Protocol (1987)
    • phaseout CFCs by 2000
    • multilateral fund to help developing countries
    • trade restrictions
  • Success?
    • Chlorine levels declining
    • Bromine levels increasing
    • Ozone hole fluctuating
global warming
Global Warming
  • Physical Problem
  • IPCC Report
    • Temperature increases caused by (human generated) CO2 increases
      • 0.5 ° C (1° F) over last 100 years
      • 1.5 ° - 4.5 ° C over next 100 years
    • rising sea levels on coastal societies
    • rapid change does not allow for evolutionary changes
    • agricultural and forestry changes
global warming52
Global Warming
  • Kyoto Protocol (1997)
    • Prescribed emission reduction targets for 6 GHGs
    • Signatories must reduce GHG 5% below 1990 levels by 2008-2012
  • Technical Responses
    • Increase earth’s absorption abilities
    • Reduce emissions

Total CO2 Production = pop x (GDP/pop) x (energy/GDP) x (CO2/energy)

  • Stern Review
    • Damage estimates: 5-20% loss in annual global GDP
    • Annual mitigation costs: 1% global GDP to meet 550ppm target
  • Policy Options
    • Differences in control costs suggests incentive-based strategies
      • Tradable discharge permits
      • Emissions tax
    • Differences in contributing factors complicate global agreements between nations
  • Types
    • Genetic material
    • Species
    • Ecosystems
  • Species Stock
    • Random mutations
    • Extinction rates
      • Over-exploitation
      • Habitat destruction
      • Introduction of non-native species

5 to 10 million species

1.4 million have been described

Normal extinction rate: 9% per million years

policy approaches
Policy Approaches
  • Endangered Species Act (1973)
    • 1452 species have been listed as endangered or threatened
      • 40 species have been removed
        • 17 have been recovered
        • 14 listed in error
        • 9 have gone extinct
    • Prohibition on takings
    • Protection of habitats
  • CITES (1975)
    • Export/import controls
    • 5000 animals/28,000 plants
  • Coase Theorem Alternative?
    • African elephants
    • Costa Rica and Merck