Topic 17&18: All Markets For Pollution

Question 1

Benefit of markets

Answer 1

Markets ensure efficient allocation of resources to point where MB=MC

Question 2

Command and Control- Pollution Regulation

Answer 2

Methods used for air and water point source pollution

Include fixed emission standards for firms

Characterised as being inflexible and not including a ‘price like’ element that provides firms collectively with incentive to find a least cost solution to pollution problem

Regulator cannot observe firm’s abatement cost schedule -> command and control cannot account heterogeneity among firms especially in terms of abatement costs

Question 3

Swedish Nitrogen Charge

Answer 3

Addressed acid rain problem

Gives firm incentive to reduce emissions per unit of energy

Charge large emitters in power sector for emitting NOX

Tax is paid back to firms on basis of energy

Question 4

US Sulfur Allowance Program

Answer 4

Cap and trade scheme

Penalty for over emissions

For acid rain

Question 5

Hunter River Salinity Trading Scheme

Answer 5

Saline water discharged from mining and other sources reduced water quality for irrigators

Discharge salty water when there is lots of salt fresh water in river

Credits and license holding