Topic 4 - Economics of pollution control Flashcards
Define: absorptive capacity
Ability of the environment to absorb pollutants
Define: Emissions load
Amount of waste product emitted
Define: Stock pollutants
Pollutants for which the environment has little/no absorptive capacity (e.g. plastics)
Define: Fund pollutants
Pollutants for which the environment has some absorptive capacity, so long as the load doesn’t exceed the capacity e.g. carbon dioxide
Define: Horizontal zone of influence
The spatial domain over which damage from pollution falls (local, regional, global)
Define: Vertical zone of influence
Whether the damage is caused mainly by ground-level concentrations of air pollutants or if the concentration is in the upper atmosphere.
What must the efficient allocation of pollution take into account?
That pollutants accumulate over time, and damage increases over time
What does dynamic efficient allocation do?
Maximises the PV of the net benefit
Net ben . = consumption -costs (incl. damage cost)
What is the impact of having the emissions rate lower than the absorptive rate?
Link between current and future damage is broken, can use static analysis.
Outline the cost-effectiveness equimarginal principle
Cost of achieving a given reduction in emissions will be minimised if, and only if, the MC of control equalised for both emitters.
Outline emissions standards
Legal limit imposed on each source (a ‘command and control’ approach)
Outline emissions charges
A fee levied on each unit of pollution released - incentive for the firm to reduce emissions so can reduce the charge
How can the efficient charge level be determined?
An iterative method (trial and error….)
Outline cap and trade
All firms face a limit on what they can emit - through allowances which are tradeable
