PIGOVIAN FEES Inte put ow mts we explored the asst markt cana be don 1 = ‘ide he igh amount of pliton mets fal when i come 0 publi ade. Neral, sume references are crmunicad to producers ough th ice rye, The sie robles of pollo sha wi a pice Sse, polar do at ss the ‘mage caused bythe pluton ie ent In Wea chap, ne expel How iy ad sepstiton cold sve the pote, We ow cose the skate pyro fev ment ire an sending siglo pollies—e goveranen pies pln ‘Siac olla adh isp ahr wor plier pa pice ery ust f palo hey genet. This cores th markt alte, ates n eo 1, PIGOVIAN FEES: SINGLE POLLUTER aly inthe eat century the English economist Artur C. igo argued forte im ston of aes on gener of plkson Since the sacl cos of plition i ex fave some ty pling, the goverment sow inerene with «tx, malig pala ‘ore con 1 the polite I te pan smc clo produc, the ple ll ‘rodace lee poll, Ths tax ha ctr ob ald Pagoan fe cx goin Suppose we have a fatry geeraig potion inthe amou x and goods out nthe amount. Prodoction css forte factory depend nx andy (ts well = put ces) an ean be wen Ci) suming ip pres are constant Fo the mos Par. tre can ao stume wil eprodaced where the maria ow of peucton of rds Toga to te price of soode For tt reso. ado Sap thing imple, we wil Seroesred in Pole Sat he nd of he chat The clinton of yan he su Presson ftp pices ress oss which depend on only, CU with marginal oss ‘MCh ational costs rom producing one mere unit of olson, x Since ess f destin ase heremd, marginal cos ae stl nav. Anterwy of ing.Pullin, Of coun the marginal savings ite negate ofthe marge MSs) Fre sume hee aN people sounding the fcr nd that platon causes damage. Forte ine being stvme that peopl cannot se octal he to change the eoun of plluion ty face. Ths thee nthing 4 pon ct doo eda so her exposure short of geting he factory oct back, or ponte anagem pl Tuto, which postive an increases in Tera evel ys fn ‘epeing this damage. We coal li ay tat person ‘Benefits fom he plas ne ‘sono B) with benefits segaive and esresng in x Or, we could sy that Dis ‘he wilingness top to elimi the poliaon. Toa damages seven by 3.00) cm) The ght smcun of pollaion the aout ta inimizes al cons ad damages Da) 2 mininizes (Cl) + 969) 2a) We know tht somethings mised when ts minal sz, Ft, he magia of sum oa th sum ofthe mara. Ths we cn st the ar fhe ‘iy in races (7.2) 2: cee) + MDG) =0 ay) Subtinting the magia version of (7.1) nto Bg, (7.20) and reoogicng that mar- inal svings is tbe negative of rgnal cot, we on sie = 3, MOUS) 20) In other words, we seek evel of pollton sch th he marginal svings tote fim fom polation (—) sequal the marge! Gamage tom pluton over ene pop non, Siac pola ss pubic tad, the agra gna damage (MD) isthe va ‘ical Su othe india marginal damages (WD) A. The Fee Level ‘We ne sen hat a mare wll nt spontaaousy emerge to supply the ih aout of pollen. it id each individual would reclve compensation eq 9 MDI" pet uit 5 polio (Linh rice) andthe fim woud py MS(*) pr un of pli, Tas ‘oul indie tbe fem o genet the cect amount of oltion. Bugs would ba sce bee ofthe retains in E72. Suppose the fem pail MCs") pert of olan bt pid ito the goverment intend ofthe consuer of te pale, ‘This would elt in be caret amount of plision being pneu sd sine consumes ano fet hi exposue, te fat ht hey arent compensated lleva er lency. Tis the concep of «Pgovie fe. Definon A Pgovian oi pdb the plier per anit of polation exc ea 10 he agrepse maria damage cused bythe pluton when elated a the ein! level f polation Te fe i generally pad the goverment ‘This suaon is sued ia Figure 71 fr the ease of oe potter an 0 vie time ofthe pln, Shown ithe lamer al of theft marl con of pal toi omer tol cot fr he ttn pt ini of ou), The magia sings tothe factory i the neti of tha shown athe Hat ppt uaa. Ae fa tory inrestesplision fom oo enone al svings ae nly gut igh When ‘sons areal ae, he avn from mitigate mae ae such sar, ‘Tous MS(o) dowd sloping. ‘Ao shown in igre 71 re the margins! damage fron fr the wo vcs of the pluton: MD). Margo damage the negative of te demand funtion fo po. 1g for each fhe india Each of the mapa damage ches op op ‘ing. When polation level are stall, eo mare unto pola cases lite damage ‘When polton vee we ihe, tha extn uit canes toe danage Since the alton ‘sa pict, aggregate marin damage, ke aggregate demand, he Vera sam ‘ot incvigul marpinal damages, Ths alo shown ote fgue (DG), The pal ‘noun of pollo ee for which MDC) = MSU, sown a in gure 7. Alo Shown ia Feu 7.1 sth Pgovian fp Ite polluter caged p* pr nt fa Ion, the polls tally sex pollen ae priced ap Thinking of pollution wan ‘up of te fen. he fir exives~p of revense for ach nit of polio tc. he MSG) = pr 3) ‘Theta aoa of money the fm pys fr he polon ep “Another way of viewing thi robles that ite Pigovan fee and witout ary oer macht orreplatos fo retitplion, the fi scaly sep of er for palaio Isoptinal (om the fs pit ew) forth mf spo 0 ‘no pase by rods where marginal ot ar se igre 7.1). Torta pl Tuongeeraon, we mst teres he et f olan by rang the fx. Ate Is ‘etims af palin ME ‘Md marginal age MD sees ma ‘nape MOQD ra ct of ning a fe prPIGOVIAN Fees ‘sed from em plain generation gad eines nil we tech when te fe ‘Noe it he Pgoria defined asthe mara savings fom plo gene on ate aptinal evel of pluton. Imes tthe pina, the Pion el be nites the creat pina cost of plain cul ne the mara damage fem lion. Thos te Pigvian fee isnt ay ems fs the marina ings fen Plone eptinal polaon kev B. Should Victims be Compensated? (One feature of the Pigovin fe i att si to he government nd the goverat eps it Isnt cesar o py ot a compensation ote vcs fe poaton aliiough ts not undsiabe dos, Why? Remeber tatty tiny the sees {or eine is thatthe acon of consumer od pases be cect, How tach i dis ielevat except the extn that tindesotialbeevir Siac comme an do nahin tints how much plltion they se expos! fo. pment of cm ematon wills change thi bebua sv polloion Sch aynet woul fe oly ‘income rae. On te eer hang, consumer an cange chon, Yeo {Chap 5 that cossomer should not be compete. If te they wld to mone toward the pallon. Ins cae payment of compensation swe tan newal-it ces eer, Ths in eer case, a long a ear Jeaing with» pe Ba, he Pgovan fe shoud be levied and ented bt ned be pd otto i ‘The arate ender may ask he foning Ifthe Coase Theorem fac the problem fetes, why do we need Pgovian es? Further, mo’ Pigvian foes eacete the probe if he Coase Tire sao perting? ‘Consider the case of Anns nd Brest who thi tie ae nighbors, Brewster ge ras lot of garage and Anna doesnot. Tost wih we have fo propery Hah Browser gets dof his exces gate by tosing I oer te fence nn it niet yd Thi situato is efesen ppc n Puc 72, Sowa i Fig 72 is the maria saving o Brewer fom honing subg: ver he ence nto Ann's ar (MS) Also shown i theta daoge Ana fs fom tis meio aciviy iD), Brewster il inlined to np he pot igre 72 Figo Conan lon, MDW) Marin ema am page fem Ml, sin level o eau evn Te ‘bebop lea mpg wi Po fn tr: Coa payment Bei sia goin oe arp ane8 REGULATING POLLUTION In previous capers, we discus the vies of markt for allocating goo nd se- ‘ces but ali th problems mires hve allocaing evienneatal gous, petically Pallon Inthe lt chapter, we ook sis step toward corecing te market ures Flcited wth pollution by intosecng the concep of goin ee, which generaly trots to cect the ofileney protien ssocted with pllon. But «Pgwan foe {es not sentneoay emerges makes do fr conventional goods. I eds etal | fatboy goverect io plement the fe In tis chuper we ice the goverment a an aie player ia svg he rod- tems ssocied wit ollon. In some cate, he goverment wil play 4 molest ro, Simply laying dowa the ound rules for 8 qusimarto operate solve he polaion Proton note ete, the goverument wil ly a mach mare ible le, dieing se ‘ie patos a owt emision are alowed Albough goverment can se prob lems that decenrlced mares cnn, overatent ea alo fal Goverment air is fo foc here, Bt we shoul! te swage hat goverment intervention fo cu market | falar is ot alway soccesf! Some ways of nervening to save plltionpcblems tue ber tan ebers RATIONALE FOR REGULATION “The teary of somomierepulton ges far eyed he ser of once en ronmen {al regula, In fac, eviomental regulate 8 spi sd eae vet xa ple ofecnense regulation or that ran, tr aprorae oplace i i lage on Bowne repulaon involves the goverment nevi ea vay of ys, in the pate actions of firms and individuals. Thre ae two base eerie of regulon, the pbc ners theory andthe intrest gowpher.* Te puicineret thon of tlaon view be purpone of relation 2 he promtioa of te publi inte. fn his net thr ae ee peer eons wy roultion might exe: impart competion,REGULATING POLLUTION imperfect information and ext. The iret gow theory of replat views the se of mein oing th mon mae of plea y “To a cern extn, the public ners ary of reruition i norm theo Recall ht some theory seks o expla what shoul appea in an Kea woh coast ners up tery sapere to explain why wel soe a doe, pee competion parcalary natural monopoly she tional sormtve sition fr goverment elation nthe es of atl nop uch ar al tckydstriutn company), economic effiseney call for single fm, Ie emt god dea to ave mall et of oles nd wie tancingdowe tors coonctig residences to sources af power* The roof goverament iso gutter a monopoly fo ater fen esti he exe fnew firm) ana, oom pce in ene fo pee ‘A rebted rol of goverment iso prevent wd concentration of power in ma ‘ets in which mulipe competing fim oreset he bert erguniationa stucre ehis ‘sete goverment temps wo prevent cllsion ad ree merges hat wil ete ‘cenive market power, The aay of US antru lavs, staring withthe Sherman Act of 190 i deine a preserves cumpettveenzonmen in the United Stes, oe ing practices ttre dared aicmpctie, Many ater counties hve amore aise fae attude vac aticmpetine ati since srk sci often sce bole omesic indus inthe interno apace. ‘The second major atonal or government sulin ithe cae of impr n formation. Acting nfrmaion coy. Ar aconequence, when cone ae ext {eterna transaction, hey may ot aloes be compet norman one ach £8 prot quay, Puiomare, became of he ost of acing infomation, tm nt ‘en be dete or conse asquze complete information te cst fay fa x ‘eed the benefits. Imapne at each tine we entered a grcery sore we had to Cott ‘tev eon he ay exc food te. Ths justin forthe govcmmest te sep into compensu fer isomplet informiton Tele be relatively hans ‘tye merveton ich as etbishing et of abit rls to cacoragethe Vision safety eed quality I probleme occr in consming pict fem canbe eld ile Property designed such iabity rex cn ince so pov cent level of saft-latd quay, Of couse, goverment can lo more dey intervene a she mares, speiyngsceptelevel fai, sucha is enraly he ease Wi tdadon o fou aes A thd atonal Yor goverment regulation nthe ae of the provision of pub lie goods and tds bli bods and exerts sre of enue or fons, As we knoe from air capers, when thee are lemons of “publics” (onary o onc abil), private markt eit, Governmen inervenes oY cone th ob. Jem. Government may ste nwo rest provide these gods or Dasa een lve sffecively eliminating the private market Ths feed te eae wi ple pods (ional dene) and rly he ete with pe tach ne cae of pubic hase ‘he wn apc for overeat defn a of statins and psn wo gv tm the provision ofthese pai adh, ee he povemment exsist af el tons esti he proocton of pan ect gp ny of epi tis at et tg Se omy ‘lon than an explain of why ume rguions exit poste theory fle ‘hon. Wht ant by rent sokng? Rent secking involves pve advo ews sing th goverment o purr ex ris et) ough goverment andaed re Scions on economic sei Fr instnce, US equirements fat cri acon of Clean-felgstlle adie te renewable sources fundamentally « iby 10 proticers of ehaol nth iidwedt United Sas (he equimment lap nated Tair quali) Groups that beef rm och guon lay govern for esions What provide tem with ren tht wool ot xi a competive make. Ml. A POLITICAL ECONOMY MODEL OF REGULATION ‘The basic problem of envounenl regulation nels he goverment ying nce 1 ple fo take soil stable stows, which oni re not nthe best tee ‘tepals. Bat he goverment ty not lay be alt eel ool he po Iter: To frter complies murs, the government fae a compen plan fe. ining ete wha evel of polation ie for vst. In eli, the govermet aes ress rm coasumes an pollsters. Altus fl developmen thi iteration I bejon the scope of his cussion, ue. | eae ame ofthis conplsiy Showa in Figure 8.1 ir highly syd scheme ofthe ntcractons among goverment Po ‘Te government i shown ln gine 814 contig of tice tranches, ei nur, he juiay ane egltr Alou he rene ay vary oa Ay county, thie a reseably genera epesetaon of hase government. he Unied Sates, the legislature woald be Congres the repsatos would Ye the EPA, dd the jcciary would be the Feral cours. Inthe Ui Kingdom Palament wold be te legate. The eplace woul be he Depart of Enver, Tampon dhe Regions, lbough eer ranches orto oll governmental eves pluton onl at nthe Unite Staten) The cour ste Hoe of Lads woul be tee leat ofthe judiciary. bough ne reply proses tends ob legos in EU than inthe nied States. The leprae lav defn wha the fegultas eto {on cotlng pllaion, The rept ae charged wth he dled implemen ‘tthe legis awe The repultr'sactons ae temper bythe jada. Not tat the leit my have dict achieving its goss since doe ot dc inease ‘hepa bt mst ct ugh ashe pa of povernmen. Ti tor part Of over ‘ent—therepuator—may have different pal Fons, gusts my bs nested Ino secu of the sz of he baresracy they cola wel ain acing pln levels. Furermor, the jy ay temper te acts of he regulstrs "The firm ar shown in Figue com of sever pee, The Board of Dee tor the cae ofthe in, ltowgh iti sabe oon by the owners tock ‘bondholders. The Bead er drectves to he mange the manages ise ‘eciver 0 employees who proce he pod tthe fm wel spall The Ley ‘Dot that repos rect he Boar ake ceran acts, bathe Bou ered,De igure 1 Schema fitaonsamsng goers pling ems commer ie by sever sep, from the employes who acu generate te polls. Furtemore, the Board as her objectives in aint pleasing the repltr (uch a pleasing te Secloles). General, dit trmed the prncipal-agen peblem beat ofthe tbiliy athe EPA he faci 6 empleely col he polser he aged. Noe a the frm may no be pase eny but may in fat inne legion, gh ob ‘ying or fancia incemvs, These re hown ie B a Figure 8 nally itis the consumer who cease te goods produced bythe fm 6 well 1 the paluin generated bythe frm. Consuer fr a teary whom ee sare i seposealy serving. Tha consomen diet vote aoe infact le sare ie A), wile the ame ine vending mone to ef In exchange fo the te oneomed "Ther is obviowsy much deal ising from Figure 8.1. We could ave employ: es oracles lbying the legate, for exams o Gs obying the ieaty ‘rough adversing.Nevertls, the eece of te proces reposted in Figure 8 Tere ae ely two important ans tt hui be nen from Fighe i The fest stat thre ae any perc inks between the lepltre andthe ple ering process. Ste the lepre cana phy cot pasion Gel, trust rely o inde means toon ts nde, nd often tse acre means my eet than pret Reguaion may be excessively con may retin cone cea, ‘my retin excessive ine del, and yf fn fo uch plain "The second pa ke from Pir is that te lgitre dos ot cesar Ay cas on ficettenercent masini of wil welbeig Although we ay tik ithe "best ithe leisure is aenced only by en wel, a west by lne IL BASIC REGULATORY INSTRUMENTS ‘Al Figure 81, the legistue wil ety be intend by ar interes, ach w the ‘ellen of the polar, a rece nie B. Thi thedstncton between meme Ute her. what soul happen pcp maximizing cizen were with soa smc fer equi), an postive tery. what wil ype (a balacing of rst, ome “pt mt" some nod). This isincion i imporamSometines we ating to nga abet ‘egultion in which ese We wan to Enw win should Kappen. Ino cue, wea {ying 0 uodesnd Why «cna eultin i on he Boks, in which case we sold ‘interested in wnt wil tappen ory snsthig has bppened. Often tence of line Bis teed replation with endogenous pats: be oman of ie Bi ered ‘epuliion wah exopenus pbs We cana view exgenos polis a siding wid the puicnteest dary of ralaion Though it my be gute dif 0 duc the fm odo the apt ing the fndamentl objective of the relay agency so mains soil welfare hw er defined, subject othe regulary consti faces. Typily, the cjcive he Teglutor is viewed as maximsing the sum of producer tad constr suis, ftps ‘wth lg bias toward coasume span “Te pov inset pop hoary meine ets consistent wh the ene os poles mol of replaton. Wit endogenous ols, we are cones fh ‘ty oflmeres groupe (boxes in Fgue 8.1). tues he elo, lento, pe hips the jadi. Envnmental regulation is prculty ssceptble to irs gap inane. One interest gop iscleatthe fms otal subject 6 environmental ‘alone poles, “owns” Ante nes group however, Be “eens ‘eviementl interest group, Underning hw the boa nd este inka with ihe leisure and vegtery agencies can expan why we tee the enviromental ga Tadont we do. ving unt acne the prevalence of oniflicing incentives an pve inforaon, ‘hs san peop time fo inrace the two mo fe of enviinetal elon Economie ceeuves and command nd cones ‘A. Command and Control Command and-contl elton ithe dominant frm of eviorenal realtone the ‘wel oy. Albough ean tke many ferme, tetas concep of cama nd so {ali fo be reguao t speiy e stp nv polters mot ak oes Ikon proble.The een of cman comtl i ha rogue cllet maton neces 0 decile he physical acon o contol pols: he elitr emmands the ple 1 ke specie physical sep to cate he pollston. The mg lator is generally quite speica 1 what ps mast be kes ‘Conmand-nd-onol eulions cn take mary forms. Oi way of conveying the sare of command and contol i by example or nstnc, te Clean Alr Act a henied Stats rere the EPA io dtr the nim pollitin cot perfoan of sow sores of pollaion. The EPA i ued to ssc for each ow egy of Scarce (eg sew power lass new efi) what olin conte a emission ‘aes we dccood scceptate. This mean tha he EPA mast investigate te practon cee fr Mery every pe of plat or factory inte Unie Sate tes i ei. ‘et pollo invaved Fa ise ne manatee EPA hashed epee ‘ocxmine the proceso ire mapuacar,pnerang2"Conl Techy Gidelie ‘hic indater what ideo pollition sonra ae pop for new te unc tng pints In ndash aply sre cous (eg fumine manfacu), el one my poe mits on he pes of conings att te wed of ay er elt wea eran pe of emt yam to espe tops ta re ented Sing PuloungFurteemore,procuts may be Bane aogetir ai theca wth many ol se pli ran aes of the Unied Sates mst every afloed by ptoheml tog. Powe plans (peducing csc) may be ei ase ert cole © ‘ace emission of wlfer die. At oe tne ia te Unie Sa, fae gs dea Seaion was reed on ll ew coed omer plat segues of he uncom aie io Be ‘Command-ndconol regulation uke many specie fms, Specie pllin ctrl augment requirement can De specified ein the sbove exampe, Alas ‘be reulion ray spec an emison lim fo pata type oF pants and parila lun An example might be he US. standards for ew atomcies every new cat ew case eed have a pce defied system for cpr apo a might ‘Scape rom th gasoline tank ding refting (In he cs fsuomobes a maja: ‘ert bears on olson sow mach theca wed There vill no eplaons ‘nh Unie Stes adesing diane driven except for mode tats on alin) a the case of poner pln, uel galty may be lime ese contest cannot exceed 1%) or emo per ut of ile may belied (eg, no moe tnt 12 ponds af sulfur oxide may be ented per ion Br ffl ed). ‘Command an onl my inf be cine with sisi fines an pnaes associa wah sencomplitc, Sich ncenives oc with crand ant contol ‘eglation sud abe cnfsed with an esommsc incetv ote plluon Though ‘ommnd an contol may take many Tom here are 0 Key fetes that stings ‘sommaod td contol from ecoeomi inative: (1) rere choice fr he pollu {0 wha means wil be se 0 achieve an appropriate even tage (2) Tack ‘of mechansms Tor equalizing mars! coma eats among several ferent pols For sare pollsters ld bya regulator ta oat ae parti ype of eu ‘ment te pil tas ie con dtemining esos If ate a hp way 0 ‘tain he sue eve nisin, ach cont saving ant be parses. Sone command ‘ed cotarequnon ay fr! some dcrion to the pole, Platts ay far Stace, be tld that hy can emit pt certain aon per ito ode cupl Ce {ams ofS per wh sl) Thi ves toe nto fo the pot, thought po Ie at ie at enon mn cs hat ve le pooner lanton of some ofthe pllon coal decison ht oul be ade by te pate, "Te best anlogy for command sad conta che term of een plang that xine inthe forme Soviet Union o manage scone. Rather han et ries sig Tinive scarcity and tu dc uals ond e ere, nearly all dione hac, neste and oven irate were made Cental by cent pass Tn theory hn cn work a well aay sytem The problem tate infomation (urements are eaoonus. In scaly, paar operate with very incomplete nen ton, which leads o seb inten. Despite tee problems thi i mr oH how pollain pseraton Is mane in most cous ARboogs hs apreach or ‘ng i esoony proved oo budensone fer the Soviet Ue, eevitonental esa ‘amos mrt ecnoae i anlily o hve sch uate sae pluie cor tals only a modest prof mars exonomi On the te and, oe su erpc tobe pul wo siglicayirgove one caret system. ‘What he pos an cons of command nd contr? Commandand.catol gv Iaons hae one mij advange ae exhty repli cole even ‘process and th mach ger cera ia baw mich platen wil esl fm ree Io fn an wan sca wih fsa floes laos comsatng fey 0 ‘vel level of wha polation, ican be diflt ofaho wekabl et of sms {tes oak ncenves wo eaten veo palson. Fremont ler of uncer, whee ts unclear Bow «polit ped oan eomomie featve, command und conral gies peter certainty 0 how ch polation wil ct tly bemited” Anos avantage of cman and cnt sin siglying monty of complanc with resus relents at pil pce of plan ool eet mont te wed menting npy investing wheter te ‘nent us been stl. Tis csr han mesg ptaon esos, ‘Thee are of counedsavanage 10 cmd snd cont, Because he info Son costs high foreman an cot uch aregly mse can be very col ‘ih ere. Tere also depts fer enue ifrman ples, Tet Imran nas rly on afro from the polit ern eee ron cost feo. Beatc af is, th par an nove o distr informa po ‘de tote replace (Thovgh is pblem often apis er fms of replat va Avery secs probe wth command nd cnt rede incnives oid beter maysto conto plu, Tismy be priya sat it, Ging proces chang or oer meas o redex pol. rH mht nove vexing in tesarch n ee ‘ays of catalog plan. In ser case many types of command uncool p> ‘ie wea ncetves or novation ee afl Sins, 1995). ethps oc of sg probes with ommend un ona iia nt ferent polars geserang the tame pola, This could cer only if reel te completly contin tht ssessent of cch fn’ ctl eat, the marina eons ‘ polsion ae not ela cos of pian one wl te unecearyhgh, This fare of te cnaring pcp strate In Tle 81, wich ows ‘he magia cat of conlingbilgcl oxygen demand (BOD, mewure af Wee lion in ver snd iaks. Table du from an anlals Magnt cl, 1980) 9REGULATING POLLUTION TABLE 1 Maria Trearent Costs of 800 Ramona US. Regulations oer ‘Sen cory Net ping Stl gine 2 epg ce 8 ped Sie re Met roting i peeing igh 2 Leste Figo ehh ih om ean ‘eer posh pe os ite saat ace oe ete ec 2 Eeestay ie “Dh dap Mega 200 mmr how the USEPA was legisatve made regarding wate gait ino regulations {0 spy to individ firms, Cle, the eimai picpe ve. wos be ‘ochre cs effi, withot ring the enorme Io ela elias on Some ‘the igh ot indies sd pen reunion on same ote lower cost inses ‘As tober etanpl, Table 82 3 lsing of 4 umber of US, command-and om eles that ar designed to protect alta sve Us. Inert es ‘ved tthe nly gal af the regulation, the equimarginal inci also fal 0 he ‘Some regulations save Ives at Very low cast, whereas Some are extenely cosy (eg fomaldyde nthe workplace a 72 bln per fe sred) ‘ina robles tat with command and contrat pllae ays cal Ke pt: in contol red damage rm he polio th lente even after or trols ein plc, To tetely provider «eit he pole, which ay cee & ‘ry ofdserions. Asan example of hr conde paper sauce With pulp (be ‘aw mtr iter cong trom rye paper (sumed pollu fre) cr ign wood BASIC REGULATORY INSTRUMENTS 143 as Seelam patna tik Hrrsned los 90 8) Aine Sie Bm o —_ome 310 io Sibir oat etn 2am Ea Fremerrenparoneny Shaw nas ico emt mnie ert 010 nicen (vith soi pllision. ficemlyreplting the manufactur of iin wood pulp i ve scing tha the proper politon sono cheved al atthe daage fm ay Testing poison is cen the pie of pulp This way the pice of pulp ees Palin cnzol cous andres damage. However, fcomantan cota regu Eons requis onypollaon col and net te payment of sual damage, rel ing pice of iin pulp wil be lower, Why ths denne? I x ay to sce dat with "ower pie of virgin ul, pope anafctres se mele to chose vis Pulp tree mcpled ul, Reais caper. Ar ares, here wl ete olan a B. Economic Incentives Beanie incentives, n onrat o command nd contro regulation, povide ew for potas wo do wha preted tobe nthe public meres We ae al fala ith ne ‘rive lsd of lorly montoring his homework cy, «part may ove "sual ed for good pads (ra dincenve orb ses) The eats align ‘ui nd paat inenives nthe cnet of plato, tee ae te base pes of ‘Sconomi nenive: foe, muhetable pers and Iai,Polluion fe involve the payment of charge per eit of plain emi If be fee isatthe ghee, hs wold be an example of Piovian fer, When» pollster mat ey for every unt plain amid, t comes inthe pollsters interest ore ‘Anurictble emit allows pollsters toby and sl he igh opie, Tho what stars voreting akin soma sd onl pret 1 olla) ts ato an 0 ‘omc incentve by allowing ting. Tadngindacer apc vl on perm op Ie, tuscan frm ose pling at an expesne acy sx polation meas fewer permits nes be Bove Thre ean oppor cst of eiting by ae ening. tte frm cn ell ee peat This used in Figsre 6.2, which cmesponds to he stato a which tie se ovo ples We a ines in allowing 109 us of polaon ina. We san by ging ech fem 50 permit The marginal savings rom pling fon re show in Fig £2 forthe two fins Tey have bern de sot any pit slog the hor zo este auber of pes each rm ols rea rm hee fori 1 3 from the ib for fem 2. Note hat wading wil Osa nl fr 1 hols and Gem 2 lds 100 The eu pe of pen ip 11 poral that anemison feof p* would achive excl the same cutee. Suppose here = ie uncertainty, Wath an emsion fe, we kom facial iat he marginal cst of exc wil be: we are les sire abst the gua of poll Yen, Wid a cle pei, we Know exaty how mich pln tere mil be; we an es sr ofthe marl ces fen, Lisl is ti typeof econ incentive. Te bac de is ht fou arm {ake alps damage fom Jor activity nto scout when eng how cel So ef yur avi. The important sues hath goverment isnt ling You what “do, jus tt you wil e responsible for any consequences. Ths crests a neato ‘becareul when dering ky ait and. in fc okt oily desirable aout of preston in nding sch ky stv. Tolar ili, sopotewe ve whadu wat storage fail ("du") ‘The damp can do hing o mini the ak of haar wastes aking the env iar 82 Marin sein to Fon 2 palling face fr two i. Was Mal srving fone ng fem yeas ‘bly ope 7 roanest. We es tamp al of erik reducing tities noon rm, recat,” the dump es a great dea of pcan, he ko leak wil low the Gu kes. Tite precaution, he i wil be igh. Preauon of coun expensive forthe Gimp undeake ll ober hing being, the damp woul retro take itl premton Damage to silty alo depends om the level of precio, This i sed in gue 83, which sbows both cot to te dump and camage ost a facto of i eve of precaution, Thee some socially ibe level of pecan at wich he mar {onl cote of aking mee pectin se fast fit by te reducon a aril aap from king more recauioe Labs works by ying tthe mp: "Do hace yoo at bt ot a acide! cer we wl id he ctl desl ve pcan 1 you wer aot king that velo psa, you wl be resemble all fee ‘rome damage om the aie” Thi show negligence ability works aug ‘te pes of aly werk na ir aha, Te het being bed responsible fo ‘cident damages is fe slice incentive for fim tts the seal dsinble ‘Oe of he Gomiast questions ia eavsomenal economics ni ulin oe the ‘vide when mos economist eloveecnonclcetves re ch ete. (Cleat, economic incentives bea number sans ovr command at coe tol Fist ifomana eueent ass gic lis ener o Kno What it ing on within frm owe an emson fx, Futberoe, conc ncn il provide an incentive fora plu mora, ning cheaper ays otal a Isr psyng fr contol cons wl pln damage Ths te 20 plc os siy totes. As we le, he fee payments spina the Sage sci withthe polaion. Consequsythe cost atl ste pec) ofthe pod maneaed | sociation wih pluton wil eect onto coe st wel vesdal pollute da tg Inthe previous eso, he example of pape mantra he impatance tts evionenl age ph os, eg a cmd tl oe ea teesanyProtly the biggest advantage of eoaomicinenvs i that be irnl ri ciple wil astomataly old for most pen of einomis incentives Far nae, ith {tm enssion fl fms set thai cost of polation cnt equal tothe. The ‘imarginal principle vial sated, When lms nde polation poms, he pce ‘fhe permit at wl be dried by the peat market sends he sue igual tall ltrs esting the operany cos enuting The egunarial nie wil bold ‘ewe wil ae in Chaps 12 nty eftetely baste paler stig mapa ‘heme cost equal o maria damage Ths he euizargin pcp wlll hol ‘Wy is meaing the eaumarnal pil so impart? Basically base the cos of ‘mplaton willbe higher ithe eur penile does hl, perhaps mic high. ‘Thus economic ncetves have the cost saving avanage ‘Terre dmdvemtge to ccoomi incentives. One problem is forging st of ono never tha an accom the complain af enviar nfo Intlon witht big excoively complex and ipraccl Jest nko wna pll- {ton in which the rage from unit of emasons cn vay conidembly fa bd ace tou tine, Desloping an conor incentive eel and erect takes thse om ‘ee ino account canbe very ii. "Asesnd problem ni seen nents i Ire pica. here «reat al of ncerainy ssid wth the etveotmenalproBien eng conto, say te neemary tad he evel ofthe incentive ve fhe ee, nanber of makele erm ee) ovr tne, a neration becomes raise This maybe very fiat ‘many pact stuors. Fr ntnce sch an ase in the Unie Shes might ‘gure Congressional acta. tak ovr 10 yes of bt In Congres before he US. ‘isn Air act wa amended ia 190 to ince sidan conto "Atl problem, also polit at many econo lcetvs involve massive tender fom firm othe goermet,Aneissions tae pene 3 ems amt f even forthe goverment acnsering the a Tis may Be god fo the ove tet iting sch tx my be very ial pc, pel case se ‘realntanfer. This explains in Ire prt wy subtialemisson fees have gone over ins mash econ cots ension fs have bee wi) we in "he frmer Soviet Union and Eastern Europe becuse of te tional deistion of he fee evenet lnvesmeat in poluion ctl Sate extepies IV. COMPLICATIONS FOR ENVIRONMENTAL REGULATION A. Space and Time In cot 9 most pes af repuation, polation eston scopic byte physical envionment a poss Hel fetveen pers ad consumes. Tiss sued in pie 8A pole generates emis, These ensions are wansforme, posbly in Compl fahio, oanbientconcenraon of plliton.Brstos ease no damage ‘tbat concesrioe that case dange Ths an important dinincon. The Word mbit referee wold rood us. Thats ee here. Ambien concen ae he Coocentton f plone sir od sone water we dank Ics ant cov (COMPLICATIONS FOR ENURONMENTAL REGULATION 147 oem Sgao | Fighs we tne the ambien environment. Thee wil be diflren pce x taser oe