Pollution standards vs charges under uncertainty
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Conventional analysis of pollution control policy under uncertainty does not properly account for the potential cost effectiveness difference between standards and charges, thus drawing misleading conclusions for the case of inefficient standards. Correcting for this anomaly, the following conclusions can be drawn. When uncertainty involves the position of the marginal damage cost schedule, rather than policy indifference, a charge is always superior to an inefficient standard. When uncertainty is about the position of the marginal control cost schedule, policy indifference may occur, but if it does it must be the case that the slope of marginal damage cost exceeds that of marginal control cost.
KeywordsCost Effectiveness Economic Policy Environmental Economic Control Policy Potential Cost
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