Pollution standards vs charges under uncertainty
- 76 Downloads
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
Unable to display preview. Download preview PDF.
- Adar, Z. and J. M. Griffin (1976), ‘Uncertainty and the Choice of Pollution Control Instruments’,Journal of Environmental Economics and Management III (October), 178–88.Google Scholar
- Baumol, W. J. and W. E. Oates (1988),The Theory of Environmental Policy, Second Edition, Cambridge University Press.Google Scholar
- Bohm, P. and C. S. Russell (1985), ‘Comparative Analysis of Alternative Policy Instruments’, in A. V. Kneese and J. L. Sweeney, eds.,Handbook of Natural Resource and Energy Economics, Vol. I, Elsevier.Google Scholar
- Fishelson, G. (1976), ‘Emission Control Policies Under Uncertainty’,Journal of Environmental Economics and Management, III (October), 189–97.Google Scholar
- Helfand, G. E. (1991), ‘Standards Versus Standards: The Effects of Different Pollution Restrictions’,American Economic Review 81 (June), 622–34.Google Scholar
- Roberts, M. J. and M. Spence (1976), ‘Effluent Charges and Licences Under Uncertainty’,Journal of Public Economics V (April/May), 193–208.Google Scholar
- Russell, C. S. (1986), ‘A Note on the Efficiency Ranking of Two Second-Best Policy Instruments for Pollution Control’,Journal of Environmental Economics and Management 13, 13–17.Google Scholar
- Tietenberg, T. (1988),Environmental and Natural Resource Economics, Second Edition, Harper Collins.Google Scholar
- Weitzman, M. L. (1974), ‘Prices vs. Quantities’,The Review of Economic Studies XLI (October), 477–91.Google Scholar