Advertisement

Environmental and Resource Economics

, Volume 71, Issue 2, pp 337–355 | Cite as

Structural Uncertainty and Pollution Control: Optimal Stringency with Unknown Pollution Sources

  • Richard T. Carson
  • Jacob LaRiviere
Article

Abstract

We relax the common assumption that regulators know the structural relationship between emissions and ambient air quality with certainty. We find that uncertainty over this relationship can manifest as a unique form of multiplicative uncertainty in the marginal damages from emissions. We show how the optimal stringency of environmental regulation depends on this structural uncertainty. We also show how new information, like the discovery of previously unknown emission sources, can counterintuitively lead to increases in both optimal emissions and ambient pollution levels.

Keywords

Information Regulation Externalities 

JEL Classification

Q58 D81 C11 Q53 

References

  1. Chambers AK, Strosher M, Wootton T, Moncrieff J, McCready P (2008) Direct measurement of fugitive emissions of hydrocarbons from a refinery. J Air Waste Manag Assoc 58(8):1047–1056CrossRefGoogle Scholar
  2. Crandall R (1981) Controlling industrial pollution. Brookings, WashingtonGoogle Scholar
  3. Dominguez G, Jackson T, Brothers L, Barnett B, Nguyen B, Thiemens MH (2008) Discovery and measurement of an isotopically distinct source of sulfate in Earth’s atmosphere. Proc Natl Acad Sci 105(35):12769–12773CrossRefGoogle Scholar
  4. EPA: (2006), Technical support document for the proposed pm naaqs rule, Office of Air Quality Planning and Standards February Google Scholar
  5. Etiope G, Ciccioli P (2009) Earth’s degassing: a missing ethane and propane source. Science 323(5913):478–482CrossRefGoogle Scholar
  6. Fowlie M, Muller N (2013) Market-based emissions regulation when damages vary across sources: What are the gains from differentiation?, NBER Working Paper 18801 Google Scholar
  7. Fu JS, Dong X, Gao Y, Wong DC, Lam YF (2012) Sensitivity and linearity analysis of ozone in east asia: the effects of domestic emission and intercontinental transport. J Air Waste Manag Assoc 62(9):1102–1114CrossRefGoogle Scholar
  8. Gray W (2002) Economic costs and consequences of environmental regulation. Ashgate Publications, FarnhamGoogle Scholar
  9. Gray W, Shimshack J (2011) The effectiveness of environmental monitoring and enforcement: a review of the empirical evidence. Rev Environ Econo Policy 5(1):3–24CrossRefGoogle Scholar
  10. Haagen-Smit A (1952) Chemistry and physiology of los angeles smog. Ind Eng Chem 44(6):1342–1346CrossRefGoogle Scholar
  11. Hamilton S, Requate T (2012) Emissions standards and ambient environmental quality standards with stochastic environmental services. J Environ Econ Manag 64:377–389CrossRefGoogle Scholar
  12. Hansen LG (1998) A damage based tax mechanism for regulation of non-point emissions. Environ Resour Econ 12(1):99–112CrossRefGoogle Scholar
  13. Hoel M, Karp L (2001) Taxes and quotas for a stock pollutant with multiplicative uncertainty. J Public Econ 82(4):91–114CrossRefGoogle Scholar
  14. Horan RD, Shortle JS (2005) When two wrongs make a right: second-best point-nonpoint trading ratios. Am J Agric Econ 87(2):340–352CrossRefGoogle Scholar
  15. Horan T, Shortle J, Abler D (1998) Ambient taxes when polluters have multiple choices. J Environ Econ Manag 36(2):186–199CrossRefGoogle Scholar
  16. Keppler F, Hamilton J, Brab M, Rockmann T (2006) Methane emissions from terrestrial plants under aerobic conditions. Nature 439:187–191CrossRefGoogle Scholar
  17. Kim D, Ching J (1999) Executive summary of science algorithms of the EPA Models-3 community multiscale air quality (CMAQ) modeling system, EPAGoogle Scholar
  18. Lemoine D, McJeon H (2013) Trapped between two tails: trading off scientific uncertainties via climate targets. Environ Res Lett 8(3):34019–34028CrossRefGoogle Scholar
  19. McKeen S, Chung S, Wilczak J, Grell G, Djalalova I, Peckham S, Gong W, Bouchet V, Moffet R, Tang Y, Carmichael G, Mathur R, Yu S (2007) Evaluation of several pm2.5 forecast models using data collected during the icartt/neaqs 2004 field study. J Geophys Res Atmos. doi: 10.1029/2006JD007608
  20. McKeen S, Grell G, Peckham S, Wilczak J, Djalalova I, Hsie E-Y, Frost G, Peischl J, Schwarz J, Spackman R, Holloway J, de Gouw J, Warneke C, Gong W, Bouchet V, Gaudreault S, Racine J, McHenry J, McQueen J, Lee P, Tang Y, Carmichael GR, Mathur R (2009) An evaluation of real-time air quality forecasts and their urban emissions over eastern texas during the summer of 2006 second texas air quality study field study. J Geophys Res Atmos. doi: 10.1029/2008JD011697
  21. Miller S, Wofsy S, Michalak A, Kort E, Andrews A, Biraud S, Dlugokencky E, Eluszkiewicz J, Fischer M, Janssens-Maenhout G, Miller B, Miller J, Montzka S, Nehrkorn T, Sweeney C (2013) Anthropogenic emissions of methane in the united states. Proc Natl Acad Sci 110(50):20018–20022CrossRefGoogle Scholar
  22. Montgomery D (1972) Markets in licenses and efficient pollution control programs. J Econ Theory 5(3):395–418CrossRefGoogle Scholar
  23. Muller N (2011) Linking policy to statistical uncertainty in air pollution damages, The B.E. Press Journal of Economic Analysis and Policy, 11(1), Contributions, Article 32Google Scholar
  24. Muller N, Mendelsohn R (2009) Efficient pollution regulation: getting the prices right. Am Econ Rev 99(5):1714–1739CrossRefGoogle Scholar
  25. Newell R, Pizer W (2003) Regulating stock externalities under uncertainty. J Environ Econ Manag 45(2):416–432CrossRefGoogle Scholar
  26. Pacyna E, Pacyna J, Sundeth K, Munthe J, Kindbom K, Wilson S, Steenhuisen F, Maxson P (2010) Global emission of mercury to the atmosphere from anthropogenic sources in 2005 and projections to 2020. Atmos Environ 44:2487–2499CrossRefGoogle Scholar
  27. Ramanathan V, Carmichael G (2008) Global and regional climate changes due to black carbon. Nat Geosci 1(4):221–227CrossRefGoogle Scholar
  28. Segerson K (1988) Uncertainty and incentives for nonpoint pollution control. J Environ Econ Manag 15(1):87–98CrossRefGoogle Scholar
  29. Spence A, Weitzman M (1978) Approaches to controlling air pollution. In: Friedlaender AF (ed) Regulating strategies for pollution control. MIT Press, CambridgeGoogle Scholar
  30. Thiemens M, Trogler W (1991) Nylon production: an unknown source of atmospheric nitrous oxide. Science 251(4996):932–934CrossRefGoogle Scholar
  31. Wang S, Xing J, Jang C, Zhu Y, Fu JS, Hao J (2011) Impact assessment of ammonia emissions on inorganic aerosols in east china using response surface modeling technique. Environ Sci Technol 45(21):9293–9300CrossRefGoogle Scholar
  32. Weitzman M (1974) Prices versus quantities. Rev Econ Stud 41:477–491CrossRefGoogle Scholar
  33. Wu C-F, gang Wu T, Hashmonay RA, Chang S-Y, Wu Y-S, Chao C-P, Hsu C-P, Chase MJ, Kagann RH (2014) Measurement of fugitive volatile organic compound emissions from a petrochemical tank farm using open-path fourier transform infrared spectrometry. Atmos Environ 82:335–342CrossRefGoogle Scholar
  34. Zhang P, Liu J, Dong J, Holovati J, Letcher B, McGann L (2012) A bayesian adjustment for multiplicative measurement errors for a calibration problem with application to a stem cell study. Biometrics 68(1):268–274CrossRefGoogle Scholar
  35. Zhang Y, Bocquet M, Mallet V, Seigneur C, Baklanov A (2012a) Real-time air quality forecasting, part i: history, techniques, and current status. Atmos Environ 60:632–655CrossRefGoogle Scholar
  36. Zhang Y, Bocquet M, Mallet V, Seigneur C, Baklanov A (2012b) Real-time air quality forecasting, part ii: state of the science, current research needs, and future prospects. Atmos Environ 60:656–676CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2017

Authors and Affiliations

  1. 1.Department of EconomicsUC San DiegoLo JollaUSA
  2. 2.Department of EconomicsUniversity of TennesseeKnoxvilleUSA

Personalised recommendations