The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Pollution Permits

  • Ted Gayer
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_2589

Abstract

Government can reduce pollution by issuing permits to polluters in numbers below existing emission levels. Under a tradable permit programme, a firm with high abatement costs can buy permits from another firm with low abatement costs, leading to a reduction in the total cost of abating relative to a system where reduction levels are strictly assigned. For tradable permits to work effectively, the emissions must come from discrete point sources and be relatively easy to monitor. Aside from issuing the permits, the government’s role is to enforce compliance and establish optimal penalties for non-compliance.

Keywords

Auction hot spot Carbon emissions Clean Air Act Amendments of 1990. Coase Theorem Externalities Market failure Pollution permits Property rights Transaction costs 
This is a preview of subscription content, log in to check access

Bibliography

  1. Carlson, C., D. Burtraw, M. Cropper, and K. Palmer. 2000. Sulfur dioxide control by electric utilities: What are the gains from trade? Journal of Political Economy 108: 1292–1326.CrossRefGoogle Scholar
  2. Coase, R. 1960. The problem of social cost. Journal of Law and Economics 3(1): 1–44.CrossRefGoogle Scholar
  3. Dales, J. 1968. Pollution, property and prices. Toronto: Toronto University Press.Google Scholar
  4. Hahn, R. 1989. Economic prescriptions for environmental problems: How the patient followed the doctor’s orders. Journal of Economic Perspectives 3(2): 95–114.CrossRefGoogle Scholar
  5. Stavins, R. 2000. Market-based environmental policies. In Public policies for environmental protection, 2nd ed., ed. P. Portney and R. Stavins. Washington, DC: Resources for the Future.Google Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Ted Gayer
    • 1
  1. 1.