1Pollution Overview IIPollution Overview IIFitting Policy Instruments to the ProblemsBroad Pollution Control StrategiesBroad Pollution Control Strategies• End-of-pipe control (prevent waste fromescaping by capturing it- scrubbers, baghouses, carbon from coal)• Problem: Then what do you do with it?• Carbon sequestration in underground wells• Industrial symbiosis (use waste as a rawmaterial)• Pollution prevention (don’t create waste orcreate less harmful waste in the first place)Policy Instruments:Air and Water Pollution ControlPolicy Instruments:Air and Water Pollution ControlRegulating BehaviorIndoor Air PollutionIndoor Air Pollution• Does this type of pollution involve anexternality or not?• What does that imply about the role ofgovernment for this particular pollutant?• What role does the government actuallyplay?• Making cheap tests available• Setting health standards so you know what level issafe• Mandatory testing and disclosure when a house issold.• Assure that products used in house (e.g. carpets,adhesives, etc) are safeQuantity-Based InstrumentsQuantity-Based InstrumentsDirect Control ofEmissions or ConcentrationsAmbient StandardsAmbient Standards• What are they?• Limits on concentrations in the ambient air.• These are the policy targets, but they do not specify polluterresponsibility.• How are they set?• In U. S. primary standards for conventional air pollutantsbased upon an adequate margin of safety for human health(see http://www.epa.gov/air/criteria.html)• Secondary standards are based upon other considerationssuch as visibility.• Except for drinking water, pollution standards for water aremore commonly based upon ecosystem or recreationaleffects.2Aggregate EmissionQuotas or “Caps”Aggregate EmissionQuotas or “Caps”• Whereas ambient standards control the level ofpollution concentration, aggregate quotas or capscontrol the total amount of emissions into the air orwater.• Caps are usually pollutant-specific (eg SO2) anddefined for a specific geographic area (city, state,nation) depending upon the zone of influence of thepollutant.• Used in the Kyoto Protocol on Climate Change andthe US sulfur allowance program to control acid rainamong many other applications (more details nextweek).Source-SpecificPolicy InstrumentsSource-SpecificPolicy InstrumentsMoving from the policy targets tothe policy instruments imposedon specific sourcesEmission StandardsEmission Standards• What are they?• Legal limits on pollutant discharges from specific dischargepoints (stacks, vents, etc.)• How are they set?• Government selects a favored technology from availablecontrol technologies.• What that technology can accomplish becomes thestandard (grams/hour, grams/unit output, grams per mile)• Note that this does not control total emissions (unless thenumber of hours, the output, miles traveled and the numberof emitters remains constant)• Used for both air and water (typically called effluentor discharge standards for water).Emissions Trading-(Credit Version)Emissions Trading-(Credit Version)• Complements emissions standards. Emitters thatexceed legal requirements for reductions getexcess reduction certified as “Emissions ReductionCredit” on the standard is tightened to reflect thepermanent reduction• Reduction credits are tradable and can be used tomeet the standards of the purchaser.• Flexibility added by this program allows achievingsame emissions reduction at substantially lowercost.• Example: US Offset Program (discussed nextweek)Emissions Trading (Allowance or Capand Trade Version)Emissions Trading (Allowance or Capand Trade Version)• The allowance version imposes an authorized aggregateemissions cap. Cap normally declines over time• Allocates these allowances (authorized emissions) on aprorata basis to individual sources (the sum equals thecap), but they are transferable.• At end of year actual emissions cannot be greater thanallocated plus acquired allowances• Note that this approach does involve a limit on totalemissions unlike emissions standards, which regulate aflow per unit time or per unit activity (such as BTUs ofenergy generated). .• More recent US emissions trading programs have allbeen of this type (will discuss later) rather than of thecredit type.Price-Based InstrumentsPrice-Based InstrumentsIndirect Control of Pollution byMaking Polluting Activity MoreExpensive3Environmental Taxation: the ConceptEnvironmental Taxation: the Concept• Principle: Tax activities you want to discourage (suchas pollution) rather than activities you want toencourage (such as income).• Pollution taxes can raise revenue and reduceemissions at the same time.• Allows firms flexibility in what methods they use tocontrol emissions, but puts constant pressure on toreduce.• In contrast to emissions trading it provides morecontrol over price, but less control over the preciseamount of emission reduction.Emissions ChargesEmissions Charges• A per unit charge on each unit of emissions(eg. $20/ton).• To provide more reduction for moredangerous substances higher charge ratesare imposed for more toxic substances.• Requires good monitoring of emissions• Used for water pollution in Europe.• Used to produce revenue for compensatingvictims of pollution in Japan.Presumptive ChargesPresumptive Charges• Used when monitoring emissions isdifficult (developing countries for example)• Set charge rate based upon assumedemission level for that type of source.• If source can prove it emitted less thanpresumed, they get a rebate for thoseextra emissions controlled• Shifts monitoring burden from governmentto sources, which is very useful when thegovernment monitoring capability is weakIndirect ChargesIndirect Charges• Used when can’t directly tax emissions(perhaps because the monitoring isinsufficient - can’t track emissions)• Solution: Tax an activity contributing topollution rather than emissions.• Examples:• Tax on gasoline rather than on auto emissions• Sewer charges based on water use ( which ismonitored) rather than on discharges (which arenot monitored).• Gas guzzler charge on large vehicles (Hummers)Deposit-Refund SystemsDeposit-Refund Systems• A deposit is required when buying a product,but it is returned when the item is returned toan approved collection facility.• Reduces littering or illegal disposal.• No government budget impact. Usescustomer’s money.• Uses• Returnable