Exam 4: Conventional Solutions to Environmental Problems: Command-And-Control Approach

According to the cost-effectiveness criterion, all polluting sources would abate pollution up to the point where their individual abatement levels were equal.

According to the textbook application about Catano, Puerto Rico, the primary source of the severe air pollution in that city was identified to be

According to the textbook application, recent EPA rules and regulations proposed under the Obama administration

Suppose that two firms, X and Y, face the following abatement costs: MAC_X = 1.2A_X, MAC_Y = 0.3A_Y TAC_X = 0.6A_X² TAC_Y = 0.15A_Y² Further assume that the combined abatement standard is 40 units for both firms. Use this information for any or all of Questions . -According to this model, if the government uses a uniform standard

Environmental standards can be specified as

It is highly unlikely that environmental standards are set at an efficient abatement level because of

Among the reasons that may explain why abatement standards are not set efficiently is imperfect information.

Based on the criteria of allocative efficiency, an abatement standard is set optimally if

Suppose that two firms, X and Y, face the following abatement costs: MAC_X = 1.2A_X, MAC_Y = 0.3A_Y TAC_X = 0.6A_X² TAC_Y = 0.15A_Y² Further assume that the combined abatement standard is 40 units for both firms. Use this information for any or all of Questions . -Based on the model given, the cost-effective solution would arise if

According to the cost-effective abatement criterion, all polluting sources would abate pollution up to the point where their individual total abatement cost (TAC) levels were equal.

Consider the environmental problem created by two paint companies that release chromium wastes into a nearby stream. The state authorities set a standard for the waterway that requires a combined abatement level (A) for chromium of 15 units. Suppose that the two firms, firm 1 and firm 2, face the following marginal abatement cost equations: MAC₁ = 3.2A₁ and MAC₂ = 0.8A₂, where costs are measured in thousands of dollars. a. If the state uses a uniform standard, show that such a ruling would not be cost-effective. Which firm should be abating more, and which firm should be abating less? b. Now find the cost-effective solution.

If an abatement standard is set to satisfy allocative efficiency on a national scale, that standard would not be optimal at the regional level unless the national MSB and MSC functions were identical to those at the regional level.

According to the criteria of cost-effectiveness, an abatement standard is set optimally if

If an abatement standard is set to achieve allocative efficiency at the national level, then

Suppose the combined abatement standard is set at 22 units and firm J and firm K have MAC functions of MAC_J = 0.5A, and MAC_K = 0.75A, respectively. If firm J is abating 10 units and firm K is abating 12 units, firm K should abate more units and firm J should abate less.

A command-and-control approach to environmental policy

According to the cost-effectiveness criterion, all polluting sources would abate pollution to the point where their individual marginal abatement cost (MAC) levels were equal.

The marginal cost of enforcement (MCE)

The command-and-control approach to environmental policy uses rules, emissions limits, and various incentive-based policy instruments.

The marginal cost of enforcement (MCE) must be added vertically to the MAC_mkt to derive the marginal social cost (MSC) of abatement function.