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ECON 3220 (17)
Ali Kamar (17)

Chapter 11-1.docx

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ECON 3220
Ali Kamar

Chapter 11-1 Pollution Standards  A legally binding maximum or upper limit of emissions set by the government o Polluters are subject to fines or other penalties if the standards are exceeded o It is one of the centralizes command-control (CAC) type of policies of environmental regulation o If the government has perfect knowledge of MAC and MD curves, it can determine the socially efficient standard by equating the MAC curve to the MD curve o When a standard is met, net benefits to the society is the difference between total damage costs and total abatement costs (TDC-TAC) for the reduced emissions Types of standards  Standards can be of three types: o Emission standards  Usually applied directly to the quantity of emissions coming from pollution sources.  Emissions standards for new cars in Canada o Ambient standards  Usually applied to the average concentration of a pollutant in the air, water or soil over a geographic region  Air quality over a city o Technology standards  Strict requirements of pollution control technologies that polluters must install,  Catalytic converters in cars and  Smoke stack scrubbers for industries to reduce SO2 emissions Class exercise: Emission/ambient standards  Suppose the government somehow determined the emission/abatement concentration standard at the socially optimal level of emissions where MAC=MD  Using the diagram determine the net benefits to society from this emission/ambient standards o Without standard:  Polluters will emit at E  TAC= 0  TDC= A+B+C+D  TSC=A+B+C+D o With standard  Reduce emission to E* level or face penalty  T
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