EC120 Lecture Notes - Lecture 20: Eurocopter Ec120 Colibri, Marginal Utility, Marginal Cost
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Wednesday november 27th 2017: marginal benefit of abatement is decreasing. Marginal cost of abatement is increasing: polluters can reduce pollution in a variety of different ways, some are cheaper than others. Optimal abatement- when marginal cost of abatement equals marginal benefit. If benefits are generic to the economy, efficiency requires marginal cost of abatement equalized across companies. Direct regulation: rules to reduce or eliminate specific pollution sources. Emissions taxes: pay a tax or fee for every unit of the pollutant produced. Tradeable pollution permits: must own a permit in order to be allowed to emit pollution. Households or firms either must do something, or must not do something else: companies must install specific technology in industrial production, households may only produce specific amounts of garbage each week. Works well if rules are clear: bans on leaf burning. Less effective if complete abatement is not desirable. Charge a specified fee for every unit of pollution.
