ECON 436 Lecture Notes - Lecture 8: Environmental Policy, Marginal Utility, Flue Gas
Document Summary
Our analysis has shown that economic incentive (ei) instruments, such as per. Gaps between economic theory and political reality unit taxes and tradable permits, are generally more efficient than command and control (c&c) instruments, such as regulations that restrict the quantity of pollution. However, in practice c&c instruments have been used much more often. In addition, when c&c instruments are used they are usually much stricter for new facilities than for existing ones, and therefore provide incentives for older, more polluting, facilities, to be kept longer. In the relatively few cases where ei instruments have been used, they have been in the form of tradable permits rather than taxes, even though the choice should depend on the characteristics of the mb and md curves. Legislators supply political support for a particular choice of instrument in response to demand from firms, environmental organizations, unions, consumers, etc. Political currency, such as campaign contributions, endorsements, and get-out-the- vote campaigns.
