EC238 Chapter Notes - Chapter 7-12: Emission Standard, Environmental Policy, Transfer Payment
Econ Term Sheet Lesson 7-12
Chapter 11
Command and Control: A public policy designed to reach a socially efficient equilibrium where
political authorities mandate behaviour in law, then use enforcement techniques (courts, police,
fines) to get people to obey the law. Emission standards are an example
Compliance Cost: Total abatement costs required to be in accordance with an environmental
policy such as a standard.
Private Costs = TCC (includes cost of taxes or permits)
Social Costs = TAC (just the cost of abatement)
Cost Effective Equilibrium: An equilibrium in which different sources of a pollutant are
controlled so that the MAC of the sources are equal for each polluter’s last unit of pollution not
released into the environment. This minimizes the TCC of reaching a target level of emissions. It
satisfies the equimarginal principle. Where MD=MAC
Transfer Coefficient: method of converting emissions of a pollutant from a particular source
into an impact on environmental quality at a monitoring station or receptor point. They are
dependent upon scientific factors such as meteorological relationships and the physical and
chemical properties of the pollutant.
Types of Standards
1. Ambient : A never-exceed limit on the amount of a pollutant that can be present in the
ambient environment. These are typically expressed in terms of average concentration
levels over a specific interval of time (e.g., per hour, per day).
2. Emission (performance): never-exceed levels applied directly to the quantities of emissions
coming from pollution sources.
3. Design: Technology-based standards that require polluters to use a specified technology to
control emissions of a pollutant. These can also be called engineering standards.
4. Individual
5. Uniform
6. Bubble
7. Technology-based:A type of standard that dictates polluters use specific techniques (e.g., a
particular type of pollution abatement equipment) or follow a specific set of operating
procedures and practices.
8. Technology-forcing: Standards set at an emission level that is lower (i.e., more stringent)
than the socially efficient level. This is done to provide an incentive for polluters to engage in
research and development to invent cheaper ways to meet the standard; that is, to find a
technology that yields lower marginal abatement costs.
Chapter 12
Market-based Incentive Policy: The use of market or market-like forces to encourage polluters
to reduce emissions to the target level set by the regulator. These include taxes and other forms
of charges or fees, subsidies, and transferable emission permits.
find more resources at oneclass.com
find more resources at oneclass.com
Porter Hypothesis: An assertion that a well-designed environmental policy can not only reduce
pollution but improve productivity and competitiveness if it results in innovation and efficiency
gains that the firm had otherwise not recognized or engaged in.
Transfer Payments: Payments made by a party to the government that are eventually recycled
back to the public in the form of government expenditures. They are not counted as a social
cost of an environmental policy. (Tax is a type of transfer payment or auctioned permits)
Two-part emission Tax: A tax rate that varies with the level of emissions released into the
environment. For example, a relatively low tax rate may be set on emissions up to a specific
threshold; thereafter a higher tax rate applies.
Net social benefits of a policy: the total damages forgone net of the social costs of
compliance.
Double Dividend of Taxes: The first dividend of an environmental tax is reduced pollution and
the second dividend is the increased consumption, saving, work and or investment in the
economy that results when the environmental tax revenue is used to finance lower tax rates
elsewhere in the economy. (Tax revenue collected from environmental policies can be recycled
into the economy reducing other taxes)
Chapter 13
Transferable Emission Permits (TEP’s): A property right to emit a specific amount of pollution.
The right is transferable; that is, it can be sold or given away.
Emission based TEP system: A transferable emission system that allows the holder of the
permit to discharge specific amount of pollution per unit time. Permits can be traded on a one-
for-one basis anywhere in the jurisdiction.
Hot Spot Problem: When non-uniformly mixed pollutants accumulate in a particular part of a
jurisdiction causing a high concentration of pollution/low level of environmental quality at that
site. For example if a firm closer to a city purchases emission permits 1-4-1 from a firm farther
from a city there is still the same amount of emissions but there is more damage as the impact
of the firm closer to city has a higher MD.
Chapter 15
Concurrency: situation where more than one level of government has laws applying to the
same activity or thing.
Paramountcy: If more than one level of government has a law covering the same thing, the
federal government’s law has precedence over the provincial law.
Voluntary Emission Reductions: The amount of reduction in emissions taken by polluters
even though there are no laws or regulations requiring these reductions.
Chapter 16
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Command and control: a public policy designed to reach a socially ef cient equilibrium where political authorities mandate behaviour in law, then use enforcement techniques (courts, police, Nes) to get people to obey the law. Compliance cost: total abatement costs required to be in accordance with an environmental policy such as a standard. Private costs = tcc (includes cost of taxes or permits) Social costs = tac (just the cost of abatement) Cost effective equilibrium: an equilibrium in which different sources of a pollutant are controlled so that the mac of the sources are equal for each polluter"s last unit of pollution not released into the environment. This minimizes the tcc of reaching a target level of emissions. Transfer coef cient: method of converting emissions of a pollutant from a particular source into an impact on environmental quality at a monitoring station or receptor point.
