Unit 7

Vote for Pedro!!!

Who should control environmental-quality decision making???

• Public sector (government)?• Private sector (businesses & individuals)?• Both?• Let’s dig deeper…

Government Control

• Who are we talking about here??– President– Congress– EPA– Department of Energy– State governors– State environmental regulators– State legislatures– Who else?

Government Control

• The government-control approach is AKA the “command-and-control” approach.– What do we mean by this?– What means might the government employ to

control private behavior (in order to achieve environmental goals)?

Government Control• Standards:– “In the case of environmental policy, the command-

and-control approach consists of relying on standards of various types to bring about improvements in environmental quality. In general, a standard is simply a mandated level of performance that is enforced in law. A speed limit is a classic type of standard; it sets maximum rates that drivers may legally travel. An emission standard is a maximum rate of emissions that is legally allowed. The spirit of a standard is, if you want people not to do something, simply pass a law that makes it illegal, then send out the authorities to enforce the law.”

Government Control• Types of standards:

– Ambient• “Ambient environmental quality refers to the qualitative dimensions of the

surrounding environment; it could be the ambient quality of the air over a particular city or the ambient quality of the water in a particular river. So an ambient standard is a never-exceed level for some pollutant in the ambient environment.”

– Emission• “Emission standards are never-exceed levels applied directly to the quantities of

emissions coming from pollution sources. Emission (or effluent) standards are normally expressed in terms of quantity of material per some unit of time; for example, grams per minute or tons per week.”

– Technology• “There are numerous standards that don’t actually specify some end result, but

rather the technologies, techniques, or practices that potential polluters must adopt. We lump these together under the heading of technology standards. The requirement that cars be equipped with catalytic converters or seat belts is a technology standard. If all electric utilities were required to install stack-gas scrubbers to reduce SO2 emissions,2 these would be, in effect, technology standards because a particular type of technology is being specified by central authorities.”

Government Control

• How many types of standards might be used at one time?– “In most actual pollution-control programs,

different types of standards are used in combination. National air pollution control policy contains all three…In the Total Maximum Daily Load program for water pollution control, authorities establish ambient standards for water quality, emission standards to reduce incoming pollution loads, and technology standards in the form of best management practices.”

Government Control

• What are the positives of a command-and-control approach?• What are the negatives?• On balance, is government control

beneficial?

Public-Private Solutions

• Like what?• Incentive policies– 2 main types:

• Charges & subsidies• Transferable discharge permits (i.e. market-based incentives)

– “Both require centralized policy initiative to get started but rely on flexible firm responses to attain efficient pollution control. In the first, firms are given latitude to respond however they wish to what is essentially a new price for using the services of the environment. The second is designed to work more or less automatically through the interactions among polluters themselves or between polluters and other interested parties.”

More on incentives…

• Charges:– “Firms pollute because they do not take into account

the social damage their actions cause. Thus, the most straightforward approach to controlling emissions is for authorities to charge a price for these emissions. This can be done in two ways: by charging for each unit of emissions or by giving a subsidy for each unit of emissions that the source cuts back.”

– Thoughts?– Can this work? How does this work? Let’s see…

Emission charges• “By leaving polluters free to determine how best to

reduce emissions, this type of policy attempts to harness their own energy and creativity and their desire to minimize costs, to find the least-cost way of reducing emissions. It could be any combination of treatment, internal process changes, changes in inputs, recycling, shifts to less polluting outputs, and so on. The essence of the charge approach is to provide an incentive for the polluters themselves to find the best way to reduce emissions, rather than having a central authority determine how it should be done.”

• Will this work in reality? Won’t firms simply pass on the higher costs to their ratepayers/consumers?

Subsidies• Instead of charging a firm for emissions, pay them (i.e. reward

them) for reducing emissions.– “Here a public authority would pay a polluter a certain

amount per ton of emissions for every ton it reduced, starting from some benchmark level. The subsidy acts as a reward for reducing emissions. More formally, it acts as an opportunity cost; when a polluter chooses to emit a unit of effluent, it is in effect forgoing the subsidy payment it could have had if it had chosen to withhold that unit of effluent instead.”

– What are the pros and cons of this approach?

Unit 7 To-Do-List

• Readings• Seminar (or alternate assignment)• Discussion Board• Key terms• Quiz• Turn in assignment (Complete your PowerPoint

presentation & submit it to the Dropbox) • Have a great week!