Pollution Control: Targets

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Pollution Control Targets
READING Common (2nd edition) Chapter 5 Perman
et al (3rd edition) Chapter 6
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THE ECONOMIC ANALYSIS OF POLLUTION TARGETS
How does pollution arise? What is the "best"
level of pollution?
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• FIRST QUESTION
• How does pollution arise?
• Pollution arises from economic activity.
• When the consequences of residual
  material/energy flows are damaging.
• This requires that flows exceed natural
  absorption and re-processing capacities of
  environmental media.

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TYPES OF POLLUTION FLOW POLLUTION D
f(pollutant flow) where D pollution damage e.g.
noise, light STOCK POLLUTION D f(pollutant
stock) e.g. greenhouse gases, particulate air
pollution MIXED CASES D f(pollutant flow,
pollutant stock) e.g. SO2, water pollution
(such as BOD), greenhouse effect ?
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• SECOND QUESTION
• What is the best level of pollution?
• Depends what you mean by best
• That is, what is the objective?
• SEVERAL POSSIBILITIES INCLUDING
• (1) ECOLOGICAL
• Minimum disruption to ecosystems
• Maintenance of biodiversity
• Avoidance of critical threshold

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• ECOLOGICAL PERSPECTIVE
• Minimum disruption to ecosystems
• Maintenance of biodiversity
• Avoidance of critical threshold
• precautionary principle
• safe minimum standard of conservation)

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(2) ACCEPTABLE RISKS TO HUMAN HEALTH e.g.
Nuclear radiation levels e.g. ambient air quality
indices But what determines "acceptable"?
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(3) ECONOMIC Best economically
efficient Efficient level which maximises net
social benefits Net benefits Gross benefit to
society less gross costs to society Must
include ALL costs and benefits in these
calculations. Key principle Pollution is both
damaging and beneficial. Or pollution control is
both beneficial and costly. So the idea here is
that there are trade-offs. Want to choose the
best point along the trade-off.
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(4) MIXED ECOLOGICAL/ ECONOMIC/HEALTH
Maximise net social benefit subject to certain
ecological and/or health constraints. Safe
minimum standard of conservation.
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THE ECONOMIC PERSPECTIVE Three ways of thinking
about this 1. What is the best level of output
of goods (with which pollution is
associated)? 2. What is the best level of
pollution? 3. What is the best level of
pollution abatement? Conceptually, are
alternative versions of same underlying question.
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The efficient level of output (with which
pollution is associated). Note that in this
diagram, the marginal cost (or damage) of the
pollution externality is shown as increasing
rather than constant.
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The efficient level of output (with which
pollution is associated)
Price
SMC PMC EMC
PMC
P
P
EMC
PMB
Quantity per period
Q
Q
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The efficient level of output (with which
pollution is associated) The next slide is an
alternative version of the previous one. In this
one, we show the marginal net benefits (PMNB) of
the output (that is, marginal gross benefits
minus marginal private costs)) on one curve, and
the marginal external cost or damage (EMC) of the
pollution externality on a second curve.
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The efficient level of output
EMC
PMNB
Output, Q
Q2
Q1
Q3
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The efficient level of pollution (M)
EMCM
PMBM
Marginal damage caused by the pollution
M2
M1
M3
Pollution emissions, M
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The efficient level of pollution abatement (Z)
MCZ
SMBZ
Pollution abatement, Z
Z2
0
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Pollution Control Equivalence of last two
diagrams
MC(M) SMB(Z)
PMB(M)MC(Z)

Pollution, M
M
Abatement,Z
Z
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SOME PROBLEMS WITH ALL THIS (1)
Non-convexity (2) Risk and uncertainty (in
conjunction with irreversibility of ecological
changes). (3) Issues of valuation (4) How to
proceed when there is no consensus about the
objectives of environmental policy. and most
importantly ..
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STOCK POLLUTION More complicated. Why? Because
the pollution damage functions change over time
and vary over space. So the previous analyses
only apply, in any simple way, to flow
pollution. In this case, need to set targets for
specific points in time (or over paths of time)
in terms of pollution concentration levels
(ambient standards). Or set targets for
particular points/areas in space in terms of
pollution concentration levels.
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Targets in practice Information very
limited (See EU targets on benzene emissions)
What is done is often what is politically
acceptable at the time. (See USA policy on
greenhouse gas emissions) Targets may thus be
set rather arbitrarily.
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Problems 1. When is the socially efficient level
of (flow) pollution zero? 2. When is it socially
efficient to have zero pollution abatement?