Efficient Pollution Regulation: Getting the Prices Right

Abstract

This paper argues for efficient environmental regulations that equate the marginal damage of pollution to marginal abatement costs across space. The paper estimates the source-specific marginal damages of air pollution and calculates the welfare gain from making the current sulfur dioxide allowance trading program for power plants more efficient. The savings from using trading ratios based on marginal damages are between $310 and $940 million per year. The potential savings from setting aggregate emissions efficiently and from including more sources of air pollution are many times higher. (JEL H23, Q53, Q58)

Regional variations in the health, environmental, and climate benefits of wind and solar generation

“…These conclusions hold under a wide range of assumptions. Results are most sensitive to the value of a statistical life, the social cost of CO 2 emissions, and the dose-response function that relates mortality to concentrations of fine particulate matter (16). Changes to these assumptions affect the magnitude of our results, but the regional variations presented in Fig.…”

“…Damages from criteria pollutants are from the APEEP model (8), which was recently used by the National Research Council to estimate the externalities from electricity production (11). APEEP estimates the damages from emissions of SO 2 , NO x , PM 2.5 , coarse particulate matter (PM 10 ), volatile organic compounds (VOC), and ammonia (NH 3 ) on a dollar-per-ton basis (8,10,16). Damages include human-health effects (e.g., lung cancer, bronchitis, asthma, and cardiopulmonary diseases), reduced crop and timber yields, reduced visibility, degradation of materials, and lost recreational services.…”

Water pollution during China's industrial transition

“…Clearly specified and transferable water entitlements can allocate water resources efficiently among competing demands (Cheng and Hu, 2012;FAO, 1993;Randall, 1981;Young and McColl, 2005). Meanwhile, a system of tradable emission rights can improve the management of water pollution cost-effectively (Harrington and Morgenstern, 2004;Muller and Mendelsohn, 2009;Zhang et al, 2012). China has relied mainly on the non-market based instruments to allow water resources and to control water pollution so far.…”

Do Americans Consume Too Little Natural Gas? An Empirical Test of Marginal Cost Pricing

“…20 Natural gas combustion releases .09 pounds of nitrogen oxides and .007 pounds of particulates per McF. 21 Using estimates from Muller and Mendelsohn 19 In related work, Buchanan (1969), Barnett (1980), and Oates and Strassman (1984) consider Pigouvian taxes in the context of an unregulated monopoly. 20 There may also be negative externalities from emerging forms of natural gas production.…”