1.  Homework #3 Due Thursday (Sept. 22)  Quiz #2 Next Thursday  No class Oct. 6  Exam #2 Oct. 11th  No class Oct. 20th  Writing Assignment Due Oct. 27th

2.  From this chapter on, two questions will be addressed: 1) How much pollution is ‘good’? 2) What are the appropriate means for pollution reduction?  Today, we will Categorize pollutants. Define an efficient allocation of pollution. Compare the marginal damage costs and the marginal control costs.

3. Categorizing Pollutants  Emission load – the amount of waste products emitted into the environment  Absorptive capacity – the ability of the environment to absorb pollutants  If the emissions loads > absorptive capacity, then pollutants accumulate in the environments

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5.  A substance is a pollutant only if the emissions load is greater than the absorptive capacity.  Absorptive Capacity Classifications Stock pollutants are pollutants for which the environment has little or no absorptive capacity. Examples – Non-biodegradable material (plastic), heavy metals (mercury), persistent synthetic chemicals (PCBs) Fund pollutants are pollutants for which the environment has some absorptive capacity. Examples - Pharmaceutically active compounds (anti- biotics, steriods, hormones), greenhouse gases (CO 2 ), volatile organic compounds (CFC’s)

6. Stock Pollutants  Damage rises as the pollutant accumulates over time, which require us to use a dynamic model.  The optimal allocation of a stock pollutant is the one that maximizes the present value of benefits from consuming the good whose production causes the pollution minus the cost of damage to the environment caused by the pollutant.

7.  The production of high voltage power cables requires lead, which is used as a sheathing material to prevent water diffusion into insulation.  Lead is a neurotoxin that accumulates in soft tissues and bone over time, and can be lethal.neurotoxin  Stock pollutants create burdens for future generations.

8.  We can use a static model because current emissions cause current damage and future emissions cause future damage (i.e. damage in each period is independent of last period’s damage)  Pollution control is most easily analyzed from the perspective of minimizing cost. Damage costs Pollution control or avoidance or abatement costs. Defining the Efficient Allocation of Pollution

10.  Marginal damage costs generally increase with the amount of pollution.  Marginal control costs typically increase with the amount of pollution that is controlled or abated.  The cost-minimizing solution is found by equating marginal damage costs to marginal control costs (or at Q* in Figure 15.2). Defining the Efficient Allocation of Pollution

13.  Damage costs are externalities.  Control costs are not externalities.  Therefore what is cheapest for the firm is not always what is cheapest for society as a whole.  Firms that attempt to control pollution unilaterally are placed at a competitive disadvantage.  The market fails to generate the efficient level of pollution control and penalizes firms that attempt to control pollution.

15.  Limit the amount of pollution of an emitter  Per-unit tax on emissions Increasing tax Constant tax  Policy Problems Must know q* for every emitter Must know MAC, MDC for every emitter

16.  Set standard based on other criteria Safe for human use or consumption Safe for human recreation Ecological health  How to regulate all polluters to meet the new standard? Cost-Effectiveness vs. Cost/Benefit Analysis

17.  Zonal Classifications Pollutants on the Horizontal Dimension  Local pollutants cause damage near the source of emissions.  Regional pollutants cause damage at greater distances. Pollutants on the Vertical Dimension  Surface pollutants cause damage near the earth’s surface  Global pollutants cause damage in the upper atmosphere

18.  Arsenic – 0.010 (Skin damage, circulatory system damage, cancer)  Cadmium – 0.005 (Kidney damage)  Fluoride – 4.0 (Bone disease)  Mercury – 0.002 (Kidney damage)  Dinoseb – 0.007 (Reproductive difficulties)  Chlorite – 1.0 (Anemia; nervous system effects)

19.  Uniformly Mixed Fund Pollutants Damage depends on how much is in the environment, not where it enters the environment Examples, SO 2 and CO 2  Policy focuses on controlling the total amount of emissions that minimize the cost of controlling all of the emitters.

20.  Homework #3 Due Thursday (Sept. 22)  Quiz #2 Next Thursday  No class Oct. 6  Exam #2 Oct. 11th  No class Oct. 20th  Writing Assignment Due Oct. 27th