Standards versus standards: The incentive and efficiency effects of pollution-control restrictions
This study compares the incentive and efficiency effects of different pollution-control standards. It shows that the choice of pollution standard can have significant effects on the levels of input use, output, profits, and the regulatory efficiency. The literature review examines the relative merits of pollution taxes and standards. The efficiency advantages of taxes rely on a number of assumptions that do not always hold. When these assumptions are lifted, the advantages of taxes are diminished. The incentive effects of five different standards are examined for one firm facing a fixed price. The firm uses two inputs: one increases pollution, and one abates it. When all standards are set to attain the same emissions level, an emissions standard gives highest profits. Pollution per unit of output or input, or mandating a level of the abating input, results in greater production; restricting the polluting input or output yields lower production. Because of these different effects, a politician sensitive to interest groups may choose an economically inefficient standard which benefits the preferred interest groups. In practice, one standard is often applied to many heterogeneous firms; if so, the emissions standard may not be most efficient. This study finds that emissions standards should be used for similar firms, while pollution per output be used when firms vary greatly.
- Research Organization:
- California Univ., Berkeley, CA (USA)
- OSTI ID:
- 7252242
- Country of Publication:
- United States
- Language:
- English
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Related Subjects
290300* -- Energy Planning & Policy-- Environment
Health
& Safety
54 ENVIRONMENTAL SCIENCES
540000 -- Environment-- (1990-)
COMPARATIVE EVALUATIONS
CONTROL
ECONOMIC IMPACT
FINANCIAL INCENTIVES
INSTITUTIONAL FACTORS
POLITICAL ASPECTS
POLLUTION CONTROL
POLLUTION REGULATIONS
REGULATIONS
STANDARDS
TAXES