The case of markets versus standards for pollution policy

Natural Resources Journal

Volumn 45, Issue 2, 2005, Pages 345-367

  Berck, Peter ^a   Helfand, Gloria E ^b  

^a UNIVERSITY OF CALIFORNIA   (United States)

^b UNIVERSITY OF MICHIGAN   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ECONOMIC INSTRUMENT; ENVIRONMENTAL ECONOMICS; POLLUTION POLICY; STANDARD (REFERENCE);

EID: 28044464004     PISSN: 00280739     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (95)

1. Clean Air Act Amendments of 1990 § 408(a), 42 U.S.C. § 7651(g) (2000).
2. Id.
3. Id. § 403(b)
4. U.S.C. § 7651(b).
5. Off. Air & Radiation, U.S. Envtl. Prot. Agency, 1990 Clean Air Act Amendment Provisions Related to Specific Stationary Source Categories, available at http://www.epa.gov/ttn/oarpg/gen/stasor.txt (last visited Apr. 6, 2005).
6. 2 Allowance Trading, J. Econ. Persp., Summer 1998, at 69;
7. U.S. Envtl. Prot. Agency, President Bush Announces Clear Skies & Global Climate Change Initiative (2002), at http://www.epa.gov/air/ clearskies/pdfs/clear_skies_factsheet.pdf (last visited Apr. 6, 2005).
8. Kyoto Protocol to the United Nations Framework Convention on Climate Change, Conference of the Parties, 3d Sess., Agenda Item 5, art. 17, U.N. Doc. FCCC/CP/1997/L.7/Add.1 (1997), available at http://unfccc.int/ resource/docs/convkp/kpeng.pdf (last visited May 25, 2005);
9. Clear Skies Act of 2005, S. 131, 109th Cong. § 404 (2005).
10. The general category of market approaches to pollution control often includes policies that encourage, but do not require, abatement by sources; these include programs that provide technical assistance to aid sources in reducing emissions (such as EPA's 33/50, Green Lights, and other pollution prevention programs) and requirements for provision of information on emissions (such as the Toxic Release Inventory, which requires firms only to report their emissions). Because pollution abatement is voluntary in these programs, they are not included in this study.
11. Off. Inspector Gen., U.S. Envtl. Prot. Agency, Open Market Trading Program for Air Emissions Needs Strengthening, Rep. No. 2002-P-00019 (2002), available at http://www.epa.gov/oigearth/reports/2002/omt.pdf (last visited May 25, 2005).
12. Curtis A. Moore, Marketing Failure: The Experience with Air Pollution Trading in the United States 2 (2003), draft available at http:// www.ksg.harvard.edu/hepg/Papers/ Moore_Marketing.Failure.Air.Pollution.trading.US_1-03.pdf (last visited May 25, 2005).
13. Clean Air Act § 109, 42 U.S.C. § 7409 (2000).
14. Id. § 124, 42 U.S.C. § 7424.
15. Id. § 111, 42 U.S.C. § 7411.
16. Id. § 202(a), 42 U.S.C. § 7521.
17. Council on Envtl. Quality, Chapter 1: Air Quality and Climate, in The Twenty-Fourth Annual Report of the Council on Environmental Quality (1993), available at http://clinton4.nara.gov/CEQ/reports/1993/ chap1.html (last visited Apr. 6, 2005).
18. Gloria E. Helfand, Standards Versus Standards: The Effects of Different Pollution Restrictions, 81 Am. Econ. Rev. 622 (1992).
19. Id.
20. See generally Maureen L. Cropper & Wallace E. Oates, Environmental Economics: A Survey, 30 J. Econ. Lit. 675 (1992).
21. Id. at 676.
22. Id. at 680.
23. Id. at 681.
24. Id. at 682.
25. Tom Tietenberg, Environmental and Natural Resource Economics 376-77 (6th ed. 2002).
26. Clean Air Act Amendments of 1990 § 111(j), 42 U.S.C. § 7411(1A) (2000).
27. Id. § 403(b)
28. 42 U.S.C. § 7651(b).
29. Charles W. Howe, Taxes Versus Tradable Discharge Permits: A Review in the Light of the U.S. and European Experience, 4 Envtl. & Resource Econ. 151, 151-52 (1994);
30. Allen Blackman & Winston Harrington, The Use of Economic Incentives in Developing Countries: Lessons from International Experience with Industrial Air Pollution, 9 J. Env't & Dev. 5, 32-35 (2000).
31. Cropper & Oates, supra note 17, at 680-81.
32. Id. at 681-82.
33. The initial distribution of the permits does not affect the ultimate allocation of the permits if markets for the permits are competitive. If the market is not competitive, a buyer or seller with market power can manipulate the permit price and, thus, who buys or sells permits. Robert W. Hahn, Market Power and Transferable Property Rights, 99 Q.J. Econ. 753, 763-64 (1984).
34. D.F. Spulber, Effluent Regulations and Long-Run Optimality, 12 J. Envtl. Econ. & Mgmt. 103 (1985).
35. Scott R. Milliman & Raymond Prince, Firm Incentives to Promote Technological Change in Pollution Control, 17 J. Envtl. Econ. & Mgmt. 247 (1989);
36. Chulho Jung et al., Incentives for Advanced Pollution Abatement Technology at the Industry Level: An Evaluation of Policy Alternatives, 30 J. Envtl. Econ. & Mgmt. 95 (1996).
37. Envtl. Pol'y Div., Cong. Res. Serv., Libr. of Cong., A Legislative History of the Water Pollution Control Act Amendments of 1972, at 1322 (Jan. 1973) (prepared for the use of the Committee on Public Works).
38. See generally Wallace E. Oates et al., The Net Benefits of Incentive-Based Regulation: A Case Study of Environmental Standard Setting, 79 Am. Econ. Rev. 1233 (1989).
39. Tietenberg, supra note 22, at 74.
40. Richard Schmalensee et al., An Interim Evaluation of Sulfur Dioxide Emissions Trading, J. Econ. Persp., Summer 1998, at 53, 64.
41. Milliman & Prince, supra note 30, at 247;
42. Jung et al., supra note 30, at 95.
43. Wendy E. Wagner, The Triumph of Technology-Based Standards, 2000 U. Ill. L. Rev. 83, 105-07.
44. Id. at 106.
45. See, e.g., W. David Montgomery, Markets in Licenses and Efficient Pollution Control Programs, 5 J. Econ. Theory 395 (1972).
46. Robert N. Stavins, Correlated Uncertainty and Policy Instrument Choice, 30 J. Envtl. Econ. & Mgmt. 218, 229-30 (1996).
47. Thomas H. (Tom) Tietenberg, Tradeable Permits for Pollution Control When Emission Location Matters: What Have We Learned?, 5 Envtl. & Resource Econ. 95, 98-110 (1995).
48. 42 U.S.C. § 7651(b) (2000).
49. Id. § 7586(f)(2).
50. Thomas H. (Tom) Tietenberg, Emissions Trading: An Exercise in Reforming Pollution Policy 68-69 (1985).
51. Oates et al., supra note 32, at 1239-40.
52. Id. at 1234-35.
53. Raul E. O'Ryan, Cost-Effective Policies to Improve Urban Air Quality in Santiago, Chile, 31 J. Envtl. Econ. & Mgmt. 302, 310-11 (1996).
54. Id. at 308-09.
55. Rachel Brasso Razon, Comment, What Is Good for the Market, Can Be Bad for the Health: Emissions Trading Under SCAQMD's Rule 1610 and the Unjust Environmental Effects, 29 Golden Gate U. L. Rev. 539, 541 (1999);
56. Stephen M. Johnson, Economics v. Equity: Do Market-Based Environmental Reforms Exacerbate Environmental Injustice?, 56 Wash. & Lee L. Rev. 111, 116-19 (1999).
57. Blackman & Harrington, supra note 25, at 12-16.
58. Id. at 220-21, 225.
59. Stavins, supra note 5, at 80.
60. Off. Inspector Gen., supra note 8, at iii-iv.
61. Blackman & Harrington, supra note 25, at 14.
62. Daniel H. Cole & Peter Z. Grossman, When Is Command and Control Efficient? Institutions, Technology, and Comparative Efficiency of Alternative Regulatory Regimes for Environmental Protection, Wis. L. Rev. 887, 919 (1999).
63. Schmalensee et al., supra note 34, at 55.
64. Blackman & Harrington, supra note 25, at 5;
65. Ruth Greenspan Bell & Clifford Russell, Environmental Policy for Developing Countries, 18 Issues Sci. & Tech., Spring 2002, at 63, 65.
66. Blackman & Harrington, supra note 25, at 29-32.
67. Bell & Russell, supra note 56.
68. Martin L. Weitzman, Prices vs. Quantities, 41 Rev. Econ. Stud. 477, 477-79 (1974).
69. Zvi Adar & James M. Griffin, Uncertainty and the Choice of Pollution Control Instruments, 3 J. Envtl. Econ. & Mgmt. 178, 179 (1976).
70. Stavins, supra note 39, at 218.
71. If the benefits of abatement are higher (lower) than expected, then net benefits to society would be higher if abatement is increased (decreased); because the policy, and, thus, pollution levels, do not respond to the new information, the policy leads to more (less) pollution than the level that maximizes net benefits.
72. Weitzman, supra note 59, at 485.
73. Stavins, supra note 39, at 229.
74. Id. at 226.
75. Robert Mendelsohn, Regulating Heterogeneous Emissions, 13 J. Envtl. Econ. & Mgmt. 301, 310-12 (1986).
76. Howe, supra note 25, at 153.
77. Id. at 152;
78. Blackman & Harrington, supra note 25, at 39.
79. James M. Buchanan & Gordon Tullock, Polluters' Profits and Political Response: Direct Controls Versus Taxes, 65 Am. Econ. Rev. 139, 139-40 (1975).
80. Michael T. Maloney & Robert E. McCormick, A Positive Theory of Environmental Quality Regulation, 25 J.L. & Econ. 99, 109-11 (1982).
81. Todd J. Zywicki, Environmental Externalities and Political Externalities: The Political Economy of Environmental Regulation and Reform, 73 Tul. L. Rev. 845, 875-78 (1999).
82. Sam Peltzman, Toward a More General Theory of Regulation, 19 J.L. & Econ. 211, 217 (1976).
83. Tietenberg, supra note 22, at 62.
84. Steven Kelman, Economists and the Environmental Muddle, 64 Pub. Int. 106 (1981).
85. Id. at 114-16.
86. Id. at 116-17.
87. Sharon Beder, Charging the Earth: The Promotion of Price-Based Measures for Pollution Control, 16 Ecological Econ. 51, 62 (1996).
88. Envtl. Pol'y Div., supra note 31, at 1322.
89. Lorena Bark Malecha et al., San Francisco Bay Area Boatyards: A Case Study in Regulating Small Polluters, 20 Envtl. Aff. 453, 467-69 (1993);
90. Wagner, supra note 36, at 103-04.
91. Moore, supra note 9, at 6-8.
92. Zywicki, supra note 71, at 875-80.
93. Buchanan & Tullock, supra note 69, at 143-45.
94. Zywicki, supra note 71, at 874-900.
95. See generally Beder, supra note 77.