Types of Air Pollutants
1) Local (e.g. CO, HAP); 2) Regional (e.g. SO2); 3) Global (CO2)
Issues with Studying Health Impacts and Pollution
1) Hard to measure lifetime exposure 2) Related, people in sample may be sick for other reasons 3) Hard to tease out exactly which pollutant is at work
Acid Rain Program
- Launched in conjunction with 1990 Clean Air Act Amendments
- Widely considered large success of market-based approach to environmental regulation
- Reasons for success: 1) deregulation of rail made it easy to ship low-sulfur coal 2) firms allowed to meet standard via variety of technologies and through banking and borrowing
3) Lessons learned: 1) need uniformly mixed pollutant 2) also need flexibility in design 3) concern about hotspots
Issues with Regulating Water Pollution
1) Most pollution coming from non-point sources, rather than point sources
2) Less liquid market (i.e. fewer players)
3) Difficult to monitor and enforce
4) People responsible for pollution (i.e. farmers) have political clout
Superfund
- creates system for managing reclamation of brownfield sites across the U.S.
- financing: “potentially responsible parties”
- slow pace of progress for restoration –> lots gof litigation
- What explains progress? Not Congressional but local community press. No evidence of racial bias.
Prisoner’s Dilemma
- game theoretic approach often applied to environmental (i.e. pollution) issues.
- demonstrates that actors are likely to continue polluting even when abating would be in both actors best interest
- ways to get past PD: iterated games, penalties and rewards, signaling, side-payments
- try to move away from PD and toward “assurance game” (i.e. stag hunt). This is form of truer cooperation between multiple actors.
Issues in addressing global warming
1) Determining how much abatement should take place (i.e. MC versus MB)
2) Determining who should abate. Regional variation in terms of impacts.
3) Determining how to abate (i.e. which policy instrument to employ)
4) In absence of abatement, how much adaptation should take place?
5) Addressing historical emissions/fact that some warming is already “baked in”
Basis for Skepticism of Climate Change
1) Determining whether there are anthropogenic forces at work
2) Magnitude of impacts
3) Timing and regional variation of impacts
Dismal Theorem
Associated with Weitzman. Idea that, in situations where we have “fat tails” (i.e. non-zero probability of catastrophic events), standard cost-benefit analysis does not apply, and we should employ precautionary principle instead.
precautionary principle
Idea that, if there is possibility of risk to the environment and/or public, but we are unsure about the magnitude of the risk, we should err on the side of “overabating” against the risk and buy ourselves insurance.
Defining sustainable development
“Development that meets the needs of the current generation without compromising the ability of future generations to meet their own needs.”
Strong form – natural capital stock must be held constant
Weak form – resources are substitutable (e.g. I can use forest to build a house
Economist and ecologists disagree about the extent to which these goods are truly substitutable for one another.
“True measure of GDP” – would incorporate the fact that environmental accounting needs to be included in the measurements that we are doing
Environmental Kuznets Curve
- notion that pollution proceeds along with development in upside-down U shape – rises at beginning of country’s development, but then begins to slop down
- Components of Kuznets curve: 1) scale effects – if economy grows, all activities in it grow proportionally; 2) composition – level of pollution determined by type of goods produced and 3) technique – method in which goods are produced
- Does it hold? 1) Type of pollutant matters and 2) Takes a while before countries reach this point.
tragedy of the commons
Idea that everybody acting in their self-interest will not effectively maintain a public good. Need third-party to manage this resource.
Schaefer Curve
Describes the conditions of “efficiency” for a renewable resource, such as a fishing. Upside-down “U” shape where, in absence of regulation, each individual party would fish until MC=MC. Social planner would instead prefer to maximize profits by setting catch at point where Benefits are greatest than Costs.
“maximum sustainable yield”
point at which growth of stock is maximized
Hotelling Rule
- Describes extraction path of a resource that is profit-maximizing for a producer. Most profitable extraction path will be when price of resource increases at the rate of interest.
- Equilibrium occurs when extractor is indifferent between extracting now or waiting until the next time period
- falls short because product is heterogenous, because price signals promote new discovery efforts, and because of the presence of “backstop technologies”
Marginal user cost
Opportunity cost associated with consuming today since you forego the profit of extracting the resource in later time periods.
Shifting perceptions of regulation
Typical belief that regulation is just pure cost imposed on firm. New hypothesis that regulation can be a driver of innovation for firms.
Does trade hurt the environment?
Daly: “race to the bottom,” scale effects
Bhagwati: “technique effects,” harmonized standards are inefficient, move up the Kuznets curve
“pollution havens”
- consistent with race to the bottom, idea that firms will choose to locate in geographies with most lax environmental standards
- earliest studies suggested that firm location decisions not materially impacted by environmental standards. key issues: level of analysis, omitted variables, time period under consideration
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