We know that China is one of the most polluted countries. The marginal abatement

Question

We know that China is one of the most polluted countries. The marginal abatement cost and marginal social cost of pollution in the Beijing area are as follows:

Pollution is measured in metric tons of sulphur dioxide.

Find the socially efficient level of pollution, and explain how a marketable permits scheme can achieve the efficient outcome.

How many permits should be issued?

Pollution Marginal Abatement cost Marginal Social Cost 10 1000 yuan 0 20 800 0 30 600 50 40 500 100 50 400 200 60 300 300 70 150 500

Explanation / Answer

Socially efficient level of pollution will be achieved where marginal social cost to the society due to pollution is equal to the marginal abatement cost bearer for pollution control. It's happening at pollution units =60 where MAC =MSC=300

Marketable permits can help to achieve this pollution level, 60 permits will be sold and whosever will purchase permits will have rights to release sulphur dioxide . So whosever will not pay and purchase permits will not be allowed to create pollution and Pollution level will be controlled upto 60. So 60 units of pollution is seasonable or efficient so 60 units permits will be issued. Through this sale of permits, amount required to control or abate pollution outcomes or harmful effects can be collected

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