7. Many observers believe that the levels of pollution in our society are too hi

Question

7. Many observers believe that the levels of pollution in our society are too high.

A. If a society wishes to reduce overall pollution by a certain amount, whys is it efficient to to have different amounts of reduction at different firms?
B. Command and control approaches often rely on uniform reductions among firms. why are these approaches generally unable to target the firms that should undertake bigger reductions?
C. Economists argue that appropriate corrective taxes or tradable pollution rights will result in efficient pollution reduction. how do these approaches target the firms that should undertake bigger reductions?

Explanation / Answer

A. Different firms output different amounts of pollution (for example, a car manufacturer might output 100,000 grams/Kg every day while an lawn care company omits 10 grams/Kg every month). It would be inefficient to make firms that don't pollute very much, reduce their pollution by the same amount as high pollution firms. Similarly, different firms have different costs for emission reductions. B. Basically, the answer to this is the same as in part A, different firms have different reduction costs. The firms that should take bigger reductions are the firms that can do it for the lowest cost. However, when "uniform" reductions are used, the restrictions on emissions can only be so low that the firms with high cost of reduction will not go out of business; thereby giving the low reduction cost firms more room to breath (or rather, pollute). C. Taxes will increase the cost of pollution. Therefore, firms who have low reductions costs will reduce pollution if they can get reduced taxes. Further, if they are allowed to trade their pollution rights, they know it will only cost them a small amount to reduce their pollution, so they will reduce their pollution so that they can sell those rights for top dollar to companies who need to emit a lot of pollution. That way, they get paid for reducing their emissions.

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