Transcript Chapter 15
C H A P T E R 15 REGULATION WITH UNKNOWN CONTROL COSTS ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc. FIGURE 15.2 Finding the optimal reward for truth telling ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc. FIGURE 15.4 Losses if firm is high cost. MD(e), marginal damage from emissions; MSH(e), marginal savings from emitting if firm is high cost; e*, p*, optimal quantity and price regulations; e**, optimal emissions if firm is known to be high cost; eH, emissions from fee p*. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc. FIGURE 15.5 (a,b) Welfare losses from price and quantity control. MD(e), marginal damage from emissions; MSH(e),MSL(e), marginal savings from emitting for high (H)- and low (L)-cost firms; e*, p*, optimal quantity and price regulations; light shaded area, inefficiency from emission fee; dark shaded area, inefficiency from quantity control. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc. FIGURE 15.6 Three damage functions and their marginals. T*, threshold; D1,MD1 , linear damage, constant marginal damage; D2,MD2, quadratic damage, linear marginal damage; D3,MD3, highly curved damage (and thus marginal damage) in vicinity of threshold, T*. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc. FIGURE 15.7 Permit system with penalty for overemitting and subsidy for under-emitting. MD(e), marginal damage from emissions; MSH(e), MS(e), MSL(e), marginal savings from emitting: high-cost, average, low-cost assumptions; e*, level of permit issuance; s, subsidy rate for underemitting; eL> emission rate if firm is low cost; p, penalty rate for overemitting; eH, emission rate if firm is high cost. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc. ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc.