Transcript Spatial & Temporal Dimensions of Environmental Regulations

Spatial Dimensions of
Environmental Regulations
How can economics help us better
regulate when the damages occur
over space?
Carpinteria marsh problem
Many creeks flow into Carpinteria salt
marsh; pollution sources throughout.
Pollution mostly in form of excess
nutrients (e.g. Nitrogen & Phosphorous)
How should pollution be controlled at
each source to achieve an ambient
standard?
The Carpinteria problem
x
x
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x
x
x
x
x
1 Receptor (o)
Many sources (x)
Marsh
o
“Transfer coefficients”
If emissions increase in a greenhouse on
Franklin Creek, how much does N
concentration change in salt marsh?
Index sources with i ; receptors with j.
Pollution at receptor j is fn of emissions:
pj = fj(e1, e2, …, eI)
dfj/dei = aij = transfer coefficient
Natural attenuation, concrete channels?
A concrete-lined channel
Pollution if no interaction effects
pj = S aijei + Bj
Where Bj is background level of Nitrogen.
Now aij = dpij/dei
The cost of emissions control
Cost is a function; depends on how much
emission the source has to control:
ci(Ei – ei), where Ei = uncontrolled
emissions level.
E.g. ci(Ei – ei) = ai + bi(Ei-ei) + gi(Ei-ei)2
Then MC is linear.
Control costs (by industry) often available
from EPA, other sources.
How much abatement?
To achieve ambient standard, A, which
sources should abate and how much?
Mine S ci(Ei-ei) s.t. S aiei  A
In words: minimize abatement cost
such that total pollution at Carpinteria
Salt Marsh  A.
Possible regulations to consider
Rollback
Standard engineering solution.
Marketable permits
Not efficient because ai’s different.
Constant fee to all polluters
Same effect as permits
Spatial version of Equi-marginal
Principle
Current pollution level
P0
= S aiEi > A
“Rollback”
Standard engineering solution.
Everyone “rolls back” pollution by the same
percentage:
x = A/P0
e i = Eix
E.g. A=100 ppm, P0=1000 ppm.
Everyone rolls back by 10%
If I started at 40, new level is 36.
Effects of the rollback
Structured to exactly hit target (A).
Ignores cost of abatement!
Ignores different contribution of each
source to receptor (Carpinteria Marsh)
Can we do any better with an economic
approach?
Marketable permits / Emission fees
Permits: Fix total amount of pollution that
is allowed (A).
Distribute A permits, where permit
required for polluting, let firms trade.
But this ignores the different contribution
of each source to Marsh
Same for uniform Emission fees.
Treat firms differently
Since each polluter has a different
contribution to overall pollution, they
need to be treated differently.
If we’re only worried about N in ocean,
then likely to be worse the closer you
are to ocean!
Need a mechanism that captures this
effect…need an adjusted version of equimarginal principle.
Adjusted equi-marginal principle
Instead of equating marginal costs of all
polluters, need to adjust for different
contributions to the receptor.
Strong contribution, cheaper to abate per
effective unit of pollution:
MCk/ak = MCj/aj
Set these = to marginal damage for
efficiency