Transcript PRESENTATION NAME

Command And Control Strategies: The
Case of Standards
Lecture 18
• CAC rely on standards and compliance costs
• Standard is a mandated level of performance that is
enforced in law
If you want people not to do
something, simply pass a law
that makes it illegal and then
send out the authorities to
enforce the law
Compliance Costs
of meeting the
standard
• Types of standards
– Ambient Standards
– Emissions Standards
– Technology Standards
• Ambient Standard
– Qualitative dimensions of the
surrounding environment
– For example, required Dissolved Oxygen
in a River
• An upper limit for the pollutant is set and is expressed in
average concentration over some period of time, for e.g.
SO2 annual average of 80 μg/m3 over a particular area
• Emissions Standards
– Upper limit on quantity of emissions coming from different
pollution sources  tons / week or average residual flows/year
– Link between emissions and ambient quality?
– Is meeting emission standard a prerequisite to meeting
ambient standard or vice versa?
• Environment usually transfers pollutants from
one region to another
• Hydrological and meteorological studies of the
environmental media
• Chemical process in environmental media
renders some pollutants harmless
• Also affected by human decisions
• Performance standards include emission
standard and other types such as workplace
standards
• Technological standard
– Techniques or practices potential polluters must adopt.
– For example, all cars be equipped with catalytic converters
• Distinction between performance standard and
technology standard
• Standards appear to give regulators a degree of positive
control to get pollution reduced; but the process is
complicated
• Setting the level of standard
An implicit trade-off:
Temporary
deteriorate
environmental
quality and damage
it today
Incurring long-run
high abatement
costs to meet
ambient quality
standards
Zero-risk
approach
• Uniformity of Standards
Policy trade-off:
Applied to heterogeneous
situations, more efficient
would be the impact
More costly will it be to
gather the required
information and make MD
and MAC functions
• Standards and the equimarginal principle
– There are multiple emissions sources producing the
same effluent, EMP must hold!
• To summarize:
– The greater the difference between marginal abatement
costs and marginal damages, the worse will be the
performance of equal-standard approach
– Pollutants are in fact emitted by many sources, and
setting different standards for different sources would
only be possible if
– “Public agency knows the MAC functions for each of
these resources”
• Incentives Aspect of the Standards
– In technology standard, polluters are dictated
various operating practices
– Reduce the incentive of polluters to find costeffective solutions to emissions reduction
– You meet the standard or you don’t meet that
level!
Perverse
Incentives
Technology
forcing and
pollution
control industry
• The Economics of
Enforcement
– Pollution-control laws
are not enough
– Accompanied by
efficient enforcement
machinery
– Various resources that
have opportunity costs
– Lower e would require
less enforcement but the
standard might be
efficiently achieved!
• Other factors affecting the enforcement costs
– Budget constraint
– Nature and amount of penalties
– Number of polluters
– US: Self-monitoring  book-keeping of the
emissions hourly rate of flow
– Periodic auditing or random visits  lower this visit
rate, lower will be the extent of compliance
– Enforcement carried out by local agencies; how
devoted and sincere are they?
– Initial compliance and continued compliance
• Implicit trade-off?