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Econ 100 Lecture 8.3

Econ 100 Lecture 8.3. Pollution and Initiatives in the NW Summer 2009. How Do We Get There?. Standards (command and control) Set the overall standard at Q* Calculate the amount of reduction necessary Set uniform reduction goal for all firms Taxes/Emission Charges

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Econ 100 Lecture 8.3

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  1. Econ 100Lecture 8.3 Pollution and Initiatives in the NW Summer 2009

  2. How Do We Get There? • Standards (command and control) • Set the overall standard at Q* • Calculate the amount of reduction necessary • Set uniform reduction goal for all firms • Taxes/Emission Charges • Set the tax = externality cost at the optimum Q* • Firms will internalize the cost • Tradable Permits (Coase) • Allocate right to pollute (Q*/N) • Allow firms to set price for trading permits

  3. Comparison of Approaches • Tradable Permits • Cost efficient • Firms will purchase permits from more efficient firms if permit cost < abatement (technology) costs • Technological incentive to reduce pollution • Marginal cost of abatement = permit cost • Similar to taxes • Administratively simpler • Require less information about the firms’ cost • Better able to handle “spatial” variation in pollution • Fewer permits auctioned in bad areas • Adjust “automatically” for changes in inflation and growth • E.g., Ca RECLAIM experience • If auctioned -> revenues for admin costs

  4. A Webinar on Tradable Permits • http://www.sightline.org/research/energy/res_pubs/cap-in-trade-2009-sightline-webinar

  5. Water Pollution Problems Types of Waste-Receiving Water • There are two general types of water bodies at risk of contamination from pollution. • Surface water includes rivers, lakes and oceans. Historically, clean-up policies have focused on surface water. • Groundwater is subsurface water. • Groundwater and surface water require different water policies. • Major issue with identifying source • Could set optimal level, but how to allocate?

  6. Western Climate Initiative (WIN) • Cap and trade program • Include BC, Washington and Oregon • Cap would be set for each state/province on Greenhouse gases at 1990 levels (Kyoto protocol) • CO2, CH4, NO, hydroflurocarbons, perfluorocarbons and sulfurhexafloride • Transportation, residential, commercial and industrial fuels • 25k metric tons of CO2 equivalent (annual) • 1 ton tradable permits • Start in 2012; reduce cap by 50% by 2020

  7. Puget Sound Clean Up • Objectives • Reduce 150k per day pounds of toxic chemicals that enter Puget Sound daily • Over 2 years -> equivalent to Exxon Valdez spill • Acquire/restore prime marine habitats • Replace degraded shorelines, wetlands, estuaries • 40 major species have declined

  8. Puget Sound Clean Up Initiative • Governor’s proposal • Added $42M to already allocated $90M • Puget Sound Partnership • 10 person team of elected official, business leaders • Proposed actions • $21M faster clean-up of pollution and shoreline • $6.5M upgrade of septic systems -> into PS • $4M for Parks to upgrade sewer systems • $3M restore estuaries (wetlands) • $2M to remove creosote logs • $1.5M for oil spill and hazardous chemical clean-up, including storage

  9. Puget Sound Clean Up • What’s happening today • Port Gardner Bay Clean Up (9 sites) • Oil, gasoline, diesel fuels, heavy metals • Everett shipyard • North Marina • Baywoods • Exxon/Mobil storage • Weyerhauser • East Waterway • ASARCO (Arsenic)

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