Pollution Taxes for the Efficient Control of Pollution

Abstract

In this chapter, we will be considering some alternative policy options which could be used to attain a specified target for pollution reduction. This target will be assumed to be different from the optimal level of pollution which, as we argued in the previous chapter, is virtually impossible to identify. Targets instead will be assumed to have been set through the political process, using scientific inputs on likely damages, and economic inputs on both damage costs and control costs. Such targets are typically of two types. The first is a target reduction in emissions output, across a specified set of dischargers. Examples of such targets include the US government's target reduction of 40 per cent in S02 emissions from power stations, relative to 1980 emissions of 25.5 million tons. This target is to be achieved over two phases, phase one ending in January 1995, and phase 2 in January 2000 under the Clean Air Act Amendments of 1990. Another example of a load reduction target is the UK government's objective of a 50 per cent reduction in the discharge of certain water-borne pollutants (so-called 'Red List' substances) to the North Sea by 1995 (Hallett et al, 1991).