Abstract
A pollution abatement policy consists of an objective plus the instruments needed to attain that objective. Most often the objective is to lower the discharge from a firm or branch. There are two ways of distinguishing between abatement instruments. In the first place, one can look at the way a firm’s conduct can be influenced. There are two kinds of instruments which can result in the generation of fewer discharges; first, direct regulations or non-market instruments and second, economic instruments or market instruments.1 The essence of direct regulation is that the government decides how much each firm should be allowed to discharge and forbids discharges in excess of those amounts, subject to civil and criminal penalties. Economic instruments or market instruments refer to the use of the price mechanism. Economic instruments include fees, marketable permits, and also subsidies.
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T.H. Tietenberg, 1985. Emissions trading. Resources for the future, Washington. W.J. Baumol and W.E. Oates, 1989. The theory of environmental policy. Cambridge University Press, Cambridge. D.W. Pearce and R.K. Turner, 1990. Economics of natural resources and the environment. Harvester Wheatsheaf, New York.
In fact, the real constraint is. Such a problem can be solved with the help of the Kuhn-Tucker conditions. For simplicity we use the equal sign here.
In this case we consider the right to pollute unpolluted nature as an input in the production function with labour and capital being constant. This is an output approach in the sense of Figure 11.1, because we are concentrating on the output (pollution) side of production.
In fact, the real constraint here is that the polluters are not allowed to exceed the total level of pollution v set by the government. This would imply an unequal sign (less than or equal to) in the constraint. Such a problem can be solved with the help of the Kuhn-Tucker conditions. For simplicity we use the equal sign here, so a simple Lagrange procedure can be used.
In fact, under conditions of perfect competition this is the same as stating that welfare must be maximized. This can be explained as follows:. With Lagrange it can be shown that in the optimum or must be equal for all j.
The expression double-edged sword might be used here.
Capital and labour are kept constant. In fact, the real constraint here is that the firms are not allowed to exceed the total level of resource input r set by the government. This would imply an unequal sign (less than or equal to) in the constraint. Such a problem can be solved with the help of the Kuhn-Tucker conditions. For simplicity we use the equal sign here.
Under conditions of perfect competition this means that welfare is maximized.
See: Bressers H., 1988. Effluent charges can work: the case of the Dutch water quality policy. In: F.J. Dietz and W.J.M. Heijman, Environmental policy in a market economy. Pudoc, Wageningen.
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© 1998 Springer Science+Business Media Dordrecht
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Heijman, W.J.M. (1998). Economic Environmental Policy Instruments. In: The Economic Metabolism. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-5038-5_11
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DOI: https://doi.org/10.1007/978-94-011-5038-5_11
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