7+ ENVIRONMENTAL STANDARDS, TAXES AND SUBSIDIES 1LL_ THE INEFFICIENCY OF STANDARD-SETTING ‘The mes common form af polltonreplton throug he seting of eoronmestlstandarde Chapter 6 indsted reas wo hy taxes ate wot widespread and are eat with some rapicion 6) pours. Stndardeting tends to imply the establishment of fata levels of environmental concentration for the pala, for example X mictogians per cate weve, or 2 percentge of ‘Asse yen in water ora kel of Ge tha ae ooo be ‘tcl, Standards ae st kl to Reset with reference 0 ee Tealthvelted eter, for example level contumiaante that ‘mst ot be eteeded in onder tha water i safe for dishing ‘oeeentaoneofsiphor Gande and paras mae that are ‘oat withthe avoidance respira ils and soo ‘The probe with standardacting tat = viual oly by cident hati wll padoce an economic een slon teit | lel to secure the optinal level of extemal. To sce this ones Figure which peat the falar pllition degra. A Standard Sis stand this caresponds 10 potion ve tad economic ae eve, Sting stundare soe Pang oe ‘monitoring agety wich oversees pollute acu and wish ha ‘Seponer tempore penalty. it hat no powers of punishment ‘eony incentive the pollster hart stay wit the standard some form of sol eanscene. Tp, then, anda are avosied vith peas" polluters ean be possuled or a Lat treated Sv prosecution In many counties aaa lg case aga poles are ate teats the alton iypectornte wes power {oaller the polluter behaviour before tease comet 0 coor omortyaasabnanon wer stasis 103 es, j ewe 7 Thine of stands Sappose the penly in uetion eet at Pin Figure 7.1. For the sanded work ey the plltr mast ony pole up tthe ‘animum permite vel, I wl Beeld hat Q.isnot opal ‘Smee ste than Q* Inder, unless he andar et at "wl bot by oplinal The standard coud cls with the opimar povided theoytimare we eninble» problem hat common {he Pigovian ox elton a well Sofa Wen ther wot uch 0 ‘hone betwen standards ad axes - beth soem 10 regu dead Infomation onthe MNPB aod MEC fnttons fr aa optimum ner. Tlie penalty Palo happens 1 ein ins ane The pollter hasan incentive to pllte up 10 Qs. Why? He wl o $0 ese the otal penalty upie Grist tha the ne private beefs From pling He wil ot g Desoad Qe because rte pollion ead pena inexon of marginale benels. Sty, Nemeed te eghvse th finding tes the probaly ofthe penal bring sufered Remeber, he pole ha 4 be enaphe by tbe Pltion sspectr and tat often fiat where, fr example, ‘Gere ate stany. pollen, in the zen, exch combating a Conpuratvey mal amount tothe ttl evel of pion, The (ieaon thatthe pole dors, therfore, to compare the ‘enuky malted he pobabity of acing me peal, win te echenefi of poling Erni the penal cerita Figure? 1. pap to palate up 0 Os‘This discusion sould india ull what the second baad requirement is fora siandad to be optina Tes that the peo ‘Should be certain wd that souls beegualo Fr the standard {abe oplnul we eq that it be stn such sway that the output leva corresponding tthe anda i opinal, andthe penal level should beset equal J a have 100 per ent etait of ig Imposed for atangrenion of "The iffeiies of securing these conditions exphas why conomistend to be wary of standard. 12. TAXES VERSUS STANDARDS. ‘Ta preceding weton indicts ase eon for prefering as ‘anand, Other considerations rea relevant ud we dace aes est cot rations In Chapter hasan ben demonstrated hat andar ito be adopted, tan isthe best way of achieving it Cleats iso Shue ofthe soperory oars over standards, bata demonstration ‘hat it of standards an tates wi, poral, be preferable Wo {he adoption of standard sone ceri and the Ber funtion Figure shows the bate polation ogra bu ti atm {heres some uceinty thou the pret lan a the bereft {ncion MNO) thow the aa one and MNPBQal) the tong ne. The declom ater ames that MNPEKai) the Cone curve Is the cos of hs mistake ue der andar o ‘ax? So long ss MEC and MNPB have the same (but peste ‘Signed ope, the cas of being wong ae te sme apd there 20 reason o prefer ata stand. Th, tbe tse on the ss Gr uying to secure te optimal level of pollon auuming MNPBus) isthe corte euve. But MNPB(tue the cost ‘curve apd bese the polluter, kaowing this, goes to the plat where MINPB(rs equals The ion much pletion (Qnted of Qh, The loss sociated with the exces polation i be aen under Mec between Q*@ mim the area under MNPB(re) between ‘O'0. This ieshown ar he trang Be. LioononnEnTAsapoanos, ane. ssnES 105 Now asus the regultory auoriy decile 10 se» sandr, slong MMPs) The andr @ Provided te Stands rity ested (tae Secon he eet fy SE&1Gl bow te optima Gnd with se ae ll been Tw shaded tnanges a of eqel Sie and eae there echo betwen a ax and ply enforced tnd igure 13 pet te stale Dutt ie he fo carves have iferent open es (othe MEC care sept than MNP, tn in ease (serie. Observation wl show tha nce) {Meta soon pts uch net low af ele Lethe standard i tobe peered. we (b the standard pods the Bigeroer-the oes to te prefered. Neti thal tee ress DE ust sre ws the ME nein about which We ae ‘Geary be infomaton requirements forming rational choice twtaeen ans und standards re quite formidable Eset he feaftor does ot know the ocrion of MNPB but Knows the ‘lon ereon te spe of MPA ond MEC ten be <9 take beng dco, Bot he elton very wey know {Revel tpe ofthe neons if dos pot kaoweven he scle tone emcl 1 . Tania i gee 73 Sandan ty, Dynamic efisency “ates ar sper to standard noe other reapes, Inspection of Figure shows that upto Qe poier hsm acento abate olluion We faces ao penal for ware emited up to tha point Buti may be soil desirable to encourage pole to serch ontinull Cor ome cost technics for esi oation Une ‘he standardaeting approach hi incentive does not exit With las, howeves th potter ipa the tax onthe optima aroun of Polstion = eal the dicuston in Chapter "nd hen has otinlng ince to reduce polation emomuaraLstnoinos was suK0HES 17 Adminraive cout ‘The ta slaton is early cosy to implement. is ao open to legal manga ox deed on ameaut of he economie vale ‘damage wtih puedo the pollute, Sinead spicy Spends sient sums on calenging tandarcs and regulation in {oer isnt clear tha thie. fea lem of he a ton ‘Toe uminsrative cost of poring te tax may ao dill le from those involved in esuing tha standards ae kept In bath ‘ust montrig i reguted, tadaeéseting impbes tha penalty System be in pce and lamentable Tones requ hat fess be Cailetd: Some eeonomiste have argoed that technology specie ‘nots are cheapest to amine, eplatons ofthe fom hala teen lecnology must be sed. Agia, however, there mist be trontoring anda pen system for Suobeyng the require. ‘Overall ts far rom cea that stadars ae cheper oadmiaser ‘har tas oly nidual ase sues wll dee he se rie prion ‘Pareto dreumance in wtih nis sel rienyinfiorve a standard Tiss where the polls 0 damaging ta at ought ba on et icles for. In sch amaanes we are eiectivey ng thatthe MEC carve etal = thee ae ffi marginal trap cots snteated wth the we of the pollu Alternately there is such unertalny that we decide tis oo ak to ue the Pollan Thi stun fs o sumber of ectoest and food ives Cll. thee is no point in having stax im these 13 POLLUTION REDUCTION SUBSIDIES Webancconcentated on egltry mechan that we the Wick” {as ora penal for exeeing a standard. Bu Wh) not preach the ie diflrely aod encourage ples to inal abatement ‘uipment by having a sabsidy on the amount of pluto edued? {ike sanders subse ae not poplar wit economia. Kis Important to understand th aatre 8 aubuidy ahs conten, The ‘eae to pve payments to firme who polite bow tern restbed lve, Let the subi be S ferent of potion, theFigee 14 Tae ven iin fade indy ait rsrbed eel be Wand the actual evel achieved by a poli be 1M; Ms tlow W: The sbi payment then Subsidy = SW" 9 Fig 7.4 itusats what happens. Te sagram bows the postion ‘ofeach ndvidal fin onthe let and the ua on the The Slt turos out tobe import The initial pot are Pa or {he frm, ith pie beng equl to the lowest ptt the average et earve AC, end Pi far the industry wah agregar 'S Note that the P= AC codon mes that we ae comeing a ‘nse in whic hee iret und ety. First consider te eo ta tat This wll shit AC and MC upward or the im, ining Shouc new shore egulitiom where the ruling pie, 2 eguals ‘he nee macs cost tg fer te Hm BL be ruling pie 200 {iow the new serge som 2 firm let hens, hing the Indutey sappy curve tothe le. Anew loegrun egies heefore POs forthe indy and Pg for the firm, Ths aiiy ‘aghforeard and as we would expec. “The ef ofthe subsidy a le more fit o analyse. This ‘ies the fis MC cuvette subi isthe sae aout asthe ‘hth curve wl silt to (MC subi) which the same a (MC {a3} Th seems 06d surly sais wil ver the MC eure Ie thr cue ts not so andthe formulation of te subi exis ‘vhy At heim expands tpt, foresaw whieh ous set plwio refute Foresng said te ame posing hah ec on meee MC a ped sats vt etme apemen or oen Royo NC cue forthe fem become (HC © sty) See ez te ("batt Ace oh frm ab Breer eet eau wir pena mtg cote ginevanew inthe shoreran apo ee ‘Shouts be sme me forthe tx Be 0 ‘Mtetwa ben The npn pnt ve lee {ea ran pen eos he nen seep cot ely an bento ori enter he nd, ing eeseon cave oor gi A sw neon elim Su at grind Porte ical fem ‘Gist apyes te plitt Te east conpaion it what saps een un Uns ht nyt fas a wre olntne tl Uneribe wmigy, tomer, ny tat “Sheu plo nde Eves hugh polo efi as ‘Siena gre 74 ar of frm acre sts, Seeing uta ety condone ‘single nach ya of eg potion. Sy at rn