PIGOUVIAN TAXES

Definition
A special tax that isoften levied on companies that pollute
the environment or create excess social costs, called
negative externalities,throughbusiness practices. In a true
market economy, a Pigovian taxis the most efficient and
effectiveway to correct negativeexternalities.

For example
Pigovian tax is applicable only because market economies
oftenfail to provide a proper incentive to reduce negative
externalities. For example,a coal-powered plantmay
bepolluting a nearby riverby disposing its harmful
byproducts in the river instead of shipping the byproducts
to a special facility. Asufficient Pigovian taxwouldpunish
this firm economically when it chooses to dispose of the
harmful byproducts in the river, creating an incentive to use
more environmentally friendly methods of disposal.

COASE THEOREM
Definition
Assignment of property rights, even in the presence of
externalities, will allow bargaining such that an efficient
solution can be obtained.

DIRECT PRODUCTION OF
ENVIRONMENTAL QUALITY

Methods that the government carry out to physically improve the

environment such as planting of trees and vegetation, stocking of
fish, treating sewage and cleaning up of toxic sites, landslide
stabilization and protection method
Includes
reforestation,
breaching of dams,
stocking of fish,
creation of wetlands,
treatment of sewage, and
toxic waste site cleanup.

POLLUTION PREVENTION

Pollution prevention is activities that reduce the amount

of pollution generated by a process, whether it is consumer
consumption, driving, or industrial production.

seeks to increase the efficiency of a process, thereby

reducing the amount of pollution generated at its source.

Pollution prevention encompasses more specialized subdisciplines including green chemistry and green design

MORAL SUASION

Meaning: an effort to change peoples behaviour by appealing to

their sense of moral values

Moral suasion is widely used as a tactic in attempting to reduce

pollution

Moral suasion does not, however, appear to lead to significant

changes in behavior when compliance costs are high or when the
activity is already widely practiced. It is therefore not likely to be an
effective tool for reducing most forms of pollution.

COMMAND AND CONTROL REGULATION

These place constraints on the behavior of households and
firms.
Constraints generally take the form of limits on inputs or
outputs in the consumption or production process.
Examples include:
Requiring sulfur-removing scrubbers on the smokestacks of coalburning utilities.
Prohibitions against dumping of toxic substances.

DEPOSIT REFUND
deposit-refund schemes, strategies to reduce government
barriers to market activity, and means of eliminating or at
least reducing problematic government subsidies.5
Moreover, a host of other ("non-market") approaches should
also be considered, such as different kinds of standards,
strengthened monitoring and enforcement mechanisms, and
the provision of information.

CHARGES

A fee charged to the polluter that varies with the quantity of

pollutants released

SUBSIDY
A payment or tax concession that provides financial assistance
for pollution reduction or plans to abate in the future

PERMITS
The establishments of a market for rights to pollute using
either credits or allowances