I never thought I'd be one for economics, but my Environmental Economics and Policy class is pretty darn cool. I'm sure this will bore most of you, but this is my blog, so bear with me.
When you have an industry such as steel production, we tend to take into account the cost of manufacturing, but not the cost to society of the harm we do to the environment through pollution. (This is called an externality).
There are various ways to force an industry to reduce pollution. One is to set a standard and everyone has to meet it. Or you can set a tax on every unit of pollution, to apporiximate the sociatal cost. Another option is to reward a firm for every unit of pollution it abates, in the form of a rebate. All of these methods will acheive similar results of the amount of units of pollution emitted.
However, these techniques have very different results in distribution of costs.
Under a tax, the firm pays both to clean up and to emit. The government collects more revenue since they have a tax, which relieves some of the tax burden on the general public.
Under standards, the firm just pays for what it cleans up and there is no revenue for the government.
Under the rebate, the firm pays to clean up, but is paid for what it does not emit. And who foots this bill? The taxpayers.
In addition, because the firm is refunded for the ammount of pollution it cleans up, the goods can be priced much lower than under the tax, so quantity of goods it produces will most likely increase.
And does it surprise anyone that rebates or standards are the most popular forms of environmental regulation? The forms that hurt the polluting firms the least and increase the tax burden on the general public the most? Well, I suppose it shouldn't, but it still did, hence why I'm sharing it.
I also learned today that I could cook an artichoke in the microwave, since I didn't feel like waiting 45 minutes before eating. What did people do without Google?
Posted by dahl at April 5, 2005 9:44 PM
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