For something I'm fairly lukewarm about I've been writing an awful lot about the environment the last couple of weeks. This article however hopes to be more informative about what economics has done for the environment than an idea of what we can do for the environment. The Economist published an article recently called Green Market Forces that illuminates the market for carbon emissions. The article is no longer on their main page but the concepts are pretty easy to follow.
The type of pollution that can be most restricted is business pollution. For example, we set the amount that businesses in a region can pollute the environment to 100 units. Now like a market place where there are 100 bags of apples each bag is up for sale to whoever values a bag the most. Companies can purchase the right to pollute the environment. It limits the amount of pollution, setting it at a fixed amount and encourages companies to reduce pollution emissions via alternative methods of production (or new energy sources) because it costs them something for one more unit of pollution.
Problems: The initial allocation of such pollution permits. How do you distribute these permits initially? On a historical basis? On a pure market basis (this may result in monopoly of pollution permits)? The initial allocation is important.
Another way that the environment is helped is by conservation societies purchasing the land and declaring it a preservation or environmental groups can purchase sulfate emission permits and sit on them. While we can do our part to be good stewards of the environment on an individual basis there are certainly institutional changes and actions that will have substantial impact on this idea as well.
3 comments:
Another problem: enforcement. How can the EPA (I'm assuming they would be in charge) properly enforce pollution permit laws when the infrastructure for monitoring and regulating is so inadequate in the first place (at least it certainly looks inadequate from here)?
Gobbergo: Enforcement is an important problem for the general topic for tradable permits. However, I did a lot of work for the federal government when the sulfate emissions permits were being set up, and when I asked about enforcement the consensus answer I got was that whenever you have a small number of large, fixed site emissions stations (e.g electric power plants) the feds have pretty good enforcement technology. In other words, if you are an electric power plant in Ohio, the federal government pretty much knows where you are and what you are doing. I guess what I'm saying is that your assumption that "the infrastructure for monitoring ... is inadequate" is not what I heard. Where enforcemnt is more of a worry is with a large number of small, otherwise unregulated, maybe mobile emissions stations (e.g. automobiles or small, transient, "Mom & Pop" businesses). Of course, with regards to Doug's point about land preservation, we have the whole common law of land title and use.
Huh, alrighty. Guess appearances can be deceiving.
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