Econ 100
Lecture 8.3
Pollution and Initiatives in the NW
Summer 2009
How Do We Get There?
• Standards (command and control)
– Set the overall standard at Q*
– Calculate the amount of reduction necessary
– Set uniform reduction goal for all firms
• Taxes/Emission Charges
– Set the tax = externality cost at the optimum
Q*
– Firms will internalize the cost
• Tradable Permits (Coase)
– Allocate right to pollute (Q*/N)
– Allow firms to set price for trading permits
Comparison of Approaches
• Tradable Permits
– Cost efficient
• Firms will purchase permits from more efficient firms if permit
cost < abatement (technology) costs
– Technological incentive to reduce pollution
• Marginal cost of abatement = permit cost
– Similar to taxes
– Administratively simpler
• Require less information about the firms’ cost
• Better able to handle “spatial” variation in pollution
– Fewer permits auctioned in bad areas
• Adjust “automatically” for changes in inflation and growth
– E.g., Ca RECLAIM experience
– If auctioned -> revenues for admin costs
A Webinar on Tradable Permits
• http://www.sightline.org/research/energy/re
s_pubs/cap-in-trade-2009-sightlinewebinar
Water Pollution Problems
Types of Waste-Receiving Water
• There are two general types of water
bodies at risk of contamination from
pollution.
– Surface water includes rivers, lakes and
oceans. Historically, clean-up policies have
focused on surface water.
– Groundwater is subsurface water.
– Groundwater and surface water require
different water policies.
• Major issue with identifying source
– Could set optimal level, but how to allocate?
Western Climate Initiative (WIN)
• Cap and trade program
– Include BC, Washington and Oregon
• Cap would be set for each state/province on
Greenhouse gases at 1990 levels (Kyoto
protocol)
– CO2, CH4, NO, hydroflurocarbons, perfluorocarbons
and sulfurhexafloride
• Transportation, residential, commercial and industrial fuels
– 25k metric tons of CO2 equivalent (annual)
– 1 ton tradable permits
– Start in 2012; reduce cap by 50% by 2020
Puget Sound Clean Up
• Objectives
– Reduce 150k per day pounds of toxic
chemicals that enter Puget Sound daily
• Over 2 years -> equivalent to Exxon Valdez spill
– Acquire/restore prime marine habitats
• Replace degraded shorelines, wetlands, estuaries
– 40 major species have declined
Puget Sound Clean Up Initiative
• Governor’s proposal
– Added $42M to already allocated $90M
– Puget Sound Partnership
• 10 person team of elected official, business leaders
• Proposed actions
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$21M faster clean-up of pollution and shoreline
$6.5M upgrade of septic systems -> into PS
$4M for Parks to upgrade sewer systems
$3M restore estuaries (wetlands)
$2M to remove creosote logs
$1.5M for oil spill and hazardous chemical clean-up,
including storage
Puget Sound Clean Up
• What’s happening today
– Port Gardner Bay Clean Up (9 sites)
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Oil, gasoline, diesel fuels, heavy metals
Everett shipyard
North Marina
Baywoods
Exxon/Mobil storage
Weyerhauser
East Waterway
ASARCO (Arsenic)