C H A P T E R 12
EMISSION PRICES AND FEES
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.
FIGURE 12.1 Firm choice of emissions/abatement when faced with emission fee, p.
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.
FIGURE 12.3 The case of two polluters. MS1 (x), marginal savings from emitting firm 1; MS2(x), marginal savings from emitting firm 2; MS(x),
aggregate marginal savings from emitting; MD(x), marginal damage from emitting; p*, Pigovian fee; x*, total amount of emissions with Pigovian
fee; x1*, emissions from firm 1 with Pigovian fee; x2*, emissions from firm 2 with Pigovian fee.
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.
FIGURE 12.4 Variable costs for heterogeneous industry, short run. (a) Old firms; (b) newer firms, MCU, marginal cost unregulated case; MCS,
marginal cost, with emission control subsidy; MCT, marginal cost, with emission fee; AVCU, average variable cost, unregulated case; AVCS,
average variable cost, with emission control subsidy; AVCT, average variable cost, with emission fee; pU,
goods price, unregulated case; pS, goods price, with emission control subsidy: pT, goods price, with emission fee.
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.
FIGURE 12.5 Short-run supply and demand, heterogeneous industry, with and without taxes and subsidies. SupplyU, goods supply,
unregulated case; SupplyS, goods supply, with emission control subsidy; SupplyT, goods supply, with emission fee;
demand, goods demand; pU, goods price, unregulated case; pS, goods price, with emission
control subsidy; pT, goods price, with emission fee.
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.
FIGURE 12.6 Long-run supply and demand, constant cost industry, with and without taxes and subsidies. MCU, marginal cost, unregulated case; MCT,
marginal cost, with emission control subsidy or emission fee; ATCU, average total cost, unregulated case; ATCS, average total cost, with emission control
subsidy; ATCT, average total cost, with emisison fee; D, goods demand; SU, long-run supply of good, unregulated case; SS, long-run supply of goods, with
emission control subsidy; ST, long-run supply of goods, with emission fee; qU equilibrium goods output, unregulated case; qS, equilibrium goods output,
with emission control subsidy; (qT, equilibrium goods output, with emission fee.
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.
FIGURE 12.7 Imposing a Pigovian fee on a goods monopolist. MCU, marginal private cost of producing steel; MCT, marginal social
cost of producing steel; D, demand for steel; MR, marginal revenue for steel; SU, steel output level, unregulated; ST, steel output
level with Pigovian tax; S*, socially optimal output of steel.
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.
FIGURE 12.8 Monopolist in provision of pollution. MS, marginal savings from polluting; MD, marginal damage from polluting; MT, marginal emission fee
payments; t*, Pigovian fee; tm, monopoly emission fee level; s*, efficient amount of smoke; sm, monopoly emissions of smoke.
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.
FIGURE 12.9 (a,b) Effect on leisure from environmental tax. VMPL, value of marginal product of labor; tL, tax on labor; w, wage rate; H*,L*, supply of
leisure and labor with tX = 0; tX, tax on X; H+, quantity of leisure with tX > 0; BCDE, wage tax revenue loss from tX > 0.
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.
FIGURE 12.10 Supply and demand of polluting good. MCsocial, marginal costs of producing X, including pollution damage; MCprivate, marginal
costs of producing X, excluding pollution damage; X*, production without internalizing externality; tX,
product tax necessary to internalize externality; X+, production with tax tX.
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.