Tradable pollution permits
As a follow-on to yesterday's post, which ended with the idea that harnessing market economics can be useful for social and environmental aims, I wanted to briefly note that I have a long-standing interest in "tradable pollution permits" - in fact, I wrote my undergraduate economics thesis on the topic.
While the idea of "buying and selling pollution" strikes many people as inherently unethical, there are many advantages to this kind of regulation. For one, it sets a cap on total pollution - which is often the overarching goal - rather than trying to reach a goal indirectly by limiting individual contributors to the problem. Second, it allows the abatement to happen wherever it is cheapest (and therefore more efficient), because those who can reduce pollution easily will reduce more than they have to and sell their permits to others (while those who find it very difficult will have to pay for extra permits from others). Third, this effectively punishes every instance of pollution, because each one incurs a very tangible cost. Fourth, it can often make a set of regulations viable in a situation where stricter "command-and-control" tactics would create a powerful backlash of lobbying and resistance.
But permit systems work well only under certain conditions. One is that the pollution must be "global" in the sense that one person's reduction is interchangable with another's. For example, SO2 contributing to acid rain is global, while littering is site-specific - so if I pay someone else to reduce littering in another town, and continue to litter in my own, then my fellow townspeople won't find this an acceptable arrangement. Also, it helps immensely to have a limited number of easily-identifiable and easily-regulated source points. For example, US acid rain mainly comes from S02, which mainly comes from 200-300 power plants - all of which are accustomed to regulatory oversight. Curbing global warming, on the other hand, is made more complex by distributed source points (automobiles) and a lack of cohesive regulation (many sovereign nations).
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After writing and posting this entry, I came across a great article from the New York Times that addresses exactly this issue ("Capital Pollution Solution," by Jeff Goodell, NYT 7/30/06).
While the idea of "buying and selling pollution" strikes many people as inherently unethical, there are many advantages to this kind of regulation. For one, it sets a cap on total pollution - which is often the overarching goal - rather than trying to reach a goal indirectly by limiting individual contributors to the problem. Second, it allows the abatement to happen wherever it is cheapest (and therefore more efficient), because those who can reduce pollution easily will reduce more than they have to and sell their permits to others (while those who find it very difficult will have to pay for extra permits from others). Third, this effectively punishes every instance of pollution, because each one incurs a very tangible cost. Fourth, it can often make a set of regulations viable in a situation where stricter "command-and-control" tactics would create a powerful backlash of lobbying and resistance.
But permit systems work well only under certain conditions. One is that the pollution must be "global" in the sense that one person's reduction is interchangable with another's. For example, SO2 contributing to acid rain is global, while littering is site-specific - so if I pay someone else to reduce littering in another town, and continue to litter in my own, then my fellow townspeople won't find this an acceptable arrangement. Also, it helps immensely to have a limited number of easily-identifiable and easily-regulated source points. For example, US acid rain mainly comes from S02, which mainly comes from 200-300 power plants - all of which are accustomed to regulatory oversight. Curbing global warming, on the other hand, is made more complex by distributed source points (automobiles) and a lack of cohesive regulation (many sovereign nations).
*********************************************************************************
After writing and posting this entry, I came across a great article from the New York Times that addresses exactly this issue ("Capital Pollution Solution," by Jeff Goodell, NYT 7/30/06).
posted by Melissa Paschall at 8/25/2006 01:51:00 PM
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