Students / Subjects

Handbook >> Environmental Economics >> Techniques of Pollution Control >>

Comparison of Pollution Control Methods

Method of Pollution Control Pros Cons
Command-and-Control Guarantees a level of abatement

Preferred when pollutant is especially harmful & MB/MD is highly inelastic

Firms and regulatory agencies experienced with this method
Guarantee comes at the sake of economic efficiency

Difficult for government to keep up with pace of technological change

Can have narrow focus on just one technique of pollution control
Green Taxes
Provides a lever of control over future program costs

The Double-Dividend Effect can generate source of revenue to reduce tax burden and subsidize feebates

Ability to apply all the way from top of supply chain down to individual consumers in effort to internalize externality
 Sacrifices guarantee over level of pollution reduction for cost certainty

Many don't believe in double-dividend effect & assert tax distorts market

Primary Tax burden can be shifted to Producer or Consumer

High information and Administration Costs with requirement to know MAC
Cap-and-Trade Guarantees a level of pollution reduction

Allows firms to choose most cost-effective way to abate

Low information and Administrative Costs

Enjoys support of Policymakers, Politicians, and Firms
 Guarantee comes at the sake of control over future abatement costs

Can't be used for non-uniformly mixing pollutants

Banking of allowances can lead to future spikes in emissions

Allocation of allowances is subject to rent-seeking from the regulated firms

This is a comparison of the three most commonly used pollution control policies; voluntary control and subsidies aren't used as frequently in modern times.

Copyright 2006 Experimental Economics Center. All rights reserved. Send us feedback