Green Permits

Transferable discharge permits create an economic incentive to reduce pollution and


exhibit many other advantages over the current command and control pollution regulation


system.   However, ‘green permits’ on a large scale would be difficult to allocate fairly, and


the efficient economic outcome may not be the socially desirable outcome.




Introduction to Green Permits




1. Green Permits as an incentive to reduce pollution:


  cost to pollute- tie up money


  induces costs/benefits of pollution to owner of permits


a.   polluter pays


  incentives for research and development




2.   Green Permit benefits over Command and Control


  under CAC delay is profitable


  new technology must develop to ever-changing EPA standards


  fixed cost of pollution -free if under guidelines no incentive to reduce


  each pollution written into law


b.   who determines value of each pollutant


c.   special interest groups ruling majority





1.   Problems with Green Permits


  initial allocation


c.   auction off - generate revenue but create barriers


d.   give away - harm firms already environmentally friendly




  trading rules leading to socially undesirable outcome


a.   anybody trade - geographic concentration problem


b.   mixing problem - receptor sites and ambient standards




4.   Green Permits as a market failure


  can’t have failed without trying on large scale


  example - rapid phaseout of lead gasoline




References:




Develin, Rose, Grafton, Quentin.   Marketable emission permits:efficiency, profitability and


substitutability.   Canadian Journal of Economics, Ap(96). Vol.29,260-264




Rothschild, Micheal. (1992)   Green Markets.   Upside.   Bionomics Institute




Field, Barry, Olewiler, Nancy.   Environmental...