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Green Permits

  • Date Submitted: 01/28/2010 06:29 AM
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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


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...


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