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Environmental Economics

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					Environmental Economics

     Of Cows and Cars
        Peter Berck
Cows
Calif is tops!
                 Production
• Dairy
  – Inputs that are paid for
     •   Feed
     •   Water
     •   Labor
     •   Land
  – Inputs not paid for
     • Removal of ammonia compounds by air
     • Removal of nitrogen and phosphorus to water
 Suppose they paid for pollution

        D
                               S’


price                               S




            Quantity of Milk
 Response to a pollution charge
• Could trap manure in a pond, digest it, and burn
  the methane in an engine.
  – Buys capital goods (engine, pond)
  – Sells electricity (but it won’t pay for engine, pond)
  – Doesn’t pollute as much
• Suppose that farmer had to pay for release of
  methane, etc. Would that tip the balance to
  cleaner production?
• As price paid for right to pollute goes up, amount
  of pollution per unit output goes down. Amount
  of other inputs goes up.
 Two effects of pollution charge
• Pollution per unit of output goes down
  (she buys the generator and pond)
• Quantity of polluting output goes down
  (her supply curve shifts in and less
  polluting output is produced in equilibrium)
                Question
• (Hypothetical) A tax of $100/ton of organic
  gasses emitted would induce the farmer to
  use the generator and decrease his
  emissions by 75%.
• Would the farmer rather be ordered to use
  the generator or would she rather face the
  tax?
                 Question:
• If farmers have to clean up (this is real see
  the draft scoping plan for GHG!)
  – It will cost them more to make milk
• Will the price of milk go up?
• Can consumers avoid paying for cleanup?
• Who does the general public think pays?
   Sacred
    Cars:
   Efficient
   Cleanup

MCA is marginal cost of
abatement—cost to
clean up the next unit of
pollution
 The Case for Tradable Permits
It costs powerplants much more than it costs cars
     to clean up 1 ton of Nox. At original allocation
We need to remove 21 mt from the air.
Which is better:
1. Cars and powerplantsmust abate as in original
2. Powerplants pays cars money and cars clean
     up another 4mt.
       What could be Wrong
• power pays cars and cars lie about
  cleaning up.
• power is in an unpopulated place and cars
  are in the center of a city
• Pollution is just wrong and power shouldn’t
  be allowed to pollute (but it isn’t wrong for
  my car to pollute, just yours…)
                  Politics
• California may not clean its air by
  prohibiting 2-stroke lawn mower engines.
• California must add alcohol to its gasoline,
  even though we don’t believe that is the
  best way to clean the air.
• California won the right to regulate heavy
  trucks in its State Implementation Plan.
                   Model
• Politicians need votes
  – Can have popular position
  – Can get $ and use them to advertise

				
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posted:5/18/2014
language:English
pages:14