American Economic Review Vol. 99 No. 5 2009

Efficient Pollution Regulation: Getting the Prices Right

Nicholas Z. Muller¹; Robert Mendelsohn²

¹ Department of Economics and Environmental Studies Program, Middlebury College, 303 College Street, Middlebury, VT 05753. · ² School of Forestry and Environmental Studies, Yale University, 205 Prospect Street, New Haven, CT 06511.

Abstract

This paper argues for efficient environmental regulations that equate the marginal damage of pollution to marginal abatement costs across space. The paper estimates the source-specific marginal damages of air pollution and calculates the welfare gain from making the current sulfur dioxide allowance trading program for power plants more efficient. The savings from using trading ratios based on marginal damages are between $310 and $940 million per year. The potential savings from setting aggregate emissions efficiently and from including more sources of air pollution are many times higher.

DOI

10.1257/aer.99.5.1714

Volume

99

Issue

5

Pages

1714-1739

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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