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How should an accumulative toxic substance be banned?

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  • Michael Toman
  • Karen Palmer

Abstract

The harmful effects on human health or ecosystems of many toxic substances depend on their cumulative concentration in the carrying medium (water, soil, or air), not just on the annual deposition rates of the substances. Accumulative toxic substances pose challenges to regulatory policy that are not faced when controlling pollutants whose damaging effects are though to depend primarily on annual emission flows. An increasingly common response is to phase out offending uses or production of the substance. In this paper we take as given the goal of phasing out an accumulative pollutant and examine different ways this could be done using a simple, partial-equilibrium dynamic model. We focus on phaseout measures in which the cumulative production and release of the offending substance over the transition period is fixed. Once this cumulative volume is reached, users must convert to a known but higher-cost substitute that is assumed to be benign. The key to the analysis is the observation that the quota on cumulative production makes production of the toxic substance during the transition analogous to extraction of an exhaustible resource with a higher-cost, nonexhaustible ‘backstop’ technology. Using this framework, we first describe the cost-effective outcome when the ‘sunset’ date is chosen to maximize product market surplus subject to the cumulative production constraint. This outcome is compared to one in which the regulator fixes the sunset date, and one in which the regulator limits annual production as well as cumulative production out of concern for acute exposure effects. Finally, we discuss the kinds of market-based policy instruments that would be appropriate for supporting a cost-effective outcome. Copyright Kluwer Academic Publishers 1997

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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental & Resource Economics.

Volume (Year): 9 (1997)
Issue (Month): 1 (January)
Pages: 83-102

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Handle: RePEc:kap:enreec:v:9:y:1997:i:1:p:83-102

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: accumulative pollutants; product bans; dynamic policy design;

References

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Citations

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Cited by:
  1. Conrad, Klaus, 2001. "The Optimal Path of Energy and CO2 Taxes for Intertemporal Resource Allocation," Discussion Papers 602, Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre.
  2. Toman, Michael & Withagen, Cees, 1998. "Accumulative Pollution, "Clean Technology," and Policy Design," Discussion Papers dp-98-43, Resources For the Future.
  3. Klaus Conrad, 2001. "The Optimal Path of Energy and CO2 Taxes for Intertemporal Resource Allocation," CESifo Working Paper Series 552, CESifo Group Munich.

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