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Efficient Pollution Regulation: Getting the Prices Right: Comment

Author

Listed:
  • Art Fraas
  • Randall Lutter

Abstract

The cost-effectiveness of cap-and-trade emissions regulations has become widely accepted. A 2009 proposal by Muller and Mendelsohn would replace conventional ton-for-ton trading with trading based on estimates of marginal damages by pollutant and by source. This proposal faces difficulties arising from the negative marginal damage estimates--neglected in Muller and Mendelsohn (2009)--for nitrogen oxide (NO x ) emissions from many urban counties. Such estimates imply nonconvexities in air chemistry that complicate trading and could result in trades that increase emissions by both buyer and seller. Uncertainty in source-specific damages also creates rent-seeking opportunities and the potential for costly litigation. (JEL H53, Q53, Q58)

Suggested Citation

  • Art Fraas & Randall Lutter, 2012. "Efficient Pollution Regulation: Getting the Prices Right: Comment," American Economic Review, American Economic Association, vol. 102(1), pages 602-607, February.
  • Handle: RePEc:aea:aecrev:v:102:y:2012:i:1:p:602-07
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.1.602
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    References listed on IDEAS

    as
    1. Spencer Banzhaf, H. & Burtraw, Dallas & Palmer, Karen, 2004. "Efficient emission fees in the US electricity sector," Resource and Energy Economics, Elsevier, vol. 26(3), pages 317-341, September.
    2. Repetto, Robert, 1987. "The policy implications of non-convex environmental damages: A smog control case study," Journal of Environmental Economics and Management, Elsevier, vol. 14(1), pages 13-29, March.
    3. Nicholas Z. Muller & Robert Mendelsohn, 2009. "Efficient Pollution Regulation: Getting the Prices Right," American Economic Review, American Economic Association, vol. 99(5), pages 1714-1739, December.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Nicholas Z. Muller & Robert Mendelsohn, 2012. "Efficient Pollution Regulation: Getting the Prices Right: Corrigendum (Mortality Rate Update)," American Economic Review, American Economic Association, vol. 102(1), pages 613-616, February.
    2. Nicholas Z. Muller & Robert Mendelsohn, 2012. "Efficient Pollution Regulation: Getting the Prices Right: Reply," American Economic Review, American Economic Association, vol. 102(1), pages 608-612, February.
    3. Lenski, Shoshannah M. & Keoleian, Gregory A. & Moore, Michael R., 2013. "An assessment of two environmental and economic benefits of ‘Cash for Clunkers’," Ecological Economics, Elsevier, vol. 96(C), pages 173-180.
    4. Muller, Nicholas Z., 2012. "The design of optimal climate policy with air pollution co-benefits," Resource and Energy Economics, Elsevier, vol. 34(4), pages 696-722.

    More about this item

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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