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Upstream Pollution, Downstream Waste Disposal, and the Design of Comprehensive Environmental Policies

  • Walls, Margaret
  • Palmer, Karen

Many environmentalists and policymakers are shifting their focus from media-specific pollution problems to product-specific, life-cycle environmental problems. In this paper, we develop a model of production and consumption that incorporates life-cycle environmental externalities—specifically, an upstream manufacturing byproduct, air or water pollution from manufacturing, and downstream solid waste disposal. We then use the model to derive optimal government policies to address all three externalities. We assume throughout that a Pigovian tax on waste disposal is precluded because of the potential for illegal dumping. We then examine four cases: one in which Pigovian taxes on the upstream externalities are feasible, one in which such taxes are infeasible, and two final cases in which the upstream pollutant is subject to one of two different types of regulatory standards. In general, we find that no single instrument can solve multiple problems, contrary to what some observers have suggested. However, we find that there are alternative ways of reaching the social optimum. We also discover that a so-called "integrated" approach to policy appears to be important, no matter what policy options are adopted. And finally, we find that there is only a limited role for product "life-cycle assessments"—enumerations of all of the resources used and pollutants emitted throughout an entire product life-cycle.

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Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 41 (2001)
Issue (Month): 1 (January)
Pages: 94-108

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Handle: RePEc:eee:jeeman:v:41:y:2001:i:1:p:94-108
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622870

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  1. Dinan Terry M., 1993. "Economic Efficiency Effects of Alternative Policies for Reducing Waste Disposal," Journal of Environmental Economics and Management, Elsevier, vol. 25(3), pages 242-256, November.
  2. Hahn, Robert W., 1986. "Trade-offs in designing markets with multiple objectives," Journal of Environmental Economics and Management, Elsevier, vol. 13(1), pages 1-12, March.
  3. Don Fullerton & Ann Wolverton, 1997. "The Case for a Two-Part Instrument: Presumptive Tax and Environmental Subsidy," NBER Working Papers 5993, National Bureau of Economic Research, Inc.
  4. Anderson, Curt L., 1987. "The production process: Inputs and wastes," Journal of Environmental Economics and Management, Elsevier, vol. 14(1), pages 1-12, March.
  5. Fullerton, Don & Wu, Wenbo, 1998. "Policies for Green Design," Journal of Environmental Economics and Management, Elsevier, vol. 36(2), pages 131-148, September.
  6. Fullerton Don & Kinnaman Thomas C., 1995. "Garbage, Recycling, and Illicit Burning or Dumping," Journal of Environmental Economics and Management, Elsevier, vol. 29(1), pages 78-91, July.
  7. Palmer, Karen & Walls, Margaret, 1997. "Optimal policies for solid waste disposal Taxes, subsidies, and standards," Journal of Public Economics, Elsevier, vol. 65(2), pages 193-205, August.
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