For controlling pollution, various options both tangible and intangible are

there, however economists have devised a mechanism for the selection of such
instrument. Discuss in detail the selecting criteria for such pollution control
instruments? Also give an account on various pollution control instruments,
along with their possible role in controlling pollution?

Pollution:

Pollution is the introduction of harmful materials into the environment. pollution, also
called environmental pollution, the addition of any substance (solid, liquid, or gas) or any form
of energy (such as heat, sound, or radioactivity) to the environment at a rate faster than it can be
dispersed, diluted, decomposed, recycled, or stored in some harmless form. The major kinds of
pollution, usually classified by environment, are air pollution, water pollution, and land
pollution. Modern society is also concerned about specific types of pollutants, such as noise
pollution, light pollution, and plastic pollution. Pollution of all kinds can have negative effects on
the environment and wildlife and often impacts human health and well-being.

Pollution control:

is the process of reducing or eliminating the release of pollutants into the [Link] is
general agreement that we must control pollution of our air, water, and land, but there is
considerable dispute over how controls should be designed and how much control is enough. The
pollution control mechanisms adopted in the United States have tended toward
detailed REGULATION of technology, leaving polluters little choice in how to achieve the
environmental goals. This “command-and-control” strategy needlessly increases the cost of
pollution controls and may even slow our progress toward a cleaner environment.

In 1970, popular concern about environmental degradation coalesced into a major political force,
resulting in President Richard Nixon’s creation of the federal Environmental Protection Agency
(EPA) and the first of the major federal attempts to regulate pollution directly—the Clean Air
Act Amendments of 1970. Since then, the federal role in regulating pollution has grown
immensely, unleashing many regulatory responsibilities on the EPA and a cascade of regulations
on local governments and the business community. But that has begun to change somewhat as
environmentalists have increasingly realized that markets can work to allocate pollution
reduction responsibilities efficiently among firms and across industries. Although the command-
and-control approach is still the norm, environmental lobbyists and legislators have, on occasion,
considered market-based approaches to pollution control. Most of the proposals for
limiting GLOBAL WARMING, for example, explicitly include market-based approaches for
controlling carbon dioxide emissions.

Criteria for choice of pollution control instruments:

There are many instruments available to an EPA charged with attaining some pollution target.
How should it choose from among these? If attaining the target were all that mattered, instrument
choice would be relatively simple. The best instrument would be the one that meets the target
with greatest reliability. But the EPA is unlikely to have only this objective. Government
typically has multiple objectives, and the terms of reference that policy makers impose on their
agents will tend to reflect that diversity of objectives. Even where these terms of reference are
not explicit, the network of influences and pressures within which the EPA operates will lead it
to adopt multiple goals de facto. Instrument choice can be envisaged in the following way. Each
available instrument can be characterized by a set of attributes, relating to such things as impacts
on income and wealth distribution, the structure of incentives generated, and the costs imposed in
abating pollution. A score can be given to each instrument, dependent on how well its attributes
match with the set of objectives sought by the EPA. This perspective is useful as it draws
attention to what kinds of attributes a ‘good’ instrument might have. There are a set of criteria in
terms of which the relative merits of instruments can be assessed that are follow:

1. Cost-effectiveness
2. Long-run effects
3. Dynamic efficiency
4. Ancillary benefits
5. Equity
6. Dependability
7. Flexibility
8. Costs of use under uncertainty
9. Information requirement

First, the use of any instrument is likely to involve conflicts or trade-offs between alternative
criteria. Instrument choice will, therefore, depend on the relative weights attached to the criteria
by the EPA. Second, it is likely that the weights (and so the choice of instrument) will vary over
different types of pollution. For example, where a dangerous and persistent toxin such as the
synthetic pesticide DDT or heavy metals such as lead or mercury is concerned, the EPA may
regard cost efficiency as being of low importance relative to the long-run effect of the chosen
instrument. Third, no single instrument is best for dealing with all types of pollution in all
circumstances. We shall see in the next chapter that this is true a fortiori where instrument choice
takes place under conditions of uncertainty. One particular criterion – cost efficiency – has
received so much attention in the environmental economics literature that it warrants special
attention now.

1: cost effective criteria

• Suppose a list is available of all instruments which are capable of achieving some
predetermined pollution abatement target.

• If one particular instrument can attain that target at lower real cost than any other can then that
instrument is cost-effective

. • Cost-effectiveness is clearly a desirable attribute of an instrument.

– Using a cost-effective instrument involves allocating the smallest amount of resources to
pollution control, conditional on a given target being achieved.

– It has the minimum opportunity cost.

– Hence, the use of cost-effective instruments is a prerequisite for achieving an economically

efficient allocation of resources

Various pollution control instruments

Command and control instruments:

The dominant method of reducing pollution in most countries has been the use of direct controls
over polluters. This set of controls is commonly known as command and control instruments.
This “command and control” pattern of regulation set uniform targets for how much firms should
emit, often by dictating the processes that should be used in their facilities. Two broad types of
command and control regulations are discernible: technology-based and performance-based. The
former specify the methods and equipment that firms must use to meet the target. Performance
standards, on the other hand set an overall target for each firm, or plant, and give firms some
discretion in how to meet the standard. Crucially, though, performance standards still hold firms
to a uniform level across the industry, ignoring the possibility that some companies may be able
to make reductions more readily than others. In addition, early command and control regulations
were often based on “end of pipe” solutions with little thought given to how pollution could be
reduced through more systemic changes to the core production process or even in product
design. Of course, changes at that level require the active input of manufacturers familiar with
the industry. However, command and control regulations give the manufacturer little incentive to
pursue such changes. There is no reward for beating a target, only the risk that the regulator will
promptly raise the standard to reflect the new technology.

While command and control (or direct) regulations were successful in securing the first tranche
of emissions reductions from previously unregulated industries, more than two decades after
their introduction they are now viewed as increasingly burdensome. Industry bemoans the
financial costs such regulations impose and the intrusiveness of a process which often dictates
their technology choice. Regulators bear the burden of keeping abreast of technological
developments in many different industries. Moreover, the process of ratcheting standards up over
time often brings the two groups into antagonistic debate and involves lengthy and detailed
discussion about the costs and suitability of alternative technologies upon which to base the next
standard.

Economic Instruments:

Economists have long advocated the use of economic instruments as an alternative, or

supplement, to direct regulation. Most importantly, economists argue that economic instruments
can create a system for pollution reduction that achieves the same level of environmental
protection for a lower overall cost (or achieves more for the same cost). Given the importance of
the overall costs of environmental protection in political debate, this is a crucial advantage.
Economic instruments also allow for a more hands-off regulation and decentralized decision-
making, giving greater freedom to firms and plants about how to comply.

Correcting a “Market Failure”

To understand the underlying logic of economic instruments, one must understand why pollution
arises in the first place. Economists perceive pollution as a ‘market failure’ which arises because
‘polluters’ – from the heavy plants of popular imagination to people who turn on their lights at
home – are not faced with the full consequences or implications of their production, consumption
or disposal choices. In the classic textbook example, a manufacturer releases effluents into the
nearby river, with adverse effects on fish populations. Downstream, commercial fishermen find
their livelihoods under threat, recreational anglers start to find their weekend pastime less
enjoyable, while others may simply be distressed by the loss of wildlife and the damage to
ecosystems (e.g. Pearce and Turner, 1990). Because the use of the river as an effluent depository
is perceived as free, the manufacturer has no incentive to curb effluents, in contrast to the
permanent incentive he has to reduce labor, material, machinery and energy inputs, all of which
have costs attached to them. In economic terms, the downstream impacts are ‘externalities’ that
lie outside of the manufacturer’s decision-making framework.

The underlying premise for economic instruments is to correct this market failure by placing a
cost on the release of pollutants.2 This will internalize the ‘externalities’ into the decision
making process. Placing a charge, or a fee, on every unit of effluent released into the river,
transforms the manufacturer’s decisions regarding how much he will produce, and how he will
produce it. Now, the manufacturer must minimize total production costs that consist not only of
labor, material, machinery and energy inputs, but also of the effluent output. In some cases, the
manufacturer may simply decide to invest in an “end-of-pipe” solution that pays for itself in
terms of avoided effluent charges. In other cases, he may decide to alter the core production
process, perhaps installing new technologies, or working with new materials which result in less
waste. By adjusting the charge level, or the cost attached to effluent outputs, the regulator can
induce a different degree of response from manufacturers, and hence control the overall level of
pollution.

1. Charges, fees or taxes

These are prices paid for discharges of pollutants to the environment, based on the quantity
and/or quality of the pollutant(s). To be most effective the charge is levied directly on the
quantity of pollution (‘emissions tax or charge’), though if this is difficult to measure or monitor,
it may be necessary to levy a charge on a proxy for the emissions, typically on the resource that
causes the pollution (‘product tax or charge’). Product charges occur at different usage points.
They have been levied on products either as they are manufactured (e.g. fertilizers), consumed
(e.g. pesticides) or disposed of (e.g. batteries) (Barde, 1997). How effective product charges are
depends on how well ‘linked’ the input, or product, is to the eventual stream of pollution. In the
case of taxing carbon fuels as a proxy for carbon dioxide emissions, the ‘linkage’ is very strong
as virtually all the carbon contained in fuels is released during combustion. Taxing the fuel is
thus little different to taxing the emissions. On the other hand, taxing pesticides as a proxy for
release of certain chemicals into water systems is less well linked as the degree of chemical
infiltration will depend on a mixture of variables relating to soil and slope conditions, the timing
of applications etc.

2. Tradable Permits:

These are similar to charges and taxes except that they operate by fixing an aggregate quantity
of emissions rather than charging a price for each unit of emissions. Instead of being charged for
releases, one needs to hold a ‘permit’ to emit or discharge. By controlling the total number of
permits, one is effectively controlling the aggregate pollution quantity.

3. Charge-Permit Hybrids

It is possible to blend the quantity-based permit approach with a pricebased charge or tax
approach to try to harness their different strengths while avoiding their weaknesses. A good
example is RFF’s proposal to use a hybrid mechanism to control CO2 emissions in the U.S.
(RFF, 1998). This would consist primarily of a permit program that would require domestic
energy producers (and importers) to obtain permits equivalent to the volume of carbon dioxide
eventually released by the fuels they sell. However, by setting the overall permit quantity, one
has no idea what price permits will sell for – this will only be revealed as businesses and
consumers begin to reduce their CO2 emissions. In order to guard against excessively high
permit prices that might arise – the very prospect of which may prevent the program being
implemented in the first place – the second aspect of the proposal would be for the government
to release an unlimited number of permits at $25 per ton of carbon should the market price of
permits reach that level. This effectively sets up a charge system of $25 per ton, capping the
possible market price. A system like this attempts to control on the basis of quantity, which is the
most desirable goal, while creating an ‘escape valve’ should costs rise too high. Even if the
escape valve is utilised, the program amounts to the institution of a charge on carbon. 4. Deposit-
refund schemes Under these schemes, a surcharge is levied on a product at the point of payment.
When pollution is avoided by returning the product, or its polluting components, to a specified
collection stream the surcharge is refunded. These economic instruments have been used most
often for drinks containers, batteries and packaging (OECD, 1997).

4. Subsidies

Where taxes or charges can be used as a penalty on discharges, subsidies can be used to reward
the reduction of discharges in a similar manner. The financial incentive is effectively the same,
though the flow of funds is in a different direction. A subsidy program will involve a transfer of
funds from the government to the industry, while a charge program would be a revenue source
for the government. Subsidies may be relatively explicit in the form of grants and soft loans, or
be somewhat indirect, such as in adjusted depreciation schedules. (Barde, 1997).

Conclusion:

The use of economic instruments would allow additional environmental improvements to be met
at least cost, or would allow present standards to be met more cost-effectively. As a regulatory
mechanism they are more in keeping with the prevailing market structure that automatically
promotes efficient solutions and that encourages and rewards innovation. As their advantages
become more widely understood, and as the desire grows to balance benefits and costs of
environmental protection, it is likely that their use will increase in coming decades. In practice,
with a well-established regulatory system based on traditional measures already in place, the key
issue will be to work out how economic instruments can complement, and integrate with,
conventional measures.