 Quiz #2 Today  Homework #4 Due Oct. 11  Exam #2 Oct. 11  Writing Assignment Due Oct. 27th

 Uniformly Mixed Pollutants – a pollutant emitted by many sources in a region resulting in relatively uniform concentration levels across the region (SOx, CO2)  Non-uniformly mixed pollutants – pollutants that have different effects in different areas, depending on where they are emitted (water pollution from factories, sewage, and runoff from agriculture)

 Standards (Non-uniformly mixed pollutants)  Taxes (Uniformly Mixed Pollutants)  Permits (Uniformly Mixed Pollutants)

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 Hahn and Noll (1982) found that the CAC approach is cost effective compared to emissions trading  Germany’s CAC control of SO2 also cost- effective. High damage and strong standards Little flexibility in control Monitoring control was easier

 100 permits  2-emitters pollute  Source 1 – polluting 700  Source 2 – polluting 300  Gov’t wants to reduce to 800 tons of pollution using a permit market  Marginal Control Cost where Q is quantity controlled. MCC(1)=1Q 1 MCC(2)=4Q 2

 Lottery (equitable) – Who buys and who sells? How many?  Grandfathering (politically appealing) – Who buys and who sells permits? How many?  Auction (government revenue generated)  - What is the most each firm will bid to obtain all of the permits?