U5123854

EMDV8078-Weekly Assignment EMDV8078 Introduction to Environmental and Resource Economics

Weekly assignment Tutorial 11/week 12 (Semester 1, 2012) Global pollution and stationary source pollution
1. What is an air pollution hot spot? What implications do such hot spots have for air pollution control policies?

Air pollution hot spot happens when emissions from specific sources may expose individuals and population groups to elevated risks of adverse health effects and contribute to the cumulative health risks of emissions from other sources in the area. Hotspot happens more highly in the urban area or clustered sources of emission, where all emitters release the pollution into the atmosphere, therefore increasing concentration of pollutant in air. For non-unfomed mixed pollutants, it is the concentration in the air that matters. The concentration is measured as the amount of pollutant found in a given volume of air, at a given location and at a given point in time. Each pollutant station has different transfer coefficient as a result their different magnitude of contribution to the pollutant concentration in air due to their location (from receptor) and timing of emission; For cost effective pollutant control allocation amongst polluters, policy needs to ensure that MC of ambient concentration reductions are equal across polluters Set ambient charge = [transfer coefficient] x [marginal cost of emission reduction] (Different charges across equal pollutants because of different transfer coefficients) Policies responses for non-uniformly mixed pollutants must take the location and possibly the timing of the emissions, meteorology conditions into account as well as the amount of pollution. In principle, this can be accomplished with either an appropriately designed ambient allowance trading system or ambient charge , which in addition, would provide more incentives for technological progress in pollution control than would ambient standards. Ambient charges and ambient trading also generate revenue. The command-and-control policy with ambient standard the legal ceiling of allowable specific pollutants in air--, is inefficient and not cost-effective, since its unrealistic to collect information on MCC and MDC of pollutant concentration and also its less flexible for firms to minimize their pollution control cost given a fixed allocation of their ambient control.

U5123854

EMDV8078-Weekly Assignment

The hot spot of air pollutant is an indication of existing policy flaws such as
Command control (emission/ambient standard) is set too low. Emission/ambient charge (tax) is lower and provide more incentive to pollute more rather

than to control.
Ambient/emission trading : The Cap may be too high; therefore, we can limit the amount

of pollution allowance to achieve the certainty of amount of pollution.

2.

Best Available Technology regulations do not ensure equality of marginal control costs across polluters. Explain.

BAT is part of the command-and controlled policy by governments environmental authority to limit the amount of pollution. This approach is tied with the pollution emission standard policy as the firms are required to have pollution control facilities to meet a certain level of allowable emission standard. In practice, its unrealistic to determine the efficient level of emission standard, and cost-effective allocation of control responsibility amongst emitters due to lack of accurate information on firms Marginal Control Cost and Marginal Damage costs which are mostly depend on non-market valuation. This policy approach fails to take into account different MCC of different firms. Its proved inefficient, costly and inflexible for the small form to invest in such expensive technology as it will rise for fixed cost and reduce the competitiveness. For large firm, technology innovation seem to be more efficient as with the economic of scale effect, they will be able to reduce MCC and improved their competitiveness, as they can produce and pollute more. Such difference between of technology affordability of firms is not consistent with cost-effective allocation of cleaning responsibility across polluters where MCCs need to be equalized.