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Regulating Pollution Efficiently

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"Some pollution may be economically efficient." Discuss. Be sure to define any technical terms you may use.

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Solution Summary

Tradeable pollution rights as a means of regulating pollution efficiently. References are provided.

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Zero pollution is not a feasible position. We tend to think of pollution as a modern phenomenon, but whenever people congregate in large numbers, pollution results. It occurred in ancient civilizations just as it does today, although on a much smaller scale. So, we cannot expect any industry to be entirely pollution-free. The earth has many systems that eliminate pollution, and the important thing is not to allow them to become overwhelmed, which will disrupt global cycles (as we are with greenhouse gases) and not to create pollution so quickly that it builds up to harmful levels before the earth can remove it. In addition we must consider that the costs of cleaning the environment are often passed on to consumers through higher prices.

Pollution rights are tolerated with this understanding. They enable governments to regulate pollution without bringing industry to a grinding halt. When pollution is limited, it puts constraints on industry which raises their costs. This in effect shifts the supply curve inward, reducing output and increasing prices. This is clearly not in the best interest of society, if it were the only effect. You must also consider how the ...

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