Module 5: Modeling Pollution Control

pollution damage functions

emission damages function: quantity of a residual and corresponding damage

ambient damage functions: concentrations in the ambient environment and the corresponding damages

marginal damage function

MD = S

additional damages from a one unti increase in emissions or ambient concentration

• threshold: x-intercept, below a certain level MD are 0

implicit assumptions:

• assuming a pollutant has a threshold has policy implications

• reversibility: graph implies that damages decrease if quantity decreases, but this isn’t true for cumulative pollutants

intertemporal implications for pollution damage functions

a MD curve shows emission quantities and damages for a certain tie period

2 interpretations:

1. noncumulative pollutant: all damages occur in same period as the emissions are released

2. cumulative pollutant: assuming the damage function shows the total value people place on current and future damages 

aggregate MD

reasons MD differ for the same pollutant

• differences in weather patterns between two areas (inversion, wind patterns)

• differences in population (fewer people = lower MD)

• differences in population vulnerability (older, at risk populations vs healthier)

• time of day: higher MD when more people are outside

abatement costs

MAC = D

cost of reducing the quantity of emission residuals and lowering ambient concentrations

• negative abatement cost means it is cost-saving in the long run (but mac curve only reflects abatement methods with positive marginal costs)

MAC

additional cost of a one unit decrease in emissions

MAC is 0 at uncontrolled level

aggregate MAC: add individual MAC horizontally

reasons the MAC curve could differ for the same abatement method

• new technologies that are cheaper but achieve the same emissions reductions

• different years

• different sources abating (new plant vs older plant)

socially efficient level of emissions

MAC = MD

• net benefits maximizes

enforcement costs

firms won’t abide by regulations, need enforcement

marginal enforcement costs added to MAC function