Env Econ Exam 2

Technology standards

none of the above

The most efficient use of revenue from Pigouvian taxes is to

reduce distortionary taxes

Market power is most likely to raise costs of compliance under

an emission trading system

Pigouvian tax equal to the marginal environmental damages from pollution

a and b

If the government issues a performance standard requiring each polluter to release only 4 tons of pollution, the total costs of the policy would be

30

If the government issues 3 marketable pollution permits (each allowing 1 ton of pollution) to each polluter, what would happen?

Polluter A would buy 1 permit from Polluter B

How much would polluter A pay for an innovation that would give it the same abatement cost as polluter B if it faces a performance standard capping its pollution at 3 tons?

$20

Suppose the marginal abatement costs (MAC) for most polluters turn out to be higher than expected at the time when the government imposes a policy. Under which policy is abatement lower than expected?

pollution tax

A “safety value” in an emission trading system

allows polluters to pay a pre-specified high price to buy allowances from the government

Consider a pollutant that is nonuniform in its effects, such as local air pollution that causes more damage when released by factories close to population centers

it may be optimal to have different marginal abatement costs for polluters depending on their locations

Which policy produces the strongest incentives for innovation?

pollution taxes

Fines for violations of pollution control laws in the United States

b and c

Relying on very high fines to enforce environmental policies may cause problems because

b and c