A resource is renewable if it can be utilized eternally when handled responsibly. As a result, if trees are removed at a sustainable pace and seedlings are planted in their place, wood is a renewable resource. To the degree that they can absorb and neutralize a certain amount of contaminants, the atmosphere and rivers are renewable resources.

Biological resources such as fish, game, forests, rivers, grasslands, and agricultural soil, in general, are renewable if properly managed. Some renewable resources are also available to the public. In terms of consumption, an open-access resource is competitive, but exclusion is expensive. Because fish captured in the ocean are not available for others to catch, they compete in conquest.

Because there are no real, enforceable private property rights to open-access resources like the air, pollution and other negative externalities occur. Negative externalities impose costs on society that are typically not accounted for in market prices. For example, the cost of a gallon of fuel does not include the expenses of greenhouse emissions, cleaner air, oil spills, and increased traffic congestion caused by your driving.

Electric pricing does not account for the negative externalities or costs that fossil-fueled power plants impose. Externalities are unexpected consequences of acts that are beneficial and meaningful in and of themselves.

Users of open-access resources such as the atmosphere, rivers, animals, and other open-access resources sometimes overlook the impact of their actions on the resource's potential to regenerate. Overuse reduces the resource's quality and quantity, making it rare and perhaps disappearing. Government rules that limit resource consumption may help to alleviate the common pool problem.

Output limits or levies may compel individuals to use the resource at a socially optimum pace. When maintaining and enforcing private property rights would be too expensive, government laws may help to increase allocative efficiency.

What would happen to the ideal amount of emissions if one or both of the marginal cost and benefit curves shifted? Assume that a technological innovation lowers the marginal cost of reducing greenhouse gas emissions.

The marginal social cost curve of decreasing emissions would shift downward to MSC', resulting in cleaner air, as depicted in panel (a) of Exhibit 3, as shown by the change from A to A'. The basic reasoning is that other things being equal, the lower the marginal cost of decreasing greenhouse emissions, the cleaner the air.

A minor increase in the benefit of air quality would have a comparable impact. Assume that research shows that the impacts of a one-degree increase in the Earth's average surface temperature will be far more disastrous than previously thought.

The perceived advantages of decreasing greenhouse gas emissions would be enhanced as a result of this discovery.

As a result, the marginal benefit of cleaner air would rise, as seen by an upward shift of the marginal social benefit curve to MSB' in Exhibit 3 panel (b). As a consequence, air quality would increase, and Exhibit 3's panel (b) would move from A to A." The cleaner the air is, the greater the marginal benefit of decreasing greenhouse gases, all other factors being equal.

The atmosphere has the ability to cleanse itself of some emissions, but the destruction of the tropical rainforest has reduced this ability, as discussed in the following case study