Environmental Economics Quiz

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Questions and Answers

What is the primary focus of stationary-source air pollution?

Air pollution generated by factories and plants (correct)

Air pollution generated by mobile sources

Air pollution from natural sources like volcanoes

Air pollution from household appliances

Which legislation significantly strengthened the federal government's role in regulating air pollution in 1970?

Clean Water Act

National Environmental Policy Act

Resource Conservation and Recovery Act

Clean Air Act Amendments (correct)

What do the National Ambient Air Quality Standards (NAAQS) establish?

Emissions standards for mobile sources

Penalties for exceeding pollution limits

Standards for the ambient concentration of pollutants (correct)

Funding sources for pollution control technologies

Which of the following is NOT considered a criteria pollutant under the Clean Air Act?

Carbon monoxide Signup and view all the answers

What was a major reason for the federal government assuming control over air pollution regulation in 1970?

Ineffectiveness of state regulations at limiting emissions Signup and view all the answers

Which type of pollution source is contrasted with stationary sources in the context of air pollution?

Mobile sources Signup and view all the answers

How many major regulated stationary air pollution sources are estimated to exist in the U.S.?

27,000 Signup and view all the answers

Which of the following pollutants is NOT mentioned as a criteria pollutant?

Carbon Dioxide (CO2) Signup and view all the answers

What is the purpose of setting short-term and long-term standards in the context of air quality management?

To protect the most vulnerable citizens. Signup and view all the answers

What happens when an air-control region is designated as 'nonattainment'?

Strict pollution controls are imposed on pollution sources. Signup and view all the answers

Which of the following describes a limitation in the EPA's monitoring process?

It only monitors every 1 in 6 days. Signup and view all the answers

Why might the implementation of BACT under the New Source Review lead to perverse incentives?

Facilities may avoid upgrades to evade high costs. Signup and view all the answers

What is a State Implementation Plan (SIP) required to outline?

How each region will achieve ambient air standards. Signup and view all the answers

What does the term 'spatial gaming' refer to in the context of air quality monitoring?

Situating monitoring stations in low pollution areas to improve results. Signup and view all the answers

What is the implication of pollution levels dropping on monitoring days?

It raises questions about the reliability of monitoring methods. Signup and view all the answers

What is one consequence of a region being in nonattainment under the Clean Air Act?

Federal funding may be withheld from the state. Signup and view all the answers

What is the main assumption regarding threshold pollutants?

They do not cause any damage below a certain level. Signup and view all the answers

Which factor is NOT considered to determine the efficiency of CAC regulations?

Economic growth rates Signup and view all the answers

What is the primary focus of the CAAA regarding air quality regulation?

Outdoor air concentrations. Signup and view all the answers

Why might it be challenging to determine if past policies like the CAAA were efficient?

There is a strict prohibition on considering costs. Signup and view all the answers

What issue arises from the application of uniform standards under the CAAA?

Geographic variations in marginal social costs are ignored. Signup and view all the answers

How does timing impact pollution emissions according to the discussed concepts?

Weather conditions change the impact of emissions timing. Signup and view all the answers

What was one of the challenges noted regarding the level of NAAQS?

It omits cost considerations from efficiency analysis. Signup and view all the answers

What potential flaw exists in the concept of a 'health threshold' for pollutants?

Recent evidence indicates damages may exist at lower levels. Signup and view all the answers

What was one of the main political issues with the RECLAIM smog trading program?

The initial caps were set too high, rendering them meaningless. Signup and view all the answers

What occurs when the permit price in the RECLAIM program becomes excessively high?

A safety valve is triggered to relieve pressure. Signup and view all the answers

What is the primary function of the Japanese emissions charge?

To tax polluters and compensate victims of pollution. Signup and view all the answers

What significant change did firms make in response to local CAAA standards?

They built taller smokestacks to disperse pollution. Signup and view all the answers

How was the tax on emissions in Japan structured in relation to pollution damage claims?

It varies to ensure it covers the damage costs. Signup and view all the answers

What distinguishes local pollution from regional pollution?

Regional pollution travels longer distances in the air. Signup and view all the answers

What regulatory approach did the Clean Air Act Amendments of 1990 aim to improve?

Command and control regulation. Signup and view all the answers

What is the phrase commonly associated with firms' response to the Clean Air Act Amendments?

'Dilution is the solution.' Signup and view all the answers

What was the main issue identified with the Costs of CAC compared to a least-cost alternative?

They showed substantial cost overruns in several studies. Signup and view all the answers

From the data provided, which pollutant saw the largest percentage reduction between 2000 and 2010?

SO2 Signup and view all the answers

What are some of the key advantages of market-based approaches to pollution control?

They shift the pollution control burden to firms and allow for flexibility. Signup and view all the answers

In which year did California's RECLAIM program start its operations?

1994 Signup and view all the answers

What is the main goal of the RECLAIM program in terms of emissions?

To cut NO and SO emissions by 80%. Signup and view all the answers

What type of control do market-based approaches allow for beyond just compliance?

Innovation in pollution prevention. Signup and view all the answers

What was the percentage reduction of CO pollution from 1980 to 2010?

82% Signup and view all the answers

What limits the efficiency of CAC compared to market-based strategies?

CAC results in high informational overhead and uniform standards. Signup and view all the answers

What was the initial focus of the regulations addressing acid rain?

Sulfur dioxide (SO2) Signup and view all the answers

What cost-effective solution did the Congressional Budget Office (CBO) suggest for reducing sulfur dioxide emissions?

Implementing an emissions tax Signup and view all the answers

What was the cap set for sulfur dioxide emissions under the Acid Rain Program by 2010?

10 million tons relative to 1980 levels Signup and view all the answers

What was a significant outcome of the Acid Rain Program between 1990 and 2004?

Emissions decreased by 36% Signup and view all the answers

What unexpected factor helped reduce sulfur dioxide emissions under the Acid Rain Program?

Railroad deregulation Signup and view all the answers

What happened with the permit prices for emissions after the Cross-State Air Pollution Rule was passed?

Permit price became approximately $0 Signup and view all the answers

Which political administration was involved in creating and passing the Acid Rain Program?

Republican administrations Signup and view all the answers

What irony is noted in the accomplishments of the Acid Rain Program regarding health considerations?

Estimated benefits largely exceeded original assessments Signup and view all the answers

What is one consequence of low transport costs in relation to private transport?

Excessive number of vehicles leading to more pollution Signup and view all the answers

Which element was included in the Clean Air Act Amendments of 1970 to address emissions standards?

Revocation of certificates for vehicles not conforming to standards Signup and view all the answers

Which aspect of the U.S. approach to mobile-source pollution is crucial for enforcement?

Assembly-line testing of vehicles for emission standards Signup and view all the answers

What was the primary benefit of the federal standards for emissions established in the Clean Air Act?

Synchronized standards across different states Signup and view all the answers

What does the Lead Phaseout Program primarily target?

Elimination of lead from gasoline as a fuel additive Signup and view all the answers

What was the primary goal of establishing CAFE standards?

To enhance fuel efficiency and reduce emissions Signup and view all the answers

By what year did the United States fully phase out leaded gasoline?

1987 Signup and view all the answers

What factor disproportionately affects the penalties for not meeting CAFE standards?

The number of vehicles produced Signup and view all the answers

What does the term 'MPG illusion' refer to?

The false belief that higher MPG always leads to significant savings Signup and view all the answers

What was the factor by which EPA's CBA analysis suggested the benefits of lead phase-out would outweigh costs?

14 Signup and view all the answers

Which year marked the implementation of CAFE standards?

1978 Signup and view all the answers

What type of system was used to phase out allowances for producing leaded gasoline?

A tradeable permit system Signup and view all the answers

Which of the following statements is true regarding the ban on leaded gasoline in Europe?

Some eastern European countries and Russia still allow leaded gasoline. Signup and view all the answers

Which aspect makes mobile air pollution sources more challenging to regulate compared to stationary sources?

Their locations are unpredictable over time. Signup and view all the answers

What is a consequence of allowing for an implicit subsidy such as free parking?

It increases the social costs associated with driving. Signup and view all the answers

How do mobile sources contribute to a growing concern regarding pollution emissions?

They are responsible for a large share of CO and NO2 pollution. Signup and view all the answers

What is the difficulty noted in regulating emissions from mobile sources compared to manufacturers?

New vehicles take a long time to significantly impact overall emissions. Signup and view all the answers

In the context of mobile source air pollution, what aspect does the concept of 'stock vs. flow' refer to?

The total number of vehicles versus the rate of pollution produced. Signup and view all the answers

What is a primary issue with using miles per gallon (MPG) as a measure of fuel efficiency?

It assumes a linear relationship between MPG and fuel consumption. Signup and view all the answers

What is one major limitation of fuel economy standards compared to a fuel tax?

They focus only on new vehicles, delaying efficiency improvements. Signup and view all the answers

What is a significant challenge faced by those trying to regulate mobile source pollution in urban areas?

Pollution concentrations can spike during traffic jams. Signup and view all the answers

What does the divergence between private marginal costs (P MC) and social marginal costs (SM C) indicate as traffic increases?

There are external costs that road users do not account for. Signup and view all the answers

Which factor diminishes the gains obtained from fuel efficiency improvements?

The 'rebound effect' from increased driving. Signup and view all the answers

Which of the following best describes the challenge of emissions from older mobile vehicles compared to new ones?

New emissions standards will impact only new vehicles. Signup and view all the answers

What external benefit is associated with CAFE standards?

Reduced emissions and decreased foreign oil dependence. Signup and view all the answers

What should not be overlooked when considering energy independence?

The potential benefits of international trade. Signup and view all the answers

Why might a flat gas tax be deemed more effective than fuel economy standards?

It can achieve greater reductions in gasoline consumption at lower costs. Signup and view all the answers

Which vehicle efficiency measure preserves a correct linear relationship in other countries?

Litres per 100 kilometers. Signup and view all the answers

What is a significant problem with consumer preferences for fuel economy options?

Automakers do not meet the demand for better fuel economy options. Signup and view all the answers

What is the estimated spending per incremental electric vehicle sold under the IRA?

$23,000 to $32,000 Signup and view all the answers

What was a significant limitation placed on the subsidies for electric vehicles under the Inflation Reduction Act?

Restricted to North American assembled cars Signup and view all the answers

Which statement best describes the behavioral response to EV subsidies according to Allcott et al. (2024)?

The majority of EV purchases were made without any subsidies. Signup and view all the answers

What is a proposed first-best policy regarding the taxation of vehicles?

Tax all vehicles due to their negative externalities Signup and view all the answers

Which factor contributes to the heterogeneity in the benefits of electric vehicles as mentioned in the analysis?

Differences in vehicle specifications and subsidies Signup and view all the answers

What important effect does the 'rebound effect' refer to in the context of energy efficiency?

Increased overall energy consumption despite efficiency gains Signup and view all the answers

Why is the political feasibility of taxing gasoline vehicles considered problematic?

There are strong lobbying efforts against increasing fuel taxes. Signup and view all the answers

What was a notable change introduced by the Energy Improvement and Extension Act regarding electric vehicle purchases?

Creation of EV tax credits capped at $7,500 Signup and view all the answers

What was a significant issue associated with biofuels policy during the 2000s?

Environmental impacts of crop monoculture Signup and view all the answers

Which approach is highlighted as more effective than Fuel taxes for managing road congestion?

Congestion pricing Signup and view all the answers

What is a potential effect of the 'parking cash-outs' policy?

Increase in driving to work Signup and view all the answers

What was the consequence of Brazil's 2009 ethanol crisis on ethanol usage?

Regular use of ethanol dropped sharply Signup and view all the answers

What is the concept behind feebates in vehicle emission policies?

Combining taxes and subsidies based on emissions Signup and view all the answers

What does the term 'mobile-source pollution' primarily refer to?

Pollution from vehicles and airplanes Signup and view all the answers

Which pricing strategy employs fees based on road congestion levels?

Congestion pricing Signup and view all the answers

What broader impact does road pricing primarily aim to achieve?

Internalize the social cost of road transport Signup and view all the answers

What does the social cost of carbon (SCC) refer to?

The present value cost of one extra ton of carbon Signup and view all the answers

What growth rate does Stern choose for the economy's per capita growth rate?

1.3% Signup and view all the answers

Which of the following best describes the discount rate in the context of climate change economics?

The rate at which future costs are evaluated in today's terms Signup and view all the answers

What is a primary challenge in addressing climate change as a public bad?

The scale and scope of the problem making implementation difficult Signup and view all the answers

What discount rate does Nordhaus argue is more appropriate compared to Stern's choice?

5% Signup and view all the answers

How does opportunity cost relate to the economic aspects of climate change?

It reflects the potential benefits lost due to climate inaction Signup and view all the answers

According to Stern, what is the economic cost of climate change expressed as a percentage cut in per capita consumption?

20% Signup and view all the answers

What significant change in the estimate of the social cost of carbon (SCC) does Nordhaus propose in 2017?

From $10 to $31 Signup and view all the answers

What role do Integrated Assessment Models (IAMs) play in climate change economics?

They integrate economic and climate systems to estimate costs Signup and view all the answers

Which of the following statements accurately reflects the miracle of compound interest in policy evaluation?

Small differences in discount rates can lead to significant changes in present value calculations Signup and view all the answers

What model did Nordhaus develop that integrates climate and economic dynamics?

DICE Signup and view all the answers

What is the primary focus of Weitzman's argument regarding Stern's policy?

Support rapid action without a low discount rate Signup and view all the answers

What primary factor affects the calculation of the social cost of carbon?

Future damages caused by current carbon emissions Signup and view all the answers

Why are economic theories often insufficient in addressing climate change effectively?

They primarily focus on short-term gains rather than long-term sustainability Signup and view all the answers

What term describes the phenomenon of overvaluing distant costs due to a low discount rate, as pointed out by Nordhaus?

Present Value Bias Signup and view all the answers

What is the main argument for a low discount rate in welfare economics as highlighted in the discussion?

It values future generations' welfare higher. Signup and view all the answers

What is a potential consequence of using a high discount rate in environmental policy decisions?

It can lead to underestimating future environmental costs. Signup and view all the answers

What was the main conclusion of the Stern Review regarding business-as-usual (BAU) practices?

They would lead to irreversible environmental changes. Signup and view all the answers

When considering the opportunity cost of capital, what is the implication of spending on environmental abatement?

Investments elsewhere could yield higher returns. Signup and view all the answers

According to the Stern Review, what stabilization target is suggested to avoid catastrophic climate change?

500-550 ppmv Signup and view all the answers

What does significant disagreement over discount rates indicate in climate change economics?

The importance of short-term versus long-term planning. Signup and view all the answers

Which element could cause a conflict when determining the correct discount rate in environmental policy?

The uncertainty of future environmental changes. Signup and view all the answers

What is a potential outcome for poorer countries as highlighted by the Stern Review?

They will suffer the most severe impacts of climate change. Signup and view all the answers

According to the Stern Review, what is the estimated annual cost of achieving stabilization at 500-550 ppmv?

1% of GDP. Signup and view all the answers

What does the Ramsey Rule indicate about the components that influence the discount rate?

It incorporates time preference and future consumption growth. Signup and view all the answers

Which choice of inputs used by Stern leads to a notably low discount rate?

δ = 0.001, η = 1, g = 0.013 Signup and view all the answers

Why does Stern argue for a low pure rate of time preference (δ)?

He believes it is ethically indefensible to prioritize earlier enjoyment. Signup and view all the answers

What does the elasticity of the marginal utility of consumption (η) represent in Stern's framework?

The change in value of consumption gain as wealth increases. Signup and view all the answers

Which economist suggested that the pure rate of time preference should reflect observed market conditions?

Dasgupta Signup and view all the answers

What is one of the implications of Stern's choice of a unitary elasticity (η = 1)?

Poor individuals gain more utility from consumption than wealthy individuals. Signup and view all the answers

What main criticism do some economists have regarding Stern's ethical approach to discount rates?

It ignores the actual market rates of return. Signup and view all the answers

What assumption is made about wealth when discussing the transfer of one dollar from a rich person to a poor person?

Bob experiences a significantly larger utility gain than Al's loss. Signup and view all the answers

What is the primary objective of the Climate Adaptive Response Estimation (CARE)?

To explain variations in response functions due to observables Signup and view all the answers

Which assumption is made regarding warmer locations in the context of future climate response?

They will guide predictions for all global locations Signup and view all the answers

What does adaptation in the context of climate change primarily involve?

Changing behaviors or systems to cope with climate impact Signup and view all the answers

What condition is suggested as a necessity for achieving a 2 °C target under the Paris Agreement?

Assumptions about heroic changes in global behavior Signup and view all the answers

Which aspect of climate impacts is noted to still require further research?

Projections for the developing world Signup and view all the answers

What is meant by 'variability' in climate response functions?

Responses change based on observable characteristics Signup and view all the answers

How does adaptation relate to individual and social preferences?

It varies based on differing risk preferences Signup and view all the answers

What sort of projections are currently considered advanced according to recent research?

Detailed assessments that include geographic variation Signup and view all the answers

What is the primary characteristic that differentiates adaptation from mitigation in climate change strategies?

Adaptation is private and local, whereas mitigation is public and global. Signup and view all the answers

Which of the following statements about the Social Cost of Carbon (SCC) is accurate?

SCC estimates the present value cost of carbon units emitted over a century. Signup and view all the answers

What factor significantly influences the optimal policy for climate action, according to the discussion?

The discount rate. Signup and view all the answers

How has the perception of climate change impacts on agriculture evolved over time?

Initially considered a net benefit, now believed to be a net loss. Signup and view all the answers

What controversy followed The Stern Review regarding its policy recommendations?

Disagreement over the high discount rate used in analysis. Signup and view all the answers

Why is long-lived infrastructure considered a significant exception in climate adaptation?

It involves high levels of uncertainty. Signup and view all the answers

Which aspect besides the discount rate significantly affects climate economics?

Damage estimates. Signup and view all the answers

What has been a key trend in scientific understanding regarding climate impacts?

Progress shows increased pessimism about climate change impacts. Signup and view all the answers

Which ruling significantly limits Clean Water Act (CWA) jurisdiction?

Sackett 2023 case Signup and view all the answers

What major implication does the EPA face regarding interpretations of CWA protections?

Uncertainty in the broad implications of different interpretations Signup and view all the answers

What is the primary focus of the Lead and Copper Rule Improvements?

To replace lead pipes within a decade Signup and view all the answers

What did Greenhill et al (2024) utilize to assess CWA protections?

Machine learning algorithms Signup and view all the answers

What is one key requirement established under the PFAS rule regarding drinking water?

Mandatory monitoring and reporting of PFAS levels Signup and view all the answers

Which of the following describes an outcome of the Steam Electric Effluent Limitations?

Stricter standards for wastewater contaminants Signup and view all the answers

Under the Clean Water Act (CWA), what is the liability limit for firms that discharge oil and are found negligent?

No limit on liability Signup and view all the answers

What was a significant legislative action related to drinking water standards implemented in 1972?

Safe Drinking Water Act Signup and view all the answers

What is the goal of the Clean Water Act regarding pollutants?

To completely eliminate all pollutants by 1985 Signup and view all the answers

Which aspect of ocean pollution is not currently governed by specific laws?

Ocean trash Signup and view all the answers

Which environmental impact is associated with heavy metals like mercury?

They can bio-accumulate in aquatic organisms. Signup and view all the answers

What was a significant feature of the Clean Water Act established in the 1972 amendments?

It mandated strict technology standards for all dischargers. Signup and view all the answers

What challenge was faced in the enforcement of the 1899 Refuse Act?

It faced significant legal challenges that weakened its authority. Signup and view all the answers

Which statement accurately reflects the purpose of the 1965 Water Quality Act?

It required states to file implementation plans for effluent quality standards. Signup and view all the answers

What was one weakness of the Water Pollution Control Act of 1948?

It left most regulatory authority with the states without strong federal enforcement. Signup and view all the answers

What ambiguity has persisted regarding the Clean Water Act (CWA)?

Fuzzy definitions of what constitutes 'Waters of the US.' Signup and view all the answers

Which of these conditions was NOT established by the Clean Water Act?

Regular federal inspections of all water quality standards. Signup and view all the answers

Which major issue arose from the enforcement of the Clean Water Act's regulations?

There was a delay in enforcing stringent regulations for certain pollutants. Signup and view all the answers

What distinguishes surface water from groundwater in terms of pollution regulation?

Groundwater has a higher potential for chemical contamination. Signup and view all the answers

What is a key characteristic of nonpoint sources of water pollution?

They are difficult to regulate due to unpredictability. Signup and view all the answers

What effect does organic material pollution have on water bodies?

It leads to a decrease in dissolved oxygen for aquatic life. Signup and view all the answers

How do stock pollutants differ from fund pollutants?

Fund pollutants can remain as long as there is assimilative capacity. Signup and view all the answers

What is a primary consequence of eutrophication in water bodies?

Depletes oxygen due to algal blooms decay. Signup and view all the answers

What is a significant challenge in regulating ocean pollution caused by oil spills?

They have cascading detrimental effects throughout ecosystems. Signup and view all the answers

Which of the following statements about thermal pollutants is correct?

They are caused by the injection of heat to water bodies. Signup and view all the answers

What role does the replenishment rate play in groundwater contamination?

Lower rates allow pollutants to accumulate longer. Signup and view all the answers

Which of the following is NOT a type of pollutant mentioned?

Chemical inhibitors Signup and view all the answers

What is a critical reason for needing a different policy approach for water pollution compared to air pollution?

Recreational benefits associated with water are more significant. Signup and view all the answers

What was the primary finding of Keiser and Shapiro (2019) regarding pollution concentrations in U.S. rivers?

Pollution concentrations have fallen substantially. Signup and view all the answers

What is a major financial implication of achieving 100% pollutant removal compared to 85-90% removal?

$317 billion Signup and view all the answers

What is the estimated total cost associated with the Clean Water Act according to the findings?

Over $1 trillion Signup and view all the answers

Why might the application of uniform effluent standards be considered inefficient?

It does not vary by pollutant location and type. Signup and view all the answers

What does the conclusion about U.S. water pollution regulation suggest regarding mandatory technology standards?

They do not provide clear benefits compared to air quality regulations. Signup and view all the answers

How does Keiser and Shapiro's analysis assess the benefits of the Clean Water Act relative to its costs?

Benefits are lower than costs, but data is unclear. Signup and view all the answers

What issue was revealed in the 1977 audit by the EPA regarding wastewater treatment plants?

Only half of the plants performed adequately. Signup and view all the answers

What strategy is suggested in the conclusion for addressing water pollution more effectively?

Adopt cost-effective strategies balancing nonpoint and point source costs. Signup and view all the answers

What is a key characteristic of watershed-based trading programs?

They allow polluters to purchase reductions from others. Signup and view all the answers

Under what condition is forcing owners to pay for cleanups from oil spills considered efficient?

When the penalty equals the actual damage with certainty. Signup and view all the answers

What major flaw was identified in the subsidies for municipal wastewater treatment plants?

There was no incentive to operate and maintain the plants properly. Signup and view all the answers

What was the general outcome from the standards set for the 60,000 sources by the EPA?

They resulted in highly variable compliance results. Signup and view all the answers

What aspect of pollutant types is often neglected in the process of remediation?

Certain pollutants may pose no threat in low quantities. Signup and view all the answers

What is the main claim of the Pollution Haven Hypothesis (PHH)?

Trade has led firms to move to countries with lax environmental regulation. Signup and view all the answers

What does the Environmental Kuznets Curve suggest about the relationship between income and environmental degradation?

There is an inverse-U relationship between per capita income and environmental degradation. Signup and view all the answers

Which factor primarily drives the trade-induced composition effect according to the concept of comparative advantage?

A country’s specialization in producing pollution-intensive goods. Signup and view all the answers

Which effect commonly influences the impact of trade on the environment according to recent findings?

Technique effect Signup and view all the answers

Which effect is considered the most significant in relation to emissions according to empirical evidence?

Technique effect Signup and view all the answers

How does an increase in the stringency of environmental regulation affect exports?

It decreases exports of dirty goods. Signup and view all the answers

What aspect of industry is highlighted as having lower trade barriers in relation to environmental impact?

Upstream industries Signup and view all the answers

What outcome does the scale effect predict in terms of emissions as a country's economic activity increases?

Emissions will increase due to higher production levels. Signup and view all the answers

Which statement accurately describes the Pollution Haven Hypothesis?

Countries with stringent regulations will see more pollution-intensive industries relocate elsewhere. Signup and view all the answers

What implication does lower tariffs on dirty industries have on carbon emissions?

They serve as an implicit subsidy for carbon emissions. Signup and view all the answers

What factor might determine the stringency of environmental policy in a country?

Exposure of an industry to outsourcing. Signup and view all the answers

What does the technique effect refer to in the context of emissions and economic growth?

The improvement in production processes that reduce emissions per unit of output. Signup and view all the answers

In which phase of the EKC does increasing per capita income first lead to worsening environmental quality?

During the initial phase of growth. Signup and view all the answers

Which type of trade policy observation did Shapiro (2021) find regarding barriers on clean and dirty industries?

Lower trade barriers on dirty industries. Signup and view all the answers

How does trade liberalization affect countries with a comparative advantage in pollution-intensive goods?

It raises the relative price of pollution-intensive goods. Signup and view all the answers

What is suggested as a potential future concern regarding the Pollution Haven Hypothesis?

The Pollution Haven Effect may become more pronounced. Signup and view all the answers

What does the Environmental Kuznets Curve (EKC) suggest about the relationship between economic growth and environmental quality?

Income growth can initially harm the environment but may improve it at higher income levels. Signup and view all the answers

Which effect of comparative advantage results in increased production and potentially higher global emissions while keeping industry composition constant?

Scale effect Signup and view all the answers

What is one outcome of the Technique effect as it relates to trade?

Greater public demand for environmental quality leads to stricter regulations. Signup and view all the answers

How does the Composition effect influence environmental outcomes in a country?

It alters the mix of clean and dirty industries present in the economy. Signup and view all the answers

Which aspect of the Scale effect is directly linked to economic activity and resource usage?

Global output increases resulting in greater resource depletion. Signup and view all the answers

A belief in the Technique effect suggests that which of the following statements is true?

Trade stimulates greater environmental improvements as incomes rise. Signup and view all the answers

What ultimate impact does the Composition effect have on the environment when considering trade patterns?

It can result in an increase in industries that are less environmentally friendly. Signup and view all the answers

Which of the following is NOT a core aspect of how comparative advantage impacts the environment?

Economic stability effect Signup and view all the answers

What does procedural justice in environmental issues primarily refer to?

The ability to participate in decision-making Signup and view all the answers

Which factor is indicated to correlate with lease terms and compensation for shale gas extraction?

Race and language Signup and view all the answers

How do governments influence pollution distribution?

Through legislation and enforcement Signup and view all the answers

What was found regarding enforcement penalties for polluters near communities of color?

Penalties are less stringent Signup and view all the answers

What mechanism leads to pollution inequality according to Hausman & Stolper?

Hidden pollution factors Signup and view all the answers

Which factor was identified as an important determinant of regulatory stringency in polluted areas?

Collective action by communities Signup and view all the answers

What results from discrimination by landlords against minority applicants in low pollution areas?

Reduced access to affordable housing Signup and view all the answers

Which of the following is a proposed solution to reduce inequality in environmental exposure?

Enhancing community participation in environmental decisions Signup and view all the answers

What is the primary impact of the Clean Air Act (CAA) on the PM 2.5 exposure gap between black and white communities?

The CAA reduced the gap in PM 2.5 exposure. Signup and view all the answers

How can market-based policies exacerbate environmental justice (EJ) concerns?

By allowing market concentration near minority neighborhoods. Signup and view all the answers

What goal did California's Assembly Bill 32 establish for GHG emissions?

Return to 1990 levels by 2020. Signup and view all the answers

What outcome was found regarding emissions reductions and neighborhood demographics in the RECLAIM program?

There was no correlation between neighborhood demographics and emissions reductions. Signup and view all the answers

What conclusion can be drawn about the EJ gap after implementing Cap and Trade (C&T) policies?

C&T policies may reverse EJ gap growth. Signup and view all the answers

What is a systematic issue faced by disadvantaged communities regarding pollution exposure?

They systematically face greater exposure to pollution. Signup and view all the answers

What should be considered alongside traditional cost-benefit analysis when evaluating environmental policies?

The environmental justice implications. Signup and view all the answers

What challenge is associated with conducting causal inference in evaluating environmental policies?

It is difficult to isolate impacts without a proper framework. Signup and view all the answers

What is a potential implication of environmental gentrification?

Higher housing prices due to local cleaning efforts Signup and view all the answers

How might Tiebout's sorting theory contribute to environmental inequities?

By leading wealthier households to relocate away from polluted areas Signup and view all the answers

What factors are considered in Coasean bargaining regarding pollution?

Households' tolerance for pollution and firms' preferences Signup and view all the answers

Which of the following describes a challenge in empirically testing the reasons for environmental injustice in communities?

Determining whether pollution sites attract low-income households or vice versa Signup and view all the answers

What might be a common misconception regarding the relationship between income and exposure to pollution?

Income does not affect the decision on where to site polluting facilities Signup and view all the answers

What does the term 'coming to the nuisance' imply in the context of pollution and residential sorting?

Households select locations based on pre-existing pollution levels Signup and view all the answers

Which of the following outcomes can arise from cleaning pollutants in local communities?

Higher housing prices leading to displacement of current residents Signup and view all the answers

What reasoning supports the idea that income influences environmental inequities?

Sorting can result in disparate exposure to pollution impacting low-income communities Signup and view all the answers

Study Notes

Housekeeping

Midterm grades will be posted by the end of the week.
Problem set 3 is due Friday, November 15th.
Project idea feedback and corrections for due dates have been posted.
Meet with the instructor during Weeks 6, 7, or 8 to discuss projects.
The paper is due December 3rd, not during Thanksgiving week.

Tradeable Permits

Cap-and-trade policies and Pigouvian policies are market-based approaches that aim to control pollution at the least cost.
Taxes are price-based instruments, aiming to stabilize prices.
Permits are quantity-based instruments, ensuring environmental effectiveness.
Under uncertainty regarding the Marginal Abatement Cost (MAC), the choice of instrument depends on the relative steepness of the Marginal Abatement Benefit (MAB) and MAC curves.

Introduction to Stationary-Source Pollution

Stationary-source pollution involves pollution generated by factories and plants.
The source of the pollution, not the pollution itself, remains stationary.
Mobile sources of air pollution include cars, trucks, and ships.
In the US, there are an estimated 27,000 regulated major stationary air pollution sources.
Most of these sources are regulated under the Clean Air Act (CAA) and its amendments.

Clean Air Act Amendments of 1970

The federal government took a stronger, centralized role in air pollution regulation in 1970.
The Amendments focused on "criteria pollutants," requiring the EPA to establish regulations.
Criteria pollutants include sulfur dioxide (SO2), nitrogen oxides (NOX), carbon dioxide (CO2), lead, ozone, and particulate matter (e.g., PM2.5).

Clean Air Act Amendments of 1970: NAAQS

National Ambient Air Quality Standards (NAAQS) set standards for ambient pollution concentrations over specific time periods (short-term and long-term).
Annual averages and maximum daily concentrations are used.
Cost considerations were not taken into account when setting NAAQS levels.
Standards were set to protect vulnerable members of society.

Clean Air Act Amendments of 1970: Implementation and Enforcement

Each state must develop a State Implementation Plan (SIP).
SIPs divide states into air-control regions and outline plans to achieve ambient air quality standards.
If a region does not meet NAAQS, it is categorized as non-attainment, triggering strict pollution control measures imposed by the EPA.
Non-attainment may involve halting new or modified pollution sources, or withholding federal funding.

Detour: Perverse Incentives

Current challenges exist in pollution control, where authorities may manipulate monitoring to benefit themselves.
Examples include spatial gaming, placing monitoring stations in low-pollution areas, and temporal gaming, monitoring pollution only sporadically.
Modern satellite-based pollution estimations help to examine these biases.

Back to CAAA: New Source Review

The Clean Air Act Amendments of 1977 introduced New Source Review (NSR).
NSR requires new or modified pollution sources to install the best available control technology (BACT).
BACT must be implemented regardless of cost.
NSR aims to improve air quality by making pollution controls in existing plants.

Backfires of New Source Review

NSR can create perverse incentives for polluters to avoid upgrading their facilities if it is expensive.
The economic cost of upgrading facilities might be prohibitive, potentially making non-upgrade the preferred strategy.

Efficiency of Command and Control (CAC) Regulations

For CAC regulations to be efficient, the Marginal Benefit (MB) of emission reductions and the Marginal Social Cost (MSC) must be equal.
The efficiency of the Clean Air Act depends on factors such as threshold pollutants (no damages under a certain threshold), NAAQS levels (no cost considerations), geographic variations in pollution damages, time variations in pollution impacts, and human exposure variations.

Threshold Pollutants

Threshold pollutants are assumed to have minimal or no external costs until they reach a critical level (threshold).
NAAQS are based on the health threshold— pollution damages are deemed absent before this threshold.
Recent evidence suggests that health damages exist at lower levels; SMC is likely upward sloping instead of horizontal.

Level Standard

The appropriate level of NAAQS should maximize net benefits of policies.
The calculation of costs and benefits is problematic because the legislation prohibiting cost considerations makes it unlikely, though not impossible, to achieve efficiency.

Uniformity

NAAQS standards apply uniformly across geographical regions.
No account is taken of geographic variation in SMC.
Varying geographic inputs may make attainment standards in some areas more challenging.

Timing

The timing of emissions can significantly impact the damages from pollution.
Large spikes in emissions are no different from concentrated emissions (in space).
Midday ozone pollution is more damaging than nighttime pollution.
Variations in SMC during the day and year should be accounted for.

Concentration vs. Exposure

The Clean Air Act focuses on outdoor air concentrations.
Most Americans only spend time outdoors for a limited portion of the day.
Regions have different levels of human exposure to outdoor air.
SMC might be higher in urban areas (higher exposure to pollution), implying stricter standards for efficiency.

1970s CAAA Cost-Effectiveness

Determining the cost-effectiveness of the CAAA of 1970 is challenging.
There are no universally agreed-upon least-cost alternatives to compare the CAAA with.
Eight of nine studies suggest substantial or overwhelming overruns (costs are greater than predicted); one study found only a slight overrun in Los Angeles.

Did the 1970s CAAA Work?

The data show significant reductions in pollution levels for different pollutants (CO, Ozone, Lead, NO2, PM10).
Changes over time indicate notable decreases in pollutant levels.

Market-Based Approaches

Market-based strategies are beneficial in shifting pollution control burden to firms.
The need for firm-specific info may be reduced.
Flexibility is advantageous to private firms.
Pollution prevention and prevention of damage, rather than simply treating pollution, are possible with market-based approaches.

Example 1: RECLAIM Smog Trading

California's Regional Clean Air Management (RECLAIM) established a smog trading program in 1994.
The objective was to achieve an 80% reduction in NOx and SOx emissions, achieving reductions of 5-8% annually.
The program allowed for the buying and selling of permits for pollution reduction, encouraging flexibility.

Example 1: RECLAIM Challenges

Initially, the program's targets were overly generous, making it less effective.
A safety valve was incorporated to assist in cases where permit prices became excessively high, temporarily switching the policy to a form of tax.
Permit prices in regions, such as California, have increased significantly during times of critical demand.

Example 2: Japanese Emissions Charge

The Japanese system uses government revenues to compensate pollution victims.
A tax on SO2 and automobile weight directly compensates victims.
The system encourages abatement through tax increases for pollution.
Increased victim compensation as the program gains popularity and falling pollution levels due to the tax system among other factors.

CAAA of 1990 & Acid Rain Program (ARP)

The Clean Air Act Amendments of 1990 addressed the issue of acid rain, primarily focusing on SO2.
The Clean Air Act Amendments (1990) introduced a market-based solution via a tradeable permit (cap-and-trade) system to reduce SO2 emissions.
A major aim was to reduce SO2 emissions by 10 million tons relative to 1980 levels.

ARP's Effects

The Acid Rain Program achieved near 100% compliance and significantly reduced emissions.
Railroad deregulation contributed to a reduction in SO2 emissions.
Benefits primarily related to improved human health were unexpected.

Evaluating the ARP: Cross-State Air Pollution Rule (CASPR)

The CASPR, which was enacted in 2011, removed the ability to trade pollution permits across state lines.
The market-based pollution permit system was effectively concluded.
The effectiveness of the market-based tool was not affected, despite the perceived political issues with the system.
The program is still maligned today.

Clean Air Act Continued Success

The CAAA remains a very effective strategy for reducing air pollution and maintaining air quality based on recent research.

Conclusions

Stationary air pollution relates to the immobility of pollution sources, not necessarily the pollution itself.
The Clean Air Act and its amendments have significantly reduced pollution in the United States.
The 1970 Clean Air Act Amendments weren't cost-effective.
The focus on local standards encourages the exporting of pollution to neighboring regions.
Policies from 1990 have significantly improved pollution levels and were designed to be cost-effective.

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Test your knowledge on cap-and-trade policies, stationary-source pollution, and various market-based approaches to controlling pollution. This quiz will cover the key concepts and instruments used in environmental economics applicable to pollution control strategies.