I'm Jonathan Tomkin from the University of Illinois. As we've seen. The world faces a number of environmental problems, and the clearly humans are not managing these problems as well as they could. In the tragedy of the commons examples we saw many natural systems that was suffering because human societies are systematically unsustainable. So, the goal of policy then is to correct this systematic unsustainable elements and return us to a more sustainable path. In this lecture I will look at the background behind many ideas of the enviromental policy, to see how they work and how they're applied. Many places have air quality problems. For example, smog. How could we sensibly reduce smog in a city or a region? What policies, laws or practices could we use? One of the very first environmental policies with the 1956 clean air act from United Kingdom. 1950s London had a huge problem with smog pollution. It's told that literally thousands of people have died, because the air quality was so low. So, the smokers fields were banned, electricity plans where moved away from the central city of London. Chimneys were made taller, so that the pollutants had more of a chance to disperse before they reach ground level. How would we describe these sorts of policies? And, how do we know if that was successful or not? How do we assess environmental policies? There are two very broad categories. The first is command-and-control legislation, and the second is market-incentive legislation. I'll talk about both strengths and weaknesses, but first I want to stress that every situation is different. And I don't think that there is only one type of policy that solves every type of environmental problem or every type of negative externality. Command and control, as the name suggests, is when a policy tells people or corporations what to do. An example of that is an ambient standard. This establishes a level of environmental quality that must be met. This is very common in the United States, and in fact in most industrialized countries. In the case of our smog example, the U.S. Environmental Protection Agency mandates that a city must keep it's pollutants below a certain level. For example, carbon monoxide concentration below nine parts per million. It's up to the city then, to figure out how to make this ambient standard work. How to meet that standard. And so there can be further regulation. So for example, power plants might require scrubbers. Factories might have to close. Leaf blowers might get banned. Cans cars might have to have catalytic converters fitted. And so on. So with a command and control. Legislation. There is a set, limit that must be met, and then its up to individuals or local governments or regional places to figure out how we meet those standards. Another type of command and control is an individual standard. This is sometimes implemented as performance, or technology standards. In the case of a technology standard, a device has some requirements. So for example in the United States, you can't just sell a fridge. There's a federal standard on the amount of energy used by every refrigerator. And it's illegal to sell a fridge, that doesn't meet that standard. Surely cars have to have a certain fuel efficiency. I'd quote numbers, but it's actually a very complicated piece of math, to get the exact amounts require the understanding about the sorts of cars manufactured by a certain company versus another company and so on. But, a small car might be required to get 36 miles per gallon, while a pickup truck might be required to get 22 miles per gallon. So again, this is a mandated standard, the designers and producers of the pickup truck can decide how they will meet that standard, but however they do it, that standard must be met. The second set of policies, is arranged around market incentives. Some times I extend the command and control approach, where used in conjunction with it. For example, you could mandate that there is a cap on the amount of pollution that an individual factory can produce. Right, you can only produce so much sulphur dioxide per day, or whatever your standard is. Now that's clearly an example of an individual standard, right? We have performance standard for this factory. But, if you allow companies to trade the right to pollute amongst one another, which we'll spend a little time on shortly, we can incentivize companies to do better than the standard. If they go below the standard, then under the old regime, they get no benefits, but under the new regime, they can sell that excess right to pollute to somebody else. A columnist like this sort of mark incentive patent because it allocates the need to reduce pollution more efficiently. The people who are really good at reducing pollution can do more of it. We'll spend a lot of time talking about various examples of this. But I want to start with the problem of acid rain. 30 years ago, fishermen and scientists in North America noticed that there was an alarming decline in some plant and animal species. In particular, forest and aquatic life seemed not to be doing very well. Research into the problem indicated that it was caused by sulfur dioxide emissions. Sulfur dioxide is a by-product of burning coal. So, just as burning fossil fuels creates carbon dioxide, which can lead to global warming. By burning coal, we can also produce other emissions. When sulfur dioxide goes into water or snow it makes it acidic. And so, by making water acidic, or indeed by making acid rain. Natural systems were being harmed. This acid rain was harmful to the life of lakes and rivers, and to natural forests. In large places, large parts of the Eastern United States and some places in Canada. So one repsonse might be, is to have a command and control legislation, that is as to limit the amount of sulphur dioxide each company is allowed to emit in to the atmoshere. And if you set that limit correctly, you can reduce the amount of sulfur dioxide so much that the amount of additional acid caused is so low as that it no longer hurts these natural systems. But critics say that this would be too expensive. And again, we don't really incentivize individual companies to reduce their emissions by more than just the bare minimum. All we're telling a company is, is that you need to get below a certain limit. So, when the legislation was crafted to mandate a limit on the total number of emissions allowed. The, policy included the ability to trade the right to pollute. So, this meant that if your company was able to reduce its level emissions well below the required performance standard, you could trade that right to pollute to another company that was struggling to meet that limit. So, perhaps you had, you developed a better technology. Or perhaps, your source of coal is cleaner, so we should be using more of that. Under this market-based plan, it's thought that none of the sole permissions go down much faster than they would've under a traditional mandate or a traditional command and control plan. But it was also much cheaper than was otherwise predicted. In fact, these coal companies were able to do it at one quarter of the cost that the initial estimates said it, said it would be. So, here we see an example of where a market incentive plan can create a more efficient result. We don't want to spend money unnecessarily if we can do something in a better way, for cheaper, we should do that. Beyond command and control and marketing incentives, there's another, there's another judicial way that we can control these negative externalities, and that's through liability. We can, if you have a legal system that is robust and uncorrupted. It's possible to sue polluters who cause harm. This is a very common approach in the United States. The US law is sometimes inconsistent. So, for example, sometimes it limits the amount of liability in the case of an oil spill. But, in general. The threat of being sued if you do something that harms others is a way of preventing individuals and companies from emitting pollutants that they know can be harmful. There are limitations with this approach. One of them is that companies who pollute might be made bankrupt. And if you're made bankrupt you can't make good on the damage that you've done. And so again, that negative externality is not addressed. This is often thought to be one of the big stumbling blocks of nuclear power. Because if there is a catastrophic event, a catastrophic failure, the negative externality could be massive and in fact could be so large as to render the energy company that was responsible for the accident bankrupt. And they would never be able to compensate all the victims of, of their failure, their negative externality, adequately. Another very common idea in environmental policies, is the polluter phase principle. This is very straightforward and it has a lovely common sense ring to it. Under polluter pays, if you make the mess, then your responsible for cleaning it up, or responsible for paying other people for the damage that you've done to them. We'll look at this in more detail in a future lecture. But in the case of cars, we already see this implemented in many places. For example, what you might do is you say, well, we know that the driving of cars burns fossil fuels, and that if we burn a fossil fuel, we create a negative externality that could be carbon dioxide, but it could also be smog. So we're, we're going to require that you pay an additional tax. And, so then, that tax money could be used for many things but, in principle at least, it could be used to, in some ways, compensate the victims of that negative externality. If we put a tax on gasoline or on petrol, then the more you drive the more you pay. So this seems like a relatively fair way of figuring out who is responsible for the damage and getting them to pay everyone else for that damage. So we have a range of different policy approaches. How can we tell if a policy approach is worth doing? We'll look at that in the next lecture. Produced by OCE Atlas Digital Media at the University of Illinois, Urbana, Champagne.
