Voluntary environmental programs were extremely popular in the United States, Europe

Chapter 0, Problem 5

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Voluntary environmental programs were extremely popular in the United States, Europe, and Japan in the 1990s. Part of their popularity stems from the fact that these programs do not require legislative authority, which is often hard to obtain. The 33/50 program started by the Environmental Protection Agency (EPA) is an example of such a program. With this program, the EPA attempted to reduce industrial emissions of 17 toxic chemicals by providing information on relatively inexpensive methods of pollution control. Companies were askedto voluntarily commit to reducing emissions from their 1988 levels by 33% by 1992 and by 50% by 1995. The program actually met its second target by 1994. a. As in Figure 75.2 draw marginal benefit curves for pollution generated by two plants, A and B, in 1988. Assume that without government intervention, each plant emits the same amount of pollution, but that at all levels of pollution less than this amount, plant As marginal benefit of polluting is less than that of plant B. Label the vertical axis Marginal benefit to individual polluter and the horizontal axis Quantity of pollution emissions. Mark the quantity of pollution each plant produces without government action. b.Do you expect the total quantity of pollution before the program was put in place to have been less than or more than the optimal quantity of pollution? Why? c. Suppose the plants whose marginal benefit curves you depicted in part a were participants in the 33/50 program. In a replica of your graph from part a, mark targeted levels of pollution in 1995 for the two plants. Compare the amounts by which the two plants reduced emissions. Was this solution necessarily efficient? d.What kind of environmental policy does the 33/50 program most closely resemble? What is the main shortcoming of such a policy? Compare it to two other types of environmental policy discussed.