Question

What are the advantages and disadvantages of a “new-source” bias in stationary-source air-pollution control? Consider especially its impacts on the incentives of the operators of existing sources. (Examples)

Answer 1

Stationary-source air-contamination control approaches: Policies for stationary-source air-contamination control in U.S. have been built up by the Environment Protection Agency (EPA). The part of EPA is to set up national surrounding principles and innovation based emanating measures keeping in mind the end goal to control stationary-source air-contamination.

A new-source bias refers to imposition of stricter standards on newer sources of pollution than the existing sources of pollution. A new-source bias is usually employed on the basis of marginal abatement costs. In general, marginal abatement costs of existing firms are higher than marginal abatement costs of new firms.

• A new-source bias can be a cost-effective measure in order to control the air-pollution caused by stationary-sources, because the marginal abatement costs associated with the new firms are low than the those of existing firms.

• Spill-over effect: New source bias may also lead to gradual spread of stricter standards throughout the existing firms or plants, when old capitals would be replaced by new ones.

• A new source bias is politically feasible as it is easy to implement stricter standards on newer sources than the existing ones.

Dis-advantages of a new-source bias:

• Economic disadvantage: Price of a new-source bias might be high, that is opportunity costs of holding new sources to stricter standard can be so high that it will be difficult for the new firms to start up.

• A new-source bias may slow up the rate of adoption of pollution-abatement technologies.

• However, the major dis-advantage of a new-source bias is that, it may provide incentives to hold into existing firms or plants as they are subject to less stricter standard than the new or modified firms.