Question

Suppose you are a polluter with very high marginal abatement costs. Rank the following policies from the one that is most favourable for you to least favourable: uniform standard, individual standard, emission tax, marketable permits distributed initially without charge. Explain the reasons for your ranking and illustrate graphically

Answer 1

Answer- Marginal abatement cost refers to the additional amount incurred for reducing the negative things in the environment. So high marginal abatement cost means high cost incurred for controlling each additional negativity in the environment. Following is a list of rank of policies -

• Emission Tax- It has been selected first because it will ensure that more the pollution more will be the tax imposed and thus is good for a high marginal abatement cost.

• Individual Standard- It come second because it will help imposing cost on the polluters that belong to a specific society or community like the industries, manufacturing units etc.

• Uniform Standard- It is generally imposing of cost uniformally or equally among every person and thus comes second last in the list.

• Marketable permits distributed initially without a charge- It comes last because such a cost or standard would be least suitable to a polluter with high abatement cost as this would allow the license holders to pollute freely.