You are the manufacturer of various pollution abatement equipment and want to maximize your sales of...

You are the manufacturer of various pollution abatement equipment and want to maximize your sales of this equipment year after year. Your industry does not create pollution. What ONE policy would you most like to see imposed on polluters? Explain why.

Expert Solution

Two types of pollution abatement equipment are-

Pollution tax- In this case producer and consumers pay the full social cost of producing pollution. If the pollution tax is 5% then the industries which want to pollute more can pay more tax and pollute.

Tradable pollution permit- Government specify certain pollution permit and allow the industries to sell their permit who want to pollute more. For an example government specify to pollute 12 ton. There is 4 industry so each industry can pollute up to 6 tons. If one industry wants to pollute 5 tons and one industry does not pollute then previous industry can buy a permit from later.

So by pollution permit government can achieve the target level of pollution. And which industry does not pollute can earn from selling permit under pollution permit policy. So if my industry does not create pollution then I most likely to see tradable pollution permit imposed on polluter.

Rahul Sunny answered 2 years ago

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