NR 326 Final Exam

NR 326 Final Exam Pollution (EconDef) when the residual assimilation services of the environment are free and unpriced Pollution (Envm Def) - waste assimilating capacity of the environment exceeded -pollution will not be reduced voluntary; requires coercion or and incentive for polluter to abate Types of Pollution Point Source: a single, identifiable, localized source of air, water, thermal, noise or light pollution (can be modeled as a point) Non-point: pollution that cannot be traced back to a single origin or source such as run off water from urban areas and failed septic systems Pollution Vocabulary comply abate emissions (air) - Criteria Air Pollutants . ( Sox, Nox, PM, CO, Lead, O3) effluent (water) - BMP Point Sources (how to minimize them) 1. Emission Standards - laws w/ fines for violation 2. Emission Charges - laws w/ charges 3. Taxes (Pigouvian Tax) - tax laws 4. Tradable Emission Point NonPoint Source 1. Cost-sharing 2.Mandated or Voluntary BMPs (best management practice) Emission Standards a legal limit on the amount of pollutant a single source is allowed to emit Command and Control Approach -pass the law and people will comply -lacking info on control (abatement) costs, regulatory agencies simply assigns each source an equal amount of pollution reduction-- not cost effective -Pros: simplicity, appealing politically -Cons: fines come after the pollution , never enough police to catch the violators, always involves litigation where lawyers are the winners and not the environment Emission Charge a fee collected by the government levied of each unit of regulated pollutant emitted by source essentially as long as it costs you less to abate then it would to pay that charge you abate Pigouvian Tax tax levied to abate pollution using the market ie. CA gas tax Steps: 1. Establish tax that adds to the firms marginal costs of production that creates pollution (Marginal Private Cost) 2. Faced with higher Marginal Cost firms have and incentive to reduce output thereby reducing pollution more effectively than with command and control 3.Total tax revenue to "state". revenue can be used by state to mitigate remaining pollution 4. Problem! Iack of information on how to set tax to efficient level ie. no knowledge of MSC, tax revenues usually diverted to cover govt. Coasian Market Solution: given a complete property rights, trade among involved parties will eliminate Pareto-relevant externalities The "Cap & Trade " Concept Permit - the right to emit x units of pollutant with and expiration date ( Not abatement, right to pollute) Total # of permits based of regulatory "cap" without effort to allocate among emitters Annual auctions of new EPA permits & spot transactions of existing permits Firms with lower MC for abatement will sell permits and abate more as long as price MC Types of Impacts Direct, Intermediate and Final Direct Impact generated directly by the activities of a sector. Those high direct impacts are candidates for direct regulation Intermediate Impacts combine direct impacts with upstream impacts generated by sectors demand for goods and services. Those with high intermediate impacts are candidates for "supply chain engagement" r Final Consumption the portion of intermediate impacts associated with goods and services sold to consumers Rents is there work involved in generating this income ? income you get from the mere act of owning something. return to the ownership landowners play no role in setting rents; he simply appropriates the additional production his more productive site provides compared to marginal sites landowners cant pass taxes or other regulatory costs to the purchase 3 Types of Rent Ricardian - productivity Von Thürnen - location, closer to market, the higher the rent Hotelling - scarcity applicable to exhaustible resources Exhaustibility is ultimately an economic concept Anything in existence is renewable given enough time but home much is enough time? ASK BEN AND SINA Issues in Managing Renewals lack of clear property rights to any resource creates fear over its future availability ; in essence peoples discount rate of the resources future rises to near infinity growing population Direct Investment Cost cost directly associated with the purchase or construction of facilities , equipment, and resources Working Capital costs to start-up and support a project Depreciation reduction of the value of an asset due to wear and tear Depletion reduction of the value of a capital assed through shrinkage, consumption, or exhaustion Amortization similar to deprecation, except the asset declines in value in ways other than by wear or exhaustion Cash Flow monies received and paid out overtime. in an investment sense it should ALWAYS refer to the after tax effects Determinants of Interest Rates T = A + R + I where T = the nominal interest rate A = alternative uses of money or the pure time value of money R = an allowance or premium for risk I = an allowance or premium for inflation Riskless Rate (T-Bond, T-bills) T = A + I Real w/ risk premium T = A + R real riskless interest rates T = A Factors Affecting Interest Rates