试听180秒074：A Menu of Anti-Pollution Policies

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Hello, Himalaya’s subscribers.My name is Timothy Taylor.

And today  we're going to discuss a menu of antipollution policies. Let's start with a question. Should China have a goal ofzero pollution? It sounds kind of attractive in a way, but along with a lot ofother economists, I think the argument for absolutely zero pollution is not allthat serious. After all, in a literal sense, zero pollution would mean shuttingdown all of industry in the economy, which doesn't seem sensible. After all froman economic viewpoint, pollution has benefits in terms of what it allows to beproduced, and pollution also has costs. So a reasonable policy goal is to thinkabout both of these and find balance.

Face it. We are all polluters. We are polluters directly with our bodies.We are indirectly polluters with where we work and what we consume. So we needto think about how to bring the social benefits of pollution in line with thesocial costs. Like so many things, pollution is a matter of trade-offs. Now, it'sjust fine, of course, to believe there's too much pollution in China, and itwould be worth a real effort to reduce it. You could say that heading in thedirection of zero pollution is useful. But right now in China, the practicalquestion is not how to have zero pollution, even if that was possible, but it'sjust how to reduce the costs of pollution so that the amount of pollution ismore in line with the benefits.

In this lecture, I want to discuss the range of tools that governments haveto address environmental policy issues with some examples of how these toolsare being used in China and elsewhere. There are four main tools that we'lltalk about. First, command and control policies. Second, pollution taxes.Third, marketable permits. And four: a clear allocation of property rights.Let's start off, first of all, with command and control policies. Command andcontrol policies are the name given to the kind of regulatory policies thatspecify either a certain amount of pollution that can legally be emitted, orcertain rules that must be followed to reduce pollution.

And it's very common to see command and control anti pollution policies.When the US and Europe started serious environmental regulation back aroundnineteen seventy, they mostly use this command and control approach. And it'sbeen widely used in China too. Example of a rule about against pollution wouldbe when certain cities like Beijing have limited the days on which people candrive. Again, the idea is to reduce pollution. But more generally, the centralgovernment in China has had fairly strict rules overtime to limit pollution andrequire that firms have permits to emit into the air, water, or soil.

The problem is, if these rules are going to be effective, they need to beenforced at the local level. That means local officials have to have strongincentives to enforce these rules. But if you go back to, say, the nineteennineties, most of the time when China's central government evaluated theperformance of local officials, I mean, like mayors of cities, what they reallyfocused on was the economic growth of the area, and the pollution outcomesdidn't seem to matter too much. Over the last fifteen years or so, thoughstrong growth still matters in evaluating local officials, but environmentalgoals are also being added to what gets counted.

And a number of studies have shown that when the environmental goal isclearly part of how local Chinese officials are being evaluated, pollution ismore likely to fall in that area. Then just in the last couple of years,there's been a big push by China's Ministry of Environmental Protection to haveevery emission from every factory or stationary source tracked. And thisdoesn't matter where the emission goes into the air or the water or the soil nomatter what it has to have a permit and if you are polluting too much thatpermit could be taken away.

Now this command and control approach certainly can be and has beeneffective.It has helped the air and water get cleaner in a lot of places. So Idon't mean to dismiss or ignore the achievements of command and controlenvironmental regulation. When I say it has some weaknesses. Let me try anddescribe a few of them. One is that the industry being regulated might seek toinfluence the pollution standard, or how well that pollution standards enforcedby influencing politicians or the way in which the rules are said. Anotherissue is that such pollution standards are not flexible.

The incentive is for the polluter to comply with exactly the legalstandard. But there's no particular reward for thinking up a way of reducingpollution that goes beyond the legal standard. In some cases, a command andcontrol regulation says exactly what kind of technology needs to be used toreduce a certain kind of pollution. Now those standards often don't payattention to whether that's the newest technology or the best technology inevery situation or not, when you have this lack of flexibility, the costs thatsociety faces for cleaning up pollution can be much, much higher than arereally necessary.

So what's the alternative? Market-oriented environmental policies areenvironmental policies that work with competition and market forces, ratherthan just setting rules like command and control regulation. And let me suggesta few policies along these lines. Our second main topic is a pollution tax, andreally, that's just what it sounds like. A pollution tax is a tax on the amountof pollution emitted. The logic here is pretty simple. If you have to pay a taxon pollution, then polluters have an incentive to reduce the amount ofpollution to use an idea from earlier. Instead of emitting pollution for free,with a pollution tax, now polluters need to pay the social cost of theirpollution.

At the beginning of 2018, China's government had just started collectingand environmental protection tax. There is a list of pollutants. And if youemit those pollutants into the air or water and soil, and you have to pay thetax accordingly, some predictions say this tax could collect fifty billion yuanper year, which compared to the size of China's whole economy, isn't that large,but it should be enough for firms and emit as to pay some attention. And here'swhy economists like this idea of a pollution tax so much.

A pollution tax gives a reason for continuous innovation to reducepollution, because as long as the firm can keep reducing pollution, it can alsoreduce its tax. It's not just to meet a certain level of command and controlregulation, and then stop, keep going, try and do better. A pollution tax alsoprovides cash for the government, unlike a command and control regulation, andgovernment tends to pay more attention to the rules if it's getting some cash.A pollution tax provides flexibility on how pollution is reduced. There's nospecific technology that is ruled that you have to use.

So the idea of a pollution tax reduces pollution in a flexible way. Givemanagers on the spot at the local factory who really know how the factoryworks, an incentive to figure out the least expensive ways to producepollution. If you want to reduce pollution more and more, raise the pollutiontax higher. Our third main policy tool are called marketable permits. A normalpollution permit, like the one I mentioned earlier that China already has,worked by giving polluters the permission to emit a certain amount ofpollution. Now you can design these pollution permits to decrease the amount ofpollution over time.

For example, imagine a permit less the polluter emit a certain amount ofsulfur dioxide into the air in one year. But you can have a rule that next yearor five years from now, that permit might only allow for eighty percent as muchin sulfur dioxide to be emitted. So the permit can shrink over time. But here'sthe trick with marketable permits, say one polluter has some cheap and easyways to reduce pollution right now, and could reduce pollution by more than theamount of the permit. With a marketable permit, that extra pollution permit canbe sold to another firm.

Or imagine there's a new producer who wants to produce and enter themarket, but doesn't have any pollution permits. Well, that producer could then,buy pollution permits from existing firms. The US has had some success withmarketable permits as a way of reducing pollution. It worked as the US reducedthe amount of lead in gasoline back in the 1980s. It worked for reducing sulfurdioxide emissions from coal burning facilities in the mid 1990s. Why doeconomists like marketable permits more than regular permits for pollution?

Again, the idea is that some emit of pollution have cheap and easy ways toproduce their to reduce their pollution, and others have only hard in expensiveways. Say the overall goal is to reduce pollution by a certain amount, liketwenty percent. If the goal is to reduce pollution as much as possible, itmight make more sense to do it. At some firms where it's cheap and easy to cutpollution by even more, say, cut pollution by forty percent, and then sellpermits to the other firms. The other firms still face an extra cost ofpolluting they needed to buy additional pollution permits, but the over goal ofreducing pollution at low cost will work better in this way.

Again, marketable permits make it valuable to keep reducing pollution,because if you can find ways to reduce pollution, you have extra pollutionpermits you can sell. In China. There have been a number of experiments inrecent years with tradable pollution permits, usually happening at the locallevel. But as far as I know, they've so far been pretty small in size, moresort of trying out how it works than anything else. But there are a couple ofinteresting actions in the works. Yet at the end of 2017, China announced itwas going to have a national system of marketable emissions permits to reduceemissions of carbon as part of the effort to reduce the risk of climate change.That we'll talk about more in the next lecture.

In addition, I mentioned that China is trying to complete a system where inthe next few years, there will be permits for all emissions from all stationarysources into air, water, and soil. And it'll be interesting to see if once thathappens, there is decision to use those permits and expand some of the localexperiments in marketable permits to get them up to a larger size. So thatcould really become a part of China's pollution reduction strategy. Our fourthapproach for reducing pollution involves property rights, and that might seem alittle weird, but property rights can often affect the incentive to produce orto reduce pollution.

For example, one way to think about the problem of pollution is that in anunregulated market, no one has a property right to breathe clean air. So no oneneeds to pay that person for making the air dirty. But if property rights wereclear and enforceable, then someone will have an incentive to avoid their costsof these negative externality. Here's a classic example due to a greateconomist named Ronald Coast, who won the Nobel Prize in economics in nineteenninety one. Imagine there's a train that goes by a farmers field, and the traingives off sparks that sometimes start a fire in the farmers field.

Now you could say the train has a property right to emit sparks, in whichcase the farmer has to figure out how to reduce the chance of fire. Or youcould say the farmer has a property right not to have sparks, in which case therailroad will have to find a way to reduce the chance of fire. So whoever hasthe property right effects who pays. But either way, if you have a clearproperty right, one party or the other has a reason to find a way to reduce thechance of fire at the lowest possible cost.

One modern application of this idea is about protecting endangered species.Consider the case of elephants in certain nations of Africa. If no one owns theelephants, then there's a problem that poachers can come and kill them, or thehabitat they need to survive can be destroyed. But if you put the elephants inan area where they're protected, that gives everyone who lives around the parkan economic incentive from tourism to protect the habitat and protect the park.There's sort of property rights now that make the elephants valuable, and thatmay help them survive.

In general, there's been a movement in countries around the world, awayfrom pure command and control approaches to reducing pollution, although theseremain in place, but toward more use of market oriented mechanisms, likepollution taxes, marketable permits, and property rights. Of course, you stillneed the government to set environmental standards and to monitor and enforcethese rules. But by offering incentives to reduce pollution and flexibility inhow to reduce it, it can be a much more effective way to meet pollution goalsat the lowest possible cost. Let's end here with a few review questions.

What is command and control regulation? What are some advantages of apollution tax over command and control regulation? How does a marketable permitsystem work? And how can clear property rights help to reduce pollution orreduce some environmental damages? In the next lecture, we'll take our toolsand ideas about the economics of environmental protection and apply them to aspecific environmental issue that's gotten a lot of attention in the last fewyears the topic of climate change.

I'm Timothy Taylor. Thank you for listening to Himalaya.