TK4 Criteria for Evaluating Environmental Policies

Question 1

Criteria for Evaluating Environmental Policies

Answer 1

• Efficiency
• Cost Effectiveness
• Fairness
• Incentives for Technological Improvements
• Enforceability
• Moral Considerations

Question 2

Efficiency

Answer 2

• A policy is efficient if it maximises the difference between social
  benefits and social costs (i.e. net social benefits)
• Marginal social benefit = Marginal social cost
• Marginal abatement costs must be equalised across polluters
• Difficult to achieve

Question 3

Cost Effectiveness

Answer 3

• A policy is cost-effective if it maximizes environmental improvement for a given cost or achieves a set improvement at the lowest cost.
• Marginal abatement costs must be equalised across polluters
• For a policy to be efficient, it must be cost effective (i.e. all efficient
  policies are cost effective)
• But a cost effective policy may not be efficient

Question 4

Incentives for Technological Improvements

Answer 4

• Does the policy strongly encourage producers/consumers to innovate and reduce environmental impacts?
• In the long run, shifting down the MAC curve with new technology
  is crucial.

Question 5

Incentives for Technological Improvements (key factors for innovation)

Answer 5

• Stringency of regulations
• Stability of the policy environmen

Question 6

Enforceability

Answer 6

• Two main steps of enforcement
• For policy goals to be achieved, regulations have to be enforced
• Enforcement takes time and resources
• Policies with too high enforcement costs are impractical
• Noncompliance by polluting firms is common

Question 7

Two main steps of enforcement (steps of enforcement)

Answer 7

• Monitoring
• Sanctioning

Question 8

Moral Considerations

Answer 8

• Go beyond fairness and equity.
• Examples:

Is it wrong to subsidize pollution abatement?

Which countries should bear more costs for global warming?