Field_4Ce_IM_Ch11

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1、Field&OlewilerEnvironmentalEconomics4Ce–Instructor’sManualChapter11Chapter11STANDARDSObjectiveAprimarygoalofthischapteristoshowstudentsthattheuseofstandards,whiledeceptivelysimpleandapparentlystraightforwardinapplication,ismoredifficulttomanageandproblematicintermsofres

2、ultsthanisoftenthought.Thechapterstressesthatstandardshaveweaknessesintermsofshort-andlong-runcost-effectiveness,butthattheyhaveadvantagesintermsofcompliancemonitoring.MainPointsThefirstsectionsimplyintroducesthethreemaintypesofenvironmentalstandards--ambient,emissions,

3、andtechnology-based(alsocalleddesignorengineeringstandards).Therestofthechapterdealswithvariousaspectsoftheeconomicsofstandards.Thefirstissueisthelevelofthestandard,discussedinrelationtoanambientstandardasinFigure11-3.Therearetwoimportantfacetstothisproblem.Thefirstisth

4、egeneraloneofwheretosetthestandardsinrelationtomarginalbenefitsandmarginalabatementcosts.Thisis,ofcourse,thebalancingissue,whichthestudentsshouldnowhaveaneasytimewithbecauseoftheearliermaterial,especiallythestandardpollution-controlmodelofChapter5.Thesecondpartoftheques

5、tionistheoneaboutwhetherregulatorsshouldsetuniformstandardsornot.Ifstandardsaretobesetinaccordancewithsomenotionofmarginalabatementcostsandmarginaldamages,thiswouldimplythattheyshouldbesetatdifferentlevelswhenthesecircumstancesdiffer.Wewillrunintothismanytimesinlatercha

6、pterswhenwediscusstheimplicationsofsettinguniformstandardsinheterogeneouseconomiccircumstances.Thereisasectiononthelong-runimpactsofstandards,especiallythequestionsoftheincentivesthestandardsprovideforengaginginR&Dtoreducemarginalabatementcosts.Ofcourse,thispresentsanov

7、erlysimpleimageofthepollution-controlindustry,andclassdiscussionmightusefullypointoutthatthereisinfactapollution-controlindustrythatspecializesinresidualshandlingequipmentandmethods.Theincentivesforinnovationonthepartofpollutersaretranslatedinparttoademandfornewproducts

8、bythepollution-controlindustry.Theothermajortopiccoveredinthechapterisenforcement,aproblemthatisnotgivensuffic