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Markets and Environmental Management with a Storable Pollutant

Lewis, Tracy R. (1978) Markets and Environmental Management with a Storable Pollutant. Social Science Working Paper, 189. California Institute of Technology , Pasadena, CA. (Unpublished)

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Lee (1977) investigates possibilities where pollutants may be stored for a period of time and later released into the environment when adverse effects are minimal. The treatment and storage of pollutants before their release into the environment is a crucial part of many abatement programs. Surprisingly, emission charges will not induce optimal abatement when storage is possible. This occurs because the firms' response to the dynamic tax is indeterminant. We suggest alternative controls, whereby rights to emit pollutants are sold competitively and demonstrate that markets provide incentives for the optimal generation-storage-emission of pollution by firms. In deriving this result an important difference between markets and taxes is revealed. With markets there is still indeterminacy at the firm level, but the aggregate response of all firms is dictated by market forces that insure pollution is reduced by some desired amount.

Item Type:Report or Paper (Working Paper)
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Additional Information:Revised. The author wishes to thank Stuart Burness and Toby Page for helpful comments. Research support from the Environmental Quality Lab at the California Institute of Technology is gratefully acknowledged. Published as Lewis, Tracy R. "Markets and environmental management with a storable pollutant." Journal of Environmental Economics and Management 8.1 (1981): 11-18.
Group:Social Science Working Papers, Environmental Quality Laboratory
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Environmental Quality LaboratoryUNSPECIFIED
Series Name:Social Science Working Paper
Issue or Number:189
Record Number:CaltechAUTHORS:20171023-111645804
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:82584
Deposited By: Jacquelyn Bussone
Deposited On:24 Oct 2017 21:20
Last Modified:03 Oct 2019 18:56

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