On the Applicability of Market Solutions to Environmental Problems

The purpose of this paper is to identify how increasingly sophisticated modeling of pollution problems might be used in making a judicious selection between policy tools. In general, the choice of an appropriate policy instrument is found to depend on the level of technical understanding of the problem and the functional relationship between emissions and pollution. Additional political and economic considerations are brought into focus by way of an example-the control of sulfur oxides emissions in Los Angeles through the use of marketable permits.