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EEE Lecture 06 - Policy Menu

The document outlines various policy measures for energy and environmental economics, categorizing them into price instruments, rights, regulation, and information/legal frameworks. It discusses the advantages and disadvantages of each type, providing examples such as taxes, tradable permits, performance standards, and public participation. The agenda includes a focus on efficient policies and future discussions on distortions and investments.

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17 views8 pages

EEE Lecture 06 - Policy Menu

The document outlines various policy measures for energy and environmental economics, categorizing them into price instruments, rights, regulation, and information/legal frameworks. It discusses the advantages and disadvantages of each type, providing examples such as taxes, tradable permits, performance standards, and public participation. The agenda includes a focus on efficient policies and future discussions on distortions and investments.

Uploaded by

no Tengo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

31C01300/31E01310

Energy & Environmental Economics


Lecture 6: Policy menu

Iivo Vehviläinen
Spring 2024
Agenda

Last time

• Prices vs. quantities


• EU ETS as an example

Today

• Policy measures in general

1
Policy menu

PRICES RIGHTS REGULATION INFO/LEGAL


Property Technological Public
Taxes
rights standard participation
Tradable Performance Information
Subsidy
permits standard disclosure
Charge, Tradable Voluntary
Ban
fee/tariff quotas agreement
Deposit-
Certificates Permits Liability
refund
Refunded Common property
Zoning
charge resource management

Source: Thomas Sterner.

2
Price instruments

• Taxes or charges, fees, or tariffs


+ Clearly defined externality → efficiency
+ Good if many sources & marginal damages flat
– Distributional issues
• Examples: Fuel tax, road tolls
• Subsidies
– Choosing uncompetitive technologies → inefficiency
+ Encourages deployment and learning
+ Cost incidence can be good for consumers
• Examples: Renewable subsidies, lower taxes on EVs
• Deposit/refund & refunded charges
+ Encourages compliance, low cost of monitoring
– Induces a cost to the suppliers
• Examples: Bottle deposit-based return system, nuclear wastes
3
Rights

• Property rights
+ Coasian solution → efficiency
– Assumes no transaction costs
• Examples: Right to pollute vs. right to a clean environment
• Tradable permits / quotas
+ Market allocation should lead to efficiency
+ Good if few point sources
• Examples: EU ETS, fishing quotas
• Certificates
– Choosing uncompetitive technologies → inefficiency
• Examples: Guarantees of Origin
• Common pool resource management
– Cooperative solutions, not everyone wants to join
• Examples: Housing cooperatives, indigenous communities
4
Regulation

• Standards
– Choosing technologies → inefficiency
+ Performance standards create incentives for R&D
• Examples: Catalytic converter, BAT rules
• Bans
– Choosing technologies → inefficiency
+ Certain outcomes, e.g., toxic materials
• Examples: Asbestos ban, coal ban in Finland
• Permitting
• Close to property rights + standards
• Examples: Environmental permits
• Zoning
+ Can be required to solve coordination failures
• Examples: Industrial zones, conservation areas
5
Information / legal

• Public participation
+ Can reduce information asymmetries, increase acceptability
• Examples: U.S. enviromental
• Information disclosure
+ Can reduce information asymmetries
• Examples: Motiva in Finland
• Voluntary agreements
– Cooperative solutions, not everyone wants to join
• Examples: Finnish Energy Efficiency Agreements
• Liabilities
+ Polluter pays principle can lead to efficiency
– High admin cost: monitoring, measurement, process
• Examples: Talvivaara mine in Finland

6
Agenda

This week

• Policies, efficient ones

Next week

• Policies, distortions
• Investments

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