Traditional environmental theory suggests that the optimal level of a pollution emission occurs when the marginal damage created by the emissions is equal to the marginal cost of reducing the emissions. We argue that the benefits from reducing pollution should be much more broadly defined to include at least three other sources of benefits. First, we develop a game-theoretic model in which firm...

Cap and trade (CAT) results in lower abatement costs relative to command and control, but might increase industry marginal abatement cost, resulting in higher equilibrium emissions. With lumpy investment, command and control leads to multiple investment equilibria and “regulatory uncertainty”. CAT, a first best policy, eliminates this uncertainty. Command and control policies cause firms to imi...

Marginal abatement cost curves (MACCs) are a favorite instrument to analyze international emissions trading. This paper focusses on the question of how to define MACCs in a general equilibrium context where the global abatement level influences energy prices and in turn national MACCs. We discuss the mechanisms theoretically and then use the CGE model DART for quantitative simulations. The resu...

Coastal aquatic ecosystems are increasingly affected by diffuse source nutrient water pollution from agricultural activities in coastal catchments, even though these ecosystems are important from a social, environmental and economic perspective. To warrant sustainable economic development of coastal regions, we need to balance marginal costs from coastal catchment water pollution abatement and ...

Weak disposability of outputs means that firms can abate harmful emissions by decreasing the activity level. Modeling weak disposability in nonparametric production analysis has caused some confusion. This paper identifies a dilemma in these approaches: conventional formulations implicitly and unintentionally assume all firms apply uniform abatement factors. However, it is usually cost efficien...