Environmental Policy: Values, Science, Economics, and Cost-Benefit Analysis

So welcome to this overview of environmental policy. This overview is meant to provide you

with one way of looking at environmental policy and environmental problems mainly in the United States but also can be

applied globally. The first thing to say is that there are many different ways to look at the question of environmental

policy and many different perspectives. This is one perspective. It's uh couched in somewhat of an economic analysis but

also includes many other considerations. So if we begin we can start by thinking of

environmental policy as an intersection between our values represented here in the yellow circle.

Science and technology or human progression in many ways which share some space if we think of this as a ven

diagram represented in the red circle with our values our societal values and also um some economic analysis which

again share some space with both of these and they obviously have separate areas and to some degree um they change

over time. Certainly our scientific technology changes, our understanding um and our use of technology uh advances or

you know depending on how you but it changes over time. Um the way in which our economics evolves as well and

certainly our values uh both individually and mainly as a society as a a nation and even global values uh

change over time. But as they change they do share space. And if we think of this intersection where they share space

we can think of that uh you know the value science and economics uh as maybe where environmental policy uh derives

from or where we get our environmental policy. So the um environmental policy being somewhat of a a dependent variable

and dependent on these three um somewhat independent but uh correlated um factors value science, technology and

economics. Many argue that from an environmental policy standpoint, while the science and

technology and economics are incredibly important, the values, our values that we overlay on our science and technology

and our economic uh sort of formulations. Uh our values are the most important factor or variable to consider

and we can think about why this might be. Um and there are many different reasons um

people feel this way or you know those who study environmental policy feel that the values um but uh if we think about

it you know all policy comes down to a question of you know what we do why we do what we do as an individual as

a group as a community as a you know national or global community and um and the consequences of what we choose to

do. And all of that stems from the reality that um we have not an infinite amount of resources or choices to make

um we have a finite uh number of resources. So when government for example uh chooses to spend so much of

its finite resources in one area then by definition it excludes the availability of those resources to be used in some

other area. Every dollar that I as a government spend on national defense, that dollar is no longer available to be

spent on social welfare, environmental protection, technological research for advancement

purposes, or anything else that we might find as a maybe a a competing uh use of that dollar. And the key again here that

we always have to remember is those dollars are not infinite. The resources, the available resources are not

infinite. They are finite by definition. They're limited. And there's more demand for those dollars than there are a

supply of dollars to meet that demand. So when we make choices, those choices often represent our values. So people

might argue that environmental policy values is the most important variable or factor or consideration in environmental

policy simply because those values reflect our choices and those choices then impact

what we do or do or do not do relative to our environment. So with that in mind, we can think for

values. How you perceive the issue of values? Do you think that it's incredibly important that it is the main

driver in environmental policy? Science and technology. We can ask what tools does science and technology

provide us to solve problems, environmental problems for example. Um, are there always technological solutions

to environmental problems? If we want to limit our production or use I should say of carbon, removing it

from the ground for example in oil or coal or natural gas and taking it and reformulating it into gasoline or

burning it to produce um electricity or many other uses. If we want to change that and stop using carbon, then we can

think of some of the technological solutions that are available us to us today that were not available to us 50

years ago, 20 years ago or even a decade. And we can also understand that from an

economic standpoint that what is available today might be if it's a new technology an

expensive right substitution an expensive solution for the problem. In other words, for example,

[sighs and gasps] the use of batteries to propel us, to provide us with the energy necessary to

move us in our automobiles. Those batteries are a new, relatively speaking, new technology over the past

two decades or so. And as a result of that, that new technology is expensive relative to the current

internal combustible engines or the gasoline engines or diesel engines that we currently use. And we can think about

this with whether it's you know it's become much cheaper now but traditionally at least at the commercial

level uh generating electricity from the use of coal certainly and but also natural

gas and to a much lesser degree oil um was less expensive than some newer technologies again at the largecale

commercial level like photovoltaic solar for example or wind hydro has always been somewhat competitive and nuclear

energy generation has always been somewhat competitive. But recently because of its wide adoption over a

period of decades um it's it's larger adoption as it continues to be more uh largely adopted generating electricity

from you know the use of wind or the use of the sun um is like hydro the use of water um and there's also geothermal and

there's title there's many other uh ways in which we can produce electricity um where the sources are relatively

speaking free because they're just naturally occurring. But it's getting much cheaper and in

many cases has become cheaper than coal. The produ the commercial production or use of electricity using coal and

certainly um oil and um to some degree natural gas depends on where you are. But the point is we understand that

there are always costs and those costs are not static. They they're not stable. They're not consistent. We all know that

we pay a lot less today for computers um with a lot of capacity and you know processing power that 10 years ago uh

would have cost us a lot more money or 20 years ago or 30 years ago a similar or even a lesser capable computer would

have cost a lot more. We understand that over time as technology progresses the adoption of that technology allows for

efficiencies in scaling and distribution and creation of those of that new technology such that the drives the

price the cost uh to the consumer down over time. And of course when we're looking at new things those costs at the

beginning are are expensive. They're they're high. Um so adoption is difficult. So that's another question I

guess where it comes to values where as technology provides us with options when do we choose those options do we

choose them when the technology is new do we choose them prior to the technology in other words do we make a

choice for example we by the year 2030 there will be no more automobiles for as a policy that are um allowed to be sold

in state A because the state has outlawed them if they're internal combustion engines. Only um batteries or

maybe hydrogen or some other uh non gasoline or diesel burning petroleum burning uh engines will be allowed in

that state. that is setting today a standard that hopefully will drive an evolution and you know fast forward the

development of battery and other technologies that will then drive down the cost. So that when that transition

occurs, it will be much cheaper than it would be if they said as of today there will no longer be allowed to be internal

combustion engines as an example or natural gas burning power plants or you know coal burning power plants or you

know so on and so forth. You can just sort of run with this. The idea of the lead time is to allow

for, you know, incentives for whether it's private industry, if you're in a capitalist system like here in the

United States, or for governments to um, you know, directly or indirectly help to incentivize the movement of capital, the

movement of current dollars towards these innovations because the promise is that there will be a high demand. And

therefore, if you generate supply today, if you do innovation, and if you create economies of scale, aka driving down the

cost of these things, then it will be um to our advantage collectively in the future because we will achieve the

environmental goal of reducing carbon, but we will do so in a way that is relatively speaking cheap. That will not

be a big sort of sticker shock that we might see today where we could buy an internal combustion vehicle for $20,000

and a similarly price a similar type of battery powered vehicle might cost you know 50% to uh 75% more might cost 30

35,000 even 40,000 even double the price of that similar internal combustion engine. So let's get that cost of those

battery co powered cars to be somewhat similar. And we've seen at least here in the United States that one of the

mitigation measures to try to indirectly stimulate uh battery power besides there being other incentives that maybe most

of us don't know about for the manufacturers credits, tax credits, that kind of thing. uh that makes it cheaper

for them to do the business of like a Tesla or other similar car companies that are gen that are developing um

batterypowered automobiles. In addition, we know us as consumers, many of us might know that we uh can receive

rebates both um in certain states. They'll provide you with a t incentive, a rebate basically to make the

automobile cheaper. And certainly the federal government has been providing rebates up to I think $7,500 to try to

make those automobiles cheaper to the consumer to create adoption to get you to purchase them so that the price

differential isn't as big as it otherwise would be and then therefore to help create that economy of scale for

the manufacturer over time. All of this drives back to our values because if we don't choose to make these decisions and

have these policies, whether they be incentives for the manufacturer, incentives for the consumer in terms of

rebates, as I just said, or even just plans, um, you know, laws put in place that identify policies of by this date,

all of that relating to the reduction of carbon intensity without a doubt that we we don't want to continually take carbon

from a stored place like the under the earth's crust and and move it into the air because of the effects. And if we

look at those effects, those effects aggregate over time and can be substantial aka climate change. So

that's one way of thinking about environmental policy in the context of these three intersecting sort of areas.

If we think of the value side, values are really we can think about how politicians sort of you know live in the

world of values where they help to define or you know redefine or confuse sometimes what are our values but often

you know our elected officials are there to hopefully you know mimic what are the constituents that elected that

individual what their values are you know to help sort of push for those values and they can vary they can vary

between individuals ideological backgrounds, um, geographic areas, um, for a number of reasons. It can be, um,

there's a a litany of different types of variations of how those values can be expressed. And generally, we think of

the science and technology area as being sort of the purview of the sort of more objective, less sort of subjective value

areas that can change, you know, easily between both within an individual and between individuals and groups. Whereas

science you know we have uh standards objective standards of measurement etc. We have you know the scientific method

we have replication we have all of these rules in place so that the science and technology lives in a world that is less

variable based on individual whims or or differences between groups. You know we adopt international units of measurement

etc. so that we can you know have consistency and we know when we say that something works in this way then in that

way is replicable and it will work indeed uh if that sort of recipe with all of those objective relatively

speaking objective standards are followed. So uh something to think about if we were to sort of create a dialect

here that the science of technology lives more on the objective objective side of the scale as that might be

perceived and understood and the values is or the politician lives more in the values or subjective side of the scale

something that is more capable of you know of varying over time and then economics lives somewhere in the middle.

Here's a benefit cost analysis curve and it's specifically from Tatenberg and Lewis um and one of their uh they have

many iterations of their textbooks uh environmental economics and policy and that sort of thing. But um if we want to

think of the efficient level of emissions some of you who have an economics background might know this

many of us might look at this and say what is this? Uh the important thing to see is on the uh left hand side you know

what we see is uh cost we see the dollar sign there that's just indicating that you know cost from zero towards the

bottom to let's call it infinity at the top and the um bottom line moving left to right not bottom to top with the e uh

the different e um is showing the level of emissions uh in tons per here. So you have cost on

the left and you have emissions on the bottom and emissions go from from the left to zero emissions to the right to

let's say lots and lots and lots of emissions infinity, you know. So we have again cost on the left and emissions on

the bottom and they're both driving uh cost goes from zero from the bottom to infinity to the top emissions zero from

the left to infinity to the right. And what you see is you see two curves. you have to say the MAC curve and the MD

curve. The MAC curve is the marginal um abatement cost. And so that's what does it cost you to get to that level of

emissions like and marginal just means you know the individual unit of cost the the next dollar you know for to to get

to that level of emissions. So if we were to sort of break this up into a grid line and we saw grids and you know

sort of lines running up and down we could see each of those as individual units of cost. And then as we moved

along we could see that's what that sort of curve is representing is that as we move the curve shows that the marginal

abatement cost changes. It lowers as the emissions go from zero to infinity. And that makes sense because as we get to

infinity the right hand side of the emissions um if you look at this uh that makes some sense to you because if we're

not if we just don't try to control right emissions at all then there are zero costs involved right and yet if we

try to completely limit emissions and bring emissions to as you can see on the left hand side it's not at the zero

because the suggestion there is it's impossible to have activity without any level of emissions. That would be the

theory here. Now, that's technically not true. If we use it in some sense of some idealized sense of well, if we removed,

if we're talking about carbon, for example, emissions, then we removed all um you know, all oil, gas, and coal from

let's say commercial production of electricity, industrial commercial production, then um we're done. We're

good. we don't have, you know, if we're just using others like re what we would call renewable energies again solar and

wind and you know hydro and maybe nuclear some others but the the point is um but even in the process of creating

those things there is some level of emissions let's say in creating the concrete and that sort of thing but the

point is traditionally speaking you never get to zero you just can't get to zero so that's why you don't see the E

on the left with a little hat on top of it um at the zero point there'll always be some level of emissions so the

marginal abatement cost. Um, what we what we get from this is that it's super high. It's

super super high on the left, really really high up there with the cost. And that makes sense because if you want to

get to very low emissions, you're going to pay a lot of money to get there. And then the MD, the other curve that seems

to run, you know, counter to the uh marginal abatement cost, the MAC, the MD is the marginal damage.

And that makes some sense because you know that if emissions are zero or close to zero the damages are zero and we can

see that on the left hand side. Whereas if emissions goes to infinity then the damages go to infinity cost. The amount

of damage the cost that we end up paying for that damage is super high. So there it is. And then you can see the W. And

the W is you know the E with the little star. And what that's telling you is that that where is that efficient level

of emissions? Well, it's where those two lines cross. This is economics. This is traditional economics when you're

talking about benefit cost analysis. And when you want to find that sort of efficient level, it's that's what you're

looking for. That's that sweet spot where the damages equal the abatement cost where they're about the same

because that means you're at the most efficient relatively speaking level. It's a hypothetical. It doesn't, you

know, there's no exact amount that we can put there that applies for every scenario, but the point is you could

measure this and you could find out effectively where that sort of, you know, that Goldilocks uh scenario there

where it's, you know, where it's just perfectly not too hot, not too cold or there's this perfect amount of uh damage

for the amount of cost relative to that damage. And obviously, it's not at zero. So the notion here would be you never

think of making the damages go to zero because the cost the the cost for abatements are just too high to get

there. And certainly you never want the cost of abatement to go to zero because if you do um then you have unlimited

damages. That's if that makes sense. You have too much damage. So what this tells us though is that as

emissions decrease as we decrease emissions right as we move from lots and lots to very little emissions which

would be on the left hand side almost zero emissions right what happens to the cost to reduce them well it increases

right so anytime that we have an environmental policy for example where we're trying to limit emissions every

time we look to limit an emission our cost to limit that emission marginally is going to increase and we

have to understand that. So that means that we're going to have to find dollars in that limited pool of dollars. We're

going to have to find some dollars that are being used for some other purpose and we're going to have to say we're

going to take those dollars from that other purpose and we need them over here because it's going to cost us to limit

to decrease. And so a simple way of saying that is if we're getting more and more people, maybe it's simple, I don't

know. If we're getting more and more people to purchase batterypowered cars and the only way we're doing or one of

the main ways we're doing that is to provide this, you know, rebate effectively directly to consumers and

mostly at least at the federal level, it's done as a tax rebate. So it's a credit. $7,500. Let's just call it

$7,500 credit in the United States on your federal taxes. Might be more. It might be a little less

depending on a number of factors. Let's just call it $7,500. If you get that credit, that is money

that's being taken away from the federal government. That's money that you otherwise, let's say, would pay or at

least some of it you would pay in taxes and that money would go to the federal government. It would be used for some

purpose. Now, that money is gone. And let's say that other purpose includes, I don't know, shoring up social security

or providing a bigger military budget or you can imagine just a variety of different things that the federal

government does. Now, that money is no longer available at $7,500 per person for those other purposes because it has

gone to you for this purpose. And that purpose is to reduce the amount of emissions, let's call it carbon

emissions. And the way they're doing it is indirectly. They're not doing it directly by controlling power plants and

how they're feeding themselves, you know, what they're using to create electricity, that sort of thing. They're

just getting you in terms of transportation reductions, not at the commercial level, not at the large scale

level, right? But at the sort of individual, you as a residential driver, private citizen driving around in your

private vehicle. They're getting you to decrease your carbon emissions relative to using electricity to power your car

rather than gasoline. and they're giving you $7,500 for it. And therefore, that's taking that $7,500 away from some other

purpose. So, there is the cost that's associated with with that marginal reduction in damage. If we if we say

carbon is the damage on the other side, if you spend no money on reducing emissions, of course, what

is the level of pollution, right? It's a lot. It's a lot. And then I'm sorry there is the sort of

again that goldilocks area where we look for this is traditional economic theory and we think about the damage function.

So what the the question of damage right most environmental policies and this is stepping back and not just thinking

about carbon or anything else but most environmental policies are concerned with damage to the environment and that

that that term damage damage from exposure to bad things for example like toxic substances you know we don't want

people you know young children uh lead paint for example that's something that's in historically we've had lead

and paint and we have a lot of older homes where young kids and you know we have [gasps] rehabil abilitation of

those homes because we don't want kids, you know, getting chipped pieces of paint where they're chewing on that and

there's lead and they have a disproportionate impact on young bodies and it's just a bad thing. But there's

many other examples. We think of uh drinking water, Flint, Michigan, for example. There's many other examples,

but you know, um potable drinking water, water that's capable of being uh drunk, you know, um so anyway, all kinds of

nasty things, but there's also damage to the environment that degrades the level of the environment. So there are these

direct damages and we usually think of them in terms of human beings welfare directly something that will directly

harm a human being. There's no sort of in between phase. This is dangerous. It's a toxic

substance and by definition we mean toxic because if humans are exposed to it, it creates a negative outcome for

humans. That kind of thing. And then there's these sort of indirect damages and that's damage to the environment

that degrades the level of the environment. So that you know harms uh the things that you know it's sort of a

a one or two or three steps away from direct human harm. So you can think of you know toxic substances that are

stored in the soil that if you wanted to use that soil to grow crops the soil is now you know poison for that purpose.

And so crops are important because that's the food we want to eat. So that's really important for human

well-being, having enough food to feed humans. So if we take the soil, the arable soil, the soil that we want to

use to grow things that we then want to eat, and we have a scenario where we're polluting, we have a company that as a

discharge, as a byproduct of making the thing that it wants to sell you, it discharges pollutions either into the

soil or into the water, the watershed that then sort of drains into the soil, but then pollutes that soil in a way

that it makes the soil incapable of being used to grow crops. You see, so there's this sort of indirect, you know,

or the example that stated here, destroying wetlands that re remove water purification functions for humans. A lot

of New York City, most of New York City gets its water from a reservoir. Um, and that reservoir uh is in the Catkills, I

believe. Right. The Catskills, the Yeah, I believe it's in the Catkills. that reservoir naturally um is fed through uh

a huge watershed that naturally purifies the water. And the um if New York City had to send its water, the amount of

water it consumes through a man-made a human-made purification system, a water filtration system, a big large one. um

if it had to do that, the amount of money it would have to spend is in the billions and billions of dollars per

year. And so it saves, you think about the watershed, the natural sort of filtration that happens when that water

up in the mountains there in New York makes its way slowly through its watershed area, through its reservoir,

and then through the pipes to New York City. It is the value of those wetlands to filter and make that water consumable

for humans without having to do something with a technological solution without having to filter it through you

know again a human intervention it's worth a lot of money that's sort of an indirect and certainly here I mean in

Massachusetts where we are it's not necessarily where I am but up in Boston the quadin reservoir is another example

many municipalities benefit large cities benefit and populations from uh the nature's natural processes. So

protecting those watersheds, protecting those environments, right? It ensures that you know humans can consume things

and so they are really important. Uh other examples are reducing greenhouse gas emissions of course resulting in a

warmer climate. So you know preventing ourselves from doing that so that we don't suffer from all of the negative

outcomes of having heat island effect having you know these really really hot uh you know uh summer periods where you

have those you know people will die because we have these terrible uh heat spells or you know all of the effects. I

mean we have sea level rise so coastal communities uh we have the types of storms that you know increased

categorical hurricanes increased uh not only um frequencies of storms but intensity like increased you know going

from a level three hurricane to a level four even a level five the destructive capacity of that. Um same thing with

tornadoes, the frequency and intensity increasing those are all sort of so you know having a less carbon in the

atmosphere um in you know helps to mitigate the effects of those higher frequency and intensity of storms and

the thing that we don't want is the intensity of storm just like we don't want um lead in our paint or just like

we don't want we want our land to be able to be easily you know uh crops to be easily grown in that land without any

you know those plants taking up things that are toxic to humans. So um these are all things that we want but they're

a couple of levels move removed a couple of factors removed um from that. So that's the indirect. So we have direct

damages directly to humans indirect and then we have nonuse or the sort of uh you know damage to environmental values

and now we're back to the values the more subjective side. So for example the loss of wilderness or unique species

think of the endangered species act uh that we cannot replace you know just the loss of it most of us I mean I don't

polar bears as far as I know even for um inuits or um you know others that uh live in the Arctic um and tradition live

traditionally mainly in the Arctic I don't think polar bears have been um much of a prey species for them they're

an apex predator I don't think there's the numbers but also for other reasons they're dangerous and u maybe for meat

purposes. But um aside from my personal ignorance, let's assume polar bears aren't used by many humans for direct

consumption. Um you know, maybe for heat and that sort of thing, the polar bear's skin and its fur, that sort of thing,

but otherwise just for direct human use is very limited. But we think of, you know, or caribou, caribou maybe more so.

But the point is there are species um that we um might care about um but we don't use directly. And so that loss of

the loss of that species um the loss of unique wilderness wild places you know we might not use them but they have

value nonetheless. So it's that sort of non-use uh damages. So when we think of damage function we have to think about

them in terms of our sort of you know are we talking about direct indirect or sort of these non-use um which you know

starts bringing us back into that sort of value side of our equation here for uh environmental policy.

As an example of the damage function, how would you measure the damage of a coal burning power plant emitting sulfur

dioxide? How would you do it? Right? So sulfur dioxide creates acid rain. It's nasty. Usually comes in the coal. Um

there's, you know, different areas of the country tend to have from natural conditions different levels of sulfur.

Western coal tends to have a lot of sulfur. Uh eastern coal, eastern side of the country has less. But let's just

sulfur is a problem. Has been a problem. It's been pretty well controlled through the Clean Air Act. But let's uh let's

just think about this from a sort of academic standpoint and think about how would you measure that damage. So

certainly you can measure the emissions. Let's say say the technology allows you to measure the amount of sulfur that's

coming out of those smoke stacks in coal burning power plants as they're burning the coal to create the to drive the

turbines to heat, you know, the water drive a turbine to create electricity. Um there's this obviously residue and as

that residue is working its way up the big pipe there to be smoke stacks to be uh sent off into the air. There's a

technological advancement there is a meter there that can read the amount of sulfur. So we can measure let's say

those emissions and then determine the resulting level of the ambient air quality. So we can make some

calculations based on how much sulfur is coming out of there and then how does that sulfur disperse in this environment

you know and that changes depends on the area. Do you have a lot of wind? Does it go up high? Do you have you know is it

the summer versus the winter? Are you having you know an inversion you know is it is it hazy hot and humid where you

are? Is it being pushed down? Where does the local population live? So you know you can determine resulting level of

ambient air quality. You can estimate the human exposure. See, wow, if this thing's near or if it's close to an

urban area with a high population, that's worse for humans at least. You know, if that damage function is a

direct damage function, right? We're just thinking about human direct human exposure versus if it's a rural area,

not a lot of humans. You can estimate the physical impacts and you can determine the values associated with

these impacts. The key is to accurately determine the value of the impacts, right? So, that's the hard part, right?

What kind of values are we talking about here? And um you know is it okay is it okay to harm you know what's an

accept acceptable level of harm? Who's the person you're using? Are you using a healthy adult? Are you using a you know

a child um are you know a newborn who hasn't you know developed all of their sort of you know capacities to deal with

negative environmental uh effects? Are you uh using an elderly person who's frail and you know otherwise you know

highly susceptible to any changes in air quality? Are you using a person that has significant asthma or lung rellated

issues? Right? Where is your sort of measure of human impact and you you know what are you using? So are you using the

least common denominator, right? those that are most affected by any changes in good air quality or are you going to

use, you know, sort of the the person, you know, as your reference point, the the per the average superhealthy normal

adult person, that kind of thing. And so some problems with this direct damage approach, the basic problem is

almost always it's seriously incomplete. And the best example, and I think this comes from Teenberg as well, suppose we

estimate the direct damages of you getting a head cold. we can come up with a direct cost of whatever the aspirin,

whatever the remedy, the thing that allows for your head, you know, the discomfort that you're experiencing that

the symptom basically of the head cold, mainly the throbbing head. There's also congestion, that sort of thing. Let's

just say the the thro the headache. We're just reducing the headache and it's a$127. They could be more, it could

be less. Yeah. Is this the true value of the cold? So, when you think about the effects of the cold, right? Is this what

you would be willing to pay to avoid the cold? So if you're saying, you know, is a$127 a a quality representation of the

effects, all of the impacts of having a cold? Now, if you lose a day at work, you can certainly say, well, no, it's

not just the the thing that reduces the discomfort of the cold, the actual direct, right, um, uh, remedy and the

direct uh, sort of harm. But it's also a lot of sort of indirect things. Um, again like the soil for producing the

crops, you know, I I work and I only have a limited amount of sick days. And if I'm not at work and I don't have a

sick day available, then I don't get paid for that day. So, or even so, even if I do get paid, I lose a sick day. So,

that sick day is no longer available for some other sickness, some other purpose, right? That resource of sick days is not

infinite. It's finite. I only get 10 a year. That sort of thing. So, if I use one, I only have nine now. And if I get

sick with some other problem um that causes me 10 days of illness, now I only have nine days of sick leave instead of

10 in order to, you know, deal with that. So, I've reduced my capacity. So, maybe that's an an additional cost we

need to consider. And by the way, being sick is terrible, right? Being sick stinks. Um there's a personal um

well-being, right? A personal sort of quality of life uh question when it comes to being sick. So, you can think

about that. So the basic problem with direct damage approaches when we only look at the direct damages as maybe you

can figure this out from an environmental policy. So thinking again of environmental policy what is it what

is it meant to do and what do we consider when we implement environmental policy if we just look at that direct

damage approach it's probably limited. We're probably not thinking of all of the things that are important to think

about. Here's another example, uh, another sort of curve or relationship of ambient SO2 or

sulfur dioxide, which is the main thing that comes out of those, um, when you're burning coal, those smoke stacks that we

were just talking about. And what we can see here is a relationship that shows the the housing price, the value of the

home goes from zero to infinity, and the particulate content of ambient air. So how much uh sulfur is in the air around

you? So it goes from zero to the left to infinity to the right. So as the housing price increases as we can see on the

what we call the x- axis uh but the going up as the housing price increases um we see that the particulate content

is zero. The most value you can get out of your home is with the cleanest air with the least amount of sulfur in the

air. As the amount of sulfur increases in the ambient air around, the value of the home, what you could sell the home

for, decreases. And that should make sense to most of us because it's like trying to sell farmland

that's full of contaminated soil where you can't grow anything that you can then feed or sell to humans, right? It's

the same thing. It's like if that soil is in perfect condition, completely arable,

no toxicity, no bad things for humans that would then be absorbed into the things, the plants that we're growing to

consume, then it's like having a house with no sulfur around, right? Really good air quality. You could think of

noise quality, right? not a lot of noise, no uh you know the house that's further away from that train that makes

a lot of racket or you know or the construction it just you you understand there's a a number of ways to look at

this but so the house that's um in the cleanest air environment is going to be worth more than the house that's um full

of you know sulfur and acid rain and um you know poor air quality. So as the level of SO2 increases the value of the

home decreases all the other things being equal and this tells us there is a direct value to environmental quality

and so we can see that what if the cost of reducing SO2 concentrations was less than reduction in home value you know

how much your home reduced would that alone justify a policy of reducing uh sulfur dioxide emissions in the area and

if not what else might you want to consider so that's relevant right if we're thinking of environmental policy

like yeah okay if this is true. And again, all other things being equal, you know, maybe the if the home is in

Manhattan or in Midtown Chicago, I'm sorry, downtown Chicago and it's next to the, you know, subway station or the L

train if it's Chicago. But the point is if you might be willing to pay more for that house even though there's a lot of

noise because it's located close to all of a bunch of other things that you highly value. um close to your work

where you make a lot of money because it's in you know middle of the city close to uh all the things all the food

all of the you know social all of the all of the things that you value highly. So that's the all of the things being

equal. Um here we're saying this is the same kind of house in the same kind of location with the same kind of um you

know uh otherwise other demand you know other consistent demands uh and values that people [snorts] would value. So,

you know, if we could reduce the SO2 emissions for less money than the um reduction in housing price, would it be

worth it? And then the question is maybe yes, it sounds like it from a pure academic standpoint, but then again, I

understand that I'm helping to maintain the housing value of some individual or individuals in an area at the expense of

doing some other things. Again, it's the other example I used. If you're spending $7,500 as the federal

government to pay back somebody to give somebody as a reduction in what they in buying a batterypowered car,

then that $7,500 can't be used for a litany of other purposes. It's no longer available for those other purposes. It

goes directly to that individual who purchased the batterypowered car. Nobody else. It's not like that person shares

it with you. They get it for their car and hopefully if there's enough of them collectively, assuming that the

electricity that they're using to then charge up their batteries doesn't come from dirty sources, they are then

reducing the aggregate amount of carbon that is in our atmosphere in an incremental marginal way for themselves

and for everybody else because we all benefit from less carbon in the air. So them not pumping out carbon by burning

gas does help on the margins. All of us, but they are getting the $7,500. They're not sharing that with

anybody else. Now that works great for those people that can afford that car, that can afford upfront to pay for the

higherric batterypowered car. Correct? It doesn't work so well for those that cannot afford it because they cannot get

that credit. That credit is after you purchase the car, not before. Although I should say there are some interesting

financing options where the dealer will take on that. If you sign over the right for the credit, then you get it off at

the time of purchase. So there are al there are ways around um you know having to wait to get the value of it but let's

just assume for the most part that doesn't exist and that you know it's really a benefit for those that can

afford to pay upfront. So if we think of that or if we think about in this case reducing spending federal dollars the

equivalent of that $7,500 to help reduce sulfur emissions in that area. If it's less than the cost is less then with a

reduction in housing price that's great but it helps to maintain and increase the housing price of those individuals

who own those homes. There is a benefit that occurs to all the people in that area for a higher quality air no doubt

and that benefit even is not equally distributed. And what I mean by that is those that are more sensitive will

benefit more than those that are less sensitive to the lower quality air. And that's the truth and we need to consider

that. But the point is um would it justify you know alone just that analysis? Would it justify yes we should

do this? We should reduce the sulfur emission simply because it will maintain the housing price. We have to think

about well does that really make sense? And what does it mean in terms of making sense? Is it okay if the benefits of

this program go to certain individuals and those benefits on the margin are much higher for those individuals? They

benefit more than the distributed benefits of the reduced sulfur for the population at large. Is that an equity

issue? Is that a value issue? We need to consider something to think about in terms of costs, in terms of

opportunity costs. Whenever resources, natural, financial, are committed to one enterprise, they can no longer be used

for some other activity. This loss of potential use for other purposes is considered an opportunity cost. So, as

I've been saying, when that $7,500 is used in order to reimburse somebody for buying a batterypowered car, that

money is no longer available for any other use by the federal government. When the federal government decides to

spend $2 trillion on, geez, that's a lot of money. I don't think it's $2 trillion, but let's say a trillion

dollars on defense out of a $4 trillion budget. that trillion dollars that 25% of the entire budget that is not

available for any other purpose. It is simply going to defense gone for any other purpose or use. So we need to

think of the opportunity cost. Whenever we commit resources in one place then they are no longer available for some

other purpose. And so instead of creating a reduction in sulfur the money could be spent on compensating people

who suffer higher incidents of asthma. There's one example because if you create the reduction in sulfur in our

example from the previous slide, the homeowners certainly benefit if it's maintaining the value of their home. And

there's other benefits because if their home is valued more than the assessment on that home for taxation purposes is

probably higher and therefore the amount of property tax income for the community is probably higher. I mean, there's many

ways and many layers to this onion. Many ways to look at this. Um, it's not an all orno. Never in policy is anything

simply an all or nothing or a binary choice. It's either a one or a zero or a yes or a no. It doesn't really work like

that. But we can see putting aside some of the nuance that yeah if most of the benefits acrew to homeowners and that's

a segment of society maybe it would be better to just allow the pollution and instead of spending that reduction money

the money it would cost to reduce or abate the damage and the pollution and spend it on compensation. Maybe it's

better to compensate those individuals. And then there's environmental costs. So environmental protection programs

also result in environmental costs. And that's maybe funny enough, but reducing airborne sulfur emission power plants by

stack gas scrubbing also leaves a highly concentrated sludge that must be disposed of in some way. So in other

words, if you're going to reduce sulfur emissions, it's not by preventing the sulfur from being on the coal. It's

actually stopping or trapping, scrubbing they call it, but trapping that sulfur before it makes its way up the smoke

stack and out into the atmosphere. It's grabbing it before it leaves the facility. It's still being burned. It's

still there. It's just capturing it like a big filter. And then that filter, you know, that that stuff has to be disposed

of and it's toxic. So, you know, you think about those costs of implementing an environmental policy must also be

considered. um people have talked about for battery powered cars now you know we're getting to the point where we have

what uh I don't know million mile batteries that those batteries that and you know are the lithium ion batteries

that are being produced in you know present day are capable of you know continually being used for the

equivalent of a million miles of driving and most of those cars will break down well before then. So you know those

batteries have other uses and um you know so but aside from that as that technology progresses and as it evolves

um aside from that there is the problem with you know both sourcing of at least lithium ion batteries right the sourcing

of it and all of the attendant costs sourcing with mining lithium lithium is a rare um it's a rare element it's hard

to find it's only in certain places and most of the time you have to do a lot of digging and It occurs in countries where

maybe um a lot of that is happening and maybe not the most sort of um I don't know environmentally uh aware way. Um

but there's more than that. It's just even just the components. Um they are not in and of themselves. They're

they're not something that can be easily disposed of. Uh so end of life uh disposal just like having the sludge

from the sulfur the batteries when they're no longer viable to be used. What do we do with them? How do we use

them? Again, some of this is being um considered and resolved now to some degree, but uh it's still an open

question. And so the point is there's always costs. Even environmental policies when you're meant to reduce

something in one area or protect something or resolve one environmental issue, you end up creating um a maybe

subsidiary but another environmental issue to consider. Enforcement costs. Most environmental

regulations are not self- enforcing. Thus, the enforcement costs, government spending on EPA, environmental

protection agency here in the United States, personnel, etc. must be considered in any environmental policy

program. Makes sense, right? So, it's not you think about the program of the tax rebate, um monitoring that, ensuring

people are properly um identifying that they have that vehicle. At the federal government level, it's a tax credit.

In Massachusetts currently, it is a rebate check that is given to you. So, it is an after the purchase rebate that

is provided to you. So, in Massachusetts at least, for example, if you were to purchase a batterypowered vehicle, you

would be entitled to a $2,500 rebate in Massachusetts. Now, in order to get that rebate, you have to purchase

the car. Then, you have to apply for the rebate. There has to be this government entity and these individuals that are

paid by the government to receive your to develop the application to um receive your application to process your

application to determine whether or not you've actually purchased the batterypowered car that qualifies for

that $2,500 rebate. to receive the funding from the state legislature, to um you know, put that funding in its

proper place, to account for it, to monitor it, to then send and cut the checks, to provide all of all of the

attendant resources and everything, the bureaucracy that is involved with government doing something something

new. If we didn't have this program, those individuals, those resources, all of that attendant cost with the

bureaucracy of developing this government agency in order to ensure that there is a proper, you know,

process and then enforcement of this rebate for buying batterypowered cars in Massachusetts. It wouldn't exist if

there wasn't this environmental policy, if there wasn't this rule, this law that had been put in place. So there are all

of those attendant enforcement costs and they exist everywhere whenever there's an environmental issue.

And then there's the question of efficiency. Remember we are looking at the most efficient policy program, the

one that best balances the relative benefits with the attendant costs of a program. The more comprehensive we can

become at considering all costs and benefits of a program, the better the environmental policy. Generally

speaking, all of that nuance I mentioned just a little bit ago, all of those sort of let's put this aside because there

are nuances, they are really important because if you're going to get to the bottom of whether or not there's an

efficient level, there's a perfect level. If you think of that curve, the two curve, the benefit cost analysis and

where those two lines meet. If there is truly to know where those two lines meet, you truly have to know all of the

attendant benefits and all of the attendant costs and not just the direct ones, not just the obvious ones, but the

not so obvious or the indirect or non-attendant, you know, the sort of trickle down benefits and costs because

they happen. And then often even when you account for them, you can have the alternatives analysis which is okay. So

if we reduce sulfur emissions, good for the homeowners, but maybe it's better to just pay use that money that to reduce

better to just pay individuals who suffer harm. Maybe that's better. Maybe that works out better depending on all

of these sort of like um connected sort of um dominoes, you know, that are from that different analysis of relative

benefits and attendant costs. So, let's measure all of those different things and let's do a sort of comparison of

different ways of doing this. Try to determine all of the benefits and costs and then make an informed decision.

And of course, even in the process of doing that, there's a lot of time and energy and expense that is incurred. So

even government considering doing a policy versus B policy versus C policy requires time, energy and resources.

So how do we internalize costs? Do we for example privatize the resource? Maybe it's just better for example, one

example is hey let's just privatize the air. Let's have the company, the coal company for example, or the electricity

generation company who's using coal, let's have them buy up the air around. Purchase it. Literally purchase. Let's

come up with a number. Let's come up with an amount. We can do that. We can figure out, you know, relative to the

damages that are going to occur, the reduction in home values, etc., etc. Let's just come up with a number. Let's

have them purchase it. Let's have them buy that upfront. And then they have the right to pollute the air because they've

already bought the resource. They can do what they want with the resource. They've paid for the pollution upfront.

And then we can use that money in a variety of ways. It's income. It's direct. We, the government, can use it.

It's a one-time deal because usually when you, you know, privatize a resource, it's not just for a day. But

there's also that you can, we do this in fishing in the United States to some degree. We can do um we can we can

provide individuals with the right to fish a particular area of the public domain. The the oceans are owned by the

public. They're not owned by private individuals. You know, so we think of the United States exclusive economic

zone 200 um nautical miles uh from the shoreline and the state has an interest as well for about three nautical miles.

But if there's a coastal state, which there always is. Uh but then you know the point is government owns that

resource and anything that's in it. So basically when you think of fishing like commercial fishing, it's really giving

individuals a right to go out and capture a public resource and the that right can be given for a period of time,

can be given for a year. And they have that right and that is their right. And sometimes they can even trade that

right. They could sell it to somebody else for the period of time that they have it. Sometimes it can be forever. Uh

sometimes they can be given that right for you know in perpetuity but can be repealed at any time by the government

because it's the government can't just give away public resources. So you know um it can grant a lease. We do this all

the time, right? Oil, offshore oil and gas leases. Think of those uh as another example where we're giving a right for

some private individual to go out into a public resource, the ocean, you know, go drill down into the bedrock, find oil,

public resource in a public area, uh and then capture that public resource. And it's usually the moment of capture where

we transition where that public resource now becomes private. So the oil that is brought up or the fish that are caught

now once they're captured are now the property because that's the incentive. They're paying, these companies are

paying, you know, the fisherman's paying for everything to go out and fish. They're paying for all of the resources

and capital to go do that plus their time and energy. Same thing with the oil and gas companies. They're going out and

spending all of their capital. So, that has to be a benefit for them to do that. And that is once they've captured that

public resource, they now have it in its private and now they're going to help put it into our hands. They're going to

make it a public net benefit. Uh so, but that's can be for a period of time. could be for a year, two years, could be

six months, a season, you know, 10 years, indefinite until, you know, decades, that sort of thing. Leases for

periods of decades, so on and so forth. So, we can do this where we privatize the resource and give that person a

right to give that entity, that private individual a right to the resource. And we can limit it. It could be forever,

but it could also be for less. So here are examples to put all of this into context in terms of trying to

understand environmental policy. So here we're going to do and we're going to do it with automobile policies based on

pollution. So current day we want to reduce the amount of pollution. We can call it carbon for

sure. Um and so internal combustion engines and really you know old cars. Old cars low miles per gallon. They're

dirty. Not only are were they, you know, designed for bigger engines, you know, less fuel efficiency, that's how they

were designed, but certainly because they're old, they just don't operate as well as they used to. So,

here's our first scenario to consider in terms of a policy to deal with polluting cars. The use of certain automobiles are

simply banned based on the emissions, generally older, cheaper automobiles. the individual is left to purchase a

newer vehicle or find other means of transportation. The government offers no aid, no subsidy to those who are

affected. So, we can think about this. This is incredibly efficient from an efficiency standpoint. It's like if you

want to lower automobile emissions or you know the pollution that comes from automobiles, banning um automobiles

based on emissions like those that emit a lot is the simplest way to do it. It's the fastest way. You know, the what is

it? The shortest distance between two points is a straight line. This is the straightest of lines between those two

points. Could not be more direct. And if we're thinking about efficiency of policy, like does the policy meet its

intended goal? I can't think of something that is better than this in terms of getting to that goal quickly.

You simply get rid of those gasg guzzling pollution prone vehicles. Of course, we can think about who does this

affect? Who generally owns older, cheaper automobiles? Rich people or poor people? We can slice

this many different ways, but just, you know, for time purposes because we don't have forever and ever, and this is

already a long introduction to environmental policy, but not too long. Um, but if we just look at it, is it

wealthy people or poor people? And even if a wealthy person has an older, cheaper automobile, what can the wealthy

person do if that automobile is banned? They can easily afford, right, a non-banned automobile because they're

wealthy. So we can say that this is incredibly efficient, but it has probably a disproportionate impact.

Think about that. Let's hold on to that. Scenario two, the government caps the amount of miles allowed to be driven by

any particular vehicle. So instead of banning it says okay um we have a pollution measure. So the

amount of miles is based on this pollution measure of a automobile. If you're an older car you know and you're

more polluting then you can travel less. You know there's less miles to drive. If you're a newer car or more fuel

efficient car generally those correlate then you can drive further. So in this case older automobiles generally can

only travel 5,000 miles per year under the program. So if you have an old automobile, you can still use it but in

a limited way. So this cap is different from the ban. It's easier or less dramatic on the enduser because it still

allows the people who can only afford and have older polluting automobiles. It still allows them to use their

automobile just a lot less. Now many of you might say 5,000 miles per year. Well, you know what? I work from home

now or, you know, I'm in a COVID to postcoid world where, you know, um I don't, you know, that's okay with me.

But for most people, they say 5,000 miles a year is nothing. That I'll be done with that in a couple of months. Um

so that doesn't really help. That's just not great. Now, of course, it's better than the banning legislation, right? You

can still use the car. You just can't use the car a lot. Of course, on the other side, shortest

distance between two points, straight line. This line, this line of a cap in comparison to banning legislation is a

little more squiggly, right? It's a little longer. It's not as straight, right, as the banning legislation. So,

it does not meet the goal as well, but it's a little bit fairer. Scenario three, government places a tax

on emissions of all automobiles. Every automobile there's a tax and it's based on emissions. Now when the factors are

considered are miles driven per year and the emissions of the automobile. Those with a higher emission vehicles pay a

rate a higher rate per mile and those who travel more miles pay a higher tax and everyone is subject to the tax. Now

if you're driving a battery powered car and it has truly zero emissions doesn't matter I guess how many miles you travel

per year right? because it's miles driven per year times the emissions of the auto. If the emissions of the auto

is zero, the amount you're going to pay is probably going to be zero. If you have a hybrid, you know, a car that has

an internal combustion engine, that's super efficient. Obviously, you're going to be able to

drive a lot more miles driven per year if you're making 60 miles per gallon, for example. Um, because the emissions

of the auto is a lot lower. So, the amount you're going to pay is less. Now, if you have a clunker that gets 10 miles

per gallon, you know, and you still drive 15 20,000 miles per year, you're going to pay a lot because it is a rate

per mile. Now, the benefit here of this tax is it is going to cost those who cause the

most emissions a lot more money than those who have no emissions, pay zero, or much less emissions, pay a little

bit. And over time, that should incentivize people. It allows you to travel. If you have the clunker, you're

not limited to 5,000 miles a year. You can go 20,000 miles. You're just going to have to pay for it in addition to all

of the other things you have to pay for. Pay for more gas because you get less miles per gallon, so on and so forth.

But no limits, no 5,000 milei limit, no banning legislation. You can you can go as long as you want, as long as you can

afford it. And certainly if we think about it, if this tax is directly related to emissions, so the money it's

generating is based directly on emissions. Now, if government is doing its job right, call it something like a

PGOian tax. You can look that up. If government's doing it right, then it's going to take

all of this income, all of the money it makes, and it's going to use it directly directly for mitigating and reducing

carbon emissions. So in the case that we've talked about when money is taken from one thing it is no longer available

for that thing because it's being used for something else. Right? We talked about that in a finite world. Well, in

the tax situation, if this tax is being used to raise money to combat carbon, the emissions of carbon in the

atmosphere, then this is money if it's being all earmarked for that purpose that is being

generated through the tax for that purpose. So in this case, we can say money income. we have an income stream

to directly generate funds to to deal with carbon emissions. And there's a variety of ways we can deal with it. We

can then use that money, right, to incentivize the development of batterypowered automobiles to reduce

$7,500 rebate, $10,000 rebate, now $12,000 rebate, $15,000 rebate. Get your, you know, batterypowered car. help

the manufacturers lower the price of those cars by making more and more of them and help the consumers afford the

car by making it cheaper and cheaper, right? Ah, you're paying $10,000 a year because you have a clunker with this tax

just to ride the car because of the carbon tax. 10,000 in carbon tax, man. Wouldn't you rather get a $10,000 rebate

if you just go you you see the point here? So, the tax can be highly efficient if it's used properly. Now

it is not a direct line necessarily right if we think of the shortest distance between two points the banning

legislation seem like a straight line this is I said direct line and a straight line I'm sorry it's squiggly

but depending on how it's used it might not be super squiggly it might be relatively straight it all depends on

how that money is used and the effect of the tax and of course what matters there what is the rate set that how much does

the worst offenders end up paying. Getting the price of carbon right really really matters here really really

matters. So, you know, getting that tax rate right, you know, the amount of money you pay per mile, that sort of

thing depending on your emissions amount, how much you're paying. You don't, you know, it's this is again a

Goldilock scenario. If you charge too much, it ends up being banning legislation, right? And if you charge

too little, well, then it's kind of like a free-for-all. If it's not a lot of money, then people will simply

incorporate it into the cost of doing business and it really won't lead to different outcomes. However, you will

still receive that income stream, less money to be used to mitigate the effects of carbon in our atmosphere in other

ways. So, it still provides government with a new resource that it didn't have otherwise. It's taking money from

consumers and you know increasing its budget for carbon reductions or carbon mitigation in other ways depending on

what environmental policy they choose. Point is you can see the benefit of a tax um in terms of its sort of um its

variability in in approach. And again here in terms of fairness well it's unfair for those that have you know the

dirtiest cars that can't afford to pay the tax. Maybe that ends up resulting like banning legislation, ends up being

like banning legislation for those individuals. But the benefit here is it instead of just the banning legislation,

which applies to certain vehicles, this applies to every vehicle. So everybody's paying for their relative amount of

emissions, which is different than many of the other examples we've used, which is showing that well, if we're going to

reduce sulfur, we're going to increase home prices for some people. If we're going to give $7,500 back for buying a

car that's not coming from this kind of sourcing of funds, right? Uh for buying a battery powered car, it's only those

individuals that are buying battery powered cars that are going to benefit from that, you know, and then the

benefits of lower carbon are, you know, sort of in the population in general here. More people pay more people pay

into the system. Final scenario, government distributes rights to air quality to private

individuals through a bidding process. The private individuals own those air rights including the quality of the air.

The private individuals can sue those who harm air quality without agreement to do so. You know, so the people that

are uh and enforcement is through the courts. So in this case, think of a

situation where we talked about before the you know power generation company, right? They coal burning power

generation company wants to buy the air around it so that it can throw sulfur into the air. That's one way to look at

it. Another way to look at it is the National Environmental Organization buys the air rights around a power generation

company and says, "Yeah, that's my air. I don't want anything coming into that air." And then the power generation

company says, "Oh, geez, I'll pay you xxx, you know, and uh and uh it's up to that company, that entity, the let's say

the environmental um organization whether or not that amount they're willing to pay is high enough." Of

course, to a point, you know, um the power generation company will never pay more than whatever value it can get out

of dirtying that air or putting the sulfur in the air because otherwise it'll engage in some other right choice.

It'll filter it out. It'll pay for the filtration technology if it's cheaper or um if paying for that air to dirty the

air cost them too much money more than they can make uh either break even or make a small profit in generating the

electricity, then they'll simply choose to go out of business. But the point is the private rights is transferring, we

talked a little bit about this before, is transferring that right to some other entity and letting the market figure it

out. And so you care about air quality, then environmental organization raise enough money to purchase the air rights

and then just leave them alone, protect them. Nobody can then dirty that air. If you power generation company care more

about using it and it's cheaper for you to buy the air right than it is to buy the technology to scrub the sulfur out

or to you know stop using coal and figure out another way natural gas or some other non-sulfur producing right or

let's do a wind farm or let's do a solar farm you know if it's about carbon um then you know then buy that air right or

engage in that alternative activity but otherwise government gets out of the process of trying to figure out what's

the best use. It starts the use but like in the fishing example or in the oil and gas lease offshore oil and gas lease the

air is a public good but if government can then you know divest itself of that public good for a period of time give

somebody else the ability give the market effectively the ability to determine what is the right price. So in

this case you can look um so in the tax case we can look at paggo or piggovian taxes for efficiency purposes and in

this case we can look at coast theorem if you want to the notion that if you just privatize everything and I'm

oversimplifying this significantly folks so but the the idea the general idea that if you privatize

um all different kinds of what we normally consider public or common goods if you privatize them then the markets

can figure it out and as long as you have direct access to the core courts in order to enforce your rights. Quick and

easy access transaction costs. Going to court is is timeconuming and expensive. So you want to reduce those transaction

costs. But assuming you can uh and you have direct access and easy access to these um you know to these enforcement

mechanisms, then maybe privatization really is good. So let's just look at these scenarios

quickly uh as a sort of summary um all four of them and think back to their sort of the efficient level of

emissions. Our little friend over here if you remember the efficient level of emissions um

scenario one banning legislation super efficient has equal application but a highly unequal impact. It is truly the

shortest distance between two points. It applies equally but in terms of you know all cars that

meet the requirements. So it's equal in that sense but its impact is highly unequal

meaning that those that can least afford newer cars more efficient cars are the ones that are going to be most impacted.

Scenario two cap and trade. you know, older 5,000 miles a year, more pollution, but less unequal impact.

So, it's a little less unequal, but we get more pollution. We get that squiggly line, you know, instead of a straight

line between those two points. Scenario three, the tax on the miles driven times the amount of pollution. That's even

more pollution, right, than you know the uh second, right? Likely because there's going to be those people in between. but

an unequal impact, but a lot more choice. There certainly is an unequal impact. Those that can't afford that

drive the older cars are going to pay much more. But there's more choice. There's more incentive for alternatives.

And if that tax revenue is being used well, then it can mitigate the effect on those that are least capable of

affording the alternative. You could give more money to those that can afford a newer car to help them afford a newer

car through this sort of tax if it's working correctly. Pgovian scenario four privatization right to air

quality pollution level is sensitive to supply and demand. So depending on, you know,

where the sort of market is, depending on who has access to capital and how much they're willing to pay for the

right to either pollute or protect the air resource that will define the market will sort of define and that we can

think of uh coast theorem, Raml Co and Coast theorem and you know we can think in that

scenario direct versus other damages you know so it's paying for what What are you paying for exactly, right? Are you

paying to pollute? Are you paying to protect? Are you paying for, you know, an opportunity to to just maximize the

income potential of, you know, of the air? That kind of thing. So, thank you very much for listening to this. I I

hope uh you get a a a good introduction or you've received a good introduction to environmental policy from this

perspective, our sort of values, science, and economics. uh and the shared space that they exist at. So what

you should get from this is yes, environmental policy is incredibly complicated. It is um because like any

other policy, it is conditional. It's conditional on factors that are somewhat objective and most importantly, like we

said, values, factors that are highly subjective and subject to change and even subject to change based on what

we're talking about, what we're trying to do. Many of you might agree that protecting

the air is important or good environmental air quality or carbon reductions are important. But how we do

it, those four examples, for example, um some of you might disagree significantly with some of those options. You might

disagree with all of them and some of you might agree with most of them or some of them. And certainly you probably

have preferences one over the other, this one over that one. So the point is even when we agree on the goal, often we

can disagree on how to get to that goal. And that is incredibly important to know when you're trying to understand and

think about environmental policy, especially environmental policy in context, what it applies to. So thank

you again for your time. Uh I hope this was helpful for you.