Guensler, Randall L. (1992) Equity Dilemmas Associated with Command-and-Control and Market-Based Approaches to Air Pollution Control. Institute of Transportation Studies, University of California, Davis, Presentation Series UCD-ITS-RP-93-11
While command-and-control regulation has brought about significant improvements in air quality, market incentives are receiving renewed interest in the policy arena, due to the high marginal costs of emission reductions (dollars paid for the last ton of emissions controlled from an operation) required to achieve air quality standards. A number of market incentive policies (mechanisms that employ economic forces to change the behavior of target groups) were either enacted by the Clean Air Act Amendments or will be adopted pursuant to the provisions by the USEPA.
This paper describes the existing command-and-control approach to air quality planning, discusses variations in market incentive implementation, and outlines some of the potential impacts and equity issues associated with each system. Three classes of market incentives are examined: 1) emission fees; 2) production-based emission trading (e.g. grams/widget); and 3) marketable emission permits. These three classes of market incentives have the potential to yield very different distributions of costs and benefits for existing industries. The social equity effects of each strategy, in terms of how much is paid for pollution control, who benefits and who ultimately pays, are likely to be distinctly different under each scenario of market incentive implementation.
Based upon the relative uncertainty in determining impacts on social equity, the paper concludes that production-based emission trading offers significantly increased efficiency and industrial productivity compared to the current command-and-control approach, without sacrificing the ability to make equity adjustments in the future.
In this paper, a broad foundation of air pollution control theory and practice is first presented. Some individuals who reviewed draft versions of this paper felt that this framework was necessary to set the stage for the comparisons made later, while others felt it was an unnecessary summation of the existing literature. Readers who are familiar with the positive and negative aspects of the existing command and control approach to air quality planning, and familiar with the general principles of market based strategies.