costs from the $59,500 cost of the command-and-control option.

9.

Incentives to Go Beyond

Flexibility about Where and How

Political Process Creates

Pollution Will Be Reduced

Loopholes and Exceptions

Pollution
Charges

If you keep reducing
pollution you reduce your
charge

Reducing pollution by any method
is fine

Marketable

Permits

If you reduce your

pollution you can sell your

extra pollution permits

Reductions of pollution will

happen at firms where it is

cheapest to do so, by the least

expensive methods

If charge applies to all
emissions of pollution then
no loopholes

If all polluters are required

to have permits then there

are no loopholes

The party that has to pay

If the property rights are

Property

for the pollution has

Reducing pollution by any method

clearly defined, then it is not

Rights

incentive to do so in a cost

is fine

effect way

legally possible to avoid

cleanup
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