Question

2. Explain why it is difficult for regulators to be successful in assigning pollution standards that vary across firms in such a way as to equalize the marginal costs of pollution abatement of all firms (and also achieve a target level of pollution reduction).

Answer 1

For assising the pollution standards by the regulators there is a need for some uniformity in the subject to be assessed. Due to heterogeneity prevailing in the production market i.e. variations in the production methods, differences in the external environment effects and at last varied sources of pollution emmission as well as emmission quantities.

These differences make it difficult and complex for the environmental regulators to assign pollution reduction standards to the companies as well as monitor and analyse their performances accordingly.

Also, due to these differences it is impossibly to assign similar marginal abatement targets to all companies manufacturing different goods at different scales and with varied methods.