Environmental Protection in a Knowledge-Based Economy

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Environmental Protection in a Knowledge-Based
Economy

• Delhi Sustainable Development Summit
• February 6-9, 2003
• Charles D. Kolstad
• 3M Visiting Professor of Environmental Economics,
  MIT
• and
• Donald Bren Professor of Environmental Economics
  Policy, University of California, Santa Barbara

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Economic Solutions to Environmental Problems

• Price emissions (pay to emit)
• Charge urban polluters based on where, when, what
• Power plants pay for using the public air
• Set up tradable rights for emissions
• Polluters buy and sell right to emit
• Aggregate emissions kept under control
• BUT what works in theory does not always work in
  practice!!!

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Two fundamental problems with economic solutions
to environmental problems

• Distributional where the burden falls
• Often falls disproportionately on the poor
• Eg, older polluting cars often owned by poor
• Burden often falls on narrow sectors
• Certain industries bear much of the cost of
  cleanup
• Coal-rich countries bear cost of climate control
• Monitoring Need to know who, what, where
• Easiest sources big stationary sources
• Tough sources smaller diffuse sources
• Cost of monitoring often not justified
• Thus technology regulations

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Technology Advances in MonitoringExample 1 Road
Congestion

• Levying tolls is the economic solution but is
  difficult and costly
• Automatic toll collection becoming reality
• Transponders
• Automatic Number Plate Recognition Technology

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Technology Advances in MonitoringExample 2 Auto
Emissions

• Technology 1 Routine vehicle emission tests
  coupled with tamper-proof odometers
• Technology 2 remote sensing of emissions tied to
  number plate recognition

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Conclusions

• One of the great obstacles to using economic
  incentives (prices) to manage the environment has
  been reliable, cheap monitoring
• The knowledge-based economy and the computer
  revolution is causing this obstacle to disappear
• In a few decades, this may well be the most
  important innovation in environmental management

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