ABSTRACT
Reflect back on the first six chapters in which perfect information was assumed along with the existence of the necessary institution(s) to allow that information to result in optimal environmental policies. By the end of Chapter 6, what policy makers should do seemed very clear for rivalrous but nonexcludable goods: merely charge a marginal pollution tax equal to marginal damages or institute a cap-and-trade system with the same amount of pollution allowed that would correspond to that optimal tax. In the case of public goods that are both nonrivalrous and nonexcludable, provide them collectively to the point where marginal benefits (aggregated vertically) just equal marginal provision costs. For long-term environmental projects (for which benefits and costs were assumed known in each future period), select those with positive net present values. The process of determining optimal environmental policy at a point in time and over time seems quite simple at a logical level.
