ABSTRACT
Renewables promise inexhaustible sources of energy without depleting our remaining nonrenewable fuels and their environmentally damaging consequences. This chapter traces the increasing attention to the environment since 1970. That year marked the first Earth Day as well as the passage of the Clean Air Act, effectively the start of the modern environmental movement in the United States. The chapter then examines the relationship between energy and environment, especially conventional oil, natural gas, and coal and their impacts on emissions of sulfur, nitrous oxide (NOx), mercury, particulate matter, and carbon. It considers environmental regulation and the distinction between command-and-control (CAC) approaches such as technology and performance standards and market-based approaches such as taxes and cap-and-trade. Cost-benefit analysis is a fundamental instrument for the government to evaluate its regulations on energy production and environmental impacts. From the economics perspective, the level of regulation should be set based on the criteria of maximizing social welfare by maximizing net benefits.
