ABSTRACT
This chapter examines analytic frameworks that will directly target pollution-related issues. It deals with a simple framework in environmental economics that provides a basis to explain how governments tend to intervene. This intervention takes the form of standards, taxes and penalties, the setting up of mechanisms for pollution trading, and other incentives and disincentives for the use of environmental goods and services. Environmental quality standards are enforced through a range of regulatory bodies in some countries. Similarly, water quality standards limit the salt content of river systems to 60 electrical conductivity units. The mandates of many regulating institutions have been unstable and affected by politics and calamitous events. The potential to achieve greater efficiency through taxes on pollution depends very much on how these tax earnings are used in the wider community and also on how firms respond to the taxes.
