ABSTRACT
One of the ecological services provided by natural systems is a sink function, the capacity to absorb waste and pollution. According to the logic of external costs and benefits, an unregulated market outcome for a good that generates pollution results in 'too much' production. This chapter considers the marginal damage associated with pollution. Pigovian taxes amount to a charge levied per unit of pollution emitted. Setting standards for emissions or other pollution sources is a common approach to reducing pollution. Setting standards for emissions or other pollution sources is a common approach to reducing pollution. Light-duty trucks in the United States, including sport utility vehicles, must therefore meet the same emissions standards as passenger cars. But consider an industry with many plants of different sizes and ages. In August 2012 the Obama Administration announced new rules that will require automakers to nearly double the fuel efficiency of new vehicles by 2025.
