ABSTRACT
This chapter explores two costs critical to the determination of the optimal level of pollution: pollution control (abatement) and the costs of pollution damage. The general problem facing society is how to clean up pollution in a cost-effective manner. More specifically, society faces the choice between taking no action and facing the full cost of the environmental damage or take some action to control pollution to mitigate environmental damage. Conceiving the problem in this way emphasizes the trade-off between pollution control and damage costs. Once this trade-off is recognized, a cost-effective solution to this kind of problem entails careful weighing of costs and benefits at the margin. However, the chapter goes beyond the mechanics of this type of analysis and stresses the importance of having a good understanding of key socio-economic, technological, and ecological factors affecting pollution damage and control cost functions. This broader view acknowledges the relevance of the two cost functions for environmental policies, while also allowing for an ecological appraisal of the standard economic notion of the ‘optimal’ level of pollution.
