ABSTRACT

The chapter begins with an overview of air and water quality and especially the causes and consequences of air and water pollution. It then turns to a brief recounting of key events in the development of pollution control policy in both the United States and the United Kingdom, culminating in the enactment of important air and water quality regulation in the 1960s and 1970s. The discussion then turns to economic analysis of two key policy instruments, the emissions (Pigouvian) tax and tradable emissions permits. The analysis here parallels the analysis in the previous chapter of carbon taxes and cap-and-trade. However, the discussion treats two additional issues: market power in the output and permit markets, and the so-called double dividend. The chapter concludes with an extended look at three key pieces of clean air legislation: the original Clean Air Act of 1970, the Clean Air Act Amendments of 1977, and the Clean Air Act Amendments of 1990. The politics surrounding these three major pieces of clean air legislation is instructive for what it tells us about the positive genesis of environmental legislation. In each case, rent-seeking special interests played a major role in shaping the final legislation to serve their interests. The result of the 1970s legislation is that it led to improvements in air quality, but probably at considerably higher cost then necessary. In the 1990 legislation, politics definitely played an important role but the final legislation did not as obviously serve the narrow interests of interest groups.