ABSTRACT
What is an efficient level of pollution? If we know that amount, what policy instruments are available to incentivize firms or individuals to reduce pollution? This chapter tackles those questions first by defining what we mean by an efficient level of pollution for different categories of pollutants in general. The economic theory of pollution control is presented. Efficient policy responses are introduced, evaluated, and compared. The revenue impacts of different policy choices are discussed, noting the importance of this policy design feature for environmental taxes or for cap-and-trade. Lastly, instrument choice under uncertainty is discussed.
