Command-and-Control Regulation: Standards, Effects, and Limitations

All flashcards

What is command-and-control regulation?

An environmental policy approach that directly sets allowable pollution levels, specifies required pollution-control technologies, or does both.

How can pollution-control requirements affect firms?

They require firms to spend resources on equipment or operational changes, raising costs and encouraging firms to account for some social costs of pollution in production decisions.

What were the roles of the EPA and the Clean Air Act in 1970?

The federal government created the EPA to oversee environmental laws, and Congress enacted the Clean Air Act to address air pollution.

Why can command-and-control rules provide little incentive for extra pollution reduction?

Once a firm meets the legal standard, the rule may offer no further reward or requirement for reducing pollution beyond that threshold.

What are three limitations economists identify?

The approach may not encourage reductions beyond the standard, may impose inflexible uniform rules on firms with different compliance costs, and may contain political compromises, exceptions, or loopholes.

Quiz questions

1. What does command-and-control regulation directly specify?Answer: Allowable pollution quantities, required control technologies, or both.
2. How can required pollution-control equipment affect a firm's production decisions?Answer: It raises costs, prompting the firm to account for some pollution costs when choosing output.
3. Which federal agency was established in 1970 to oversee environmental laws?Answer: The Environmental Protection Agency (EPA).
4. Why can a uniform pollution standard be inefficient across firms?Answer: Firms may face different costs of meeting the same standard.
5. A firm meets its emissions limit but could reduce pollution further. What incentive problem may arise?Answer: The rule may offer no additional reward or requirement for further reductions.