How Should An Accumulative Toxic Substance be Banned? |
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Authors: | Michael Toman Karen Palmer |
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Institution: | (1) Resources for the Future, 1616 P Street N.W., 20036 Washington, DC, USA |
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Abstract: | The harmful effects on human health or ecosystems of many toxic substances depend on their cumulative concentration in the
carrying medium (water, soil, or air), not just on the annual deposition rates of the substances. Accumulative toxic substances
pose challenges to regulatory policy that are not faced when controlling pollutants whose damaging effects are though to depend
primarily on annual emission flows. An increasingly common response is to phase out offending uses or production of the substance.
In this paper we take as given the goal of phasing out an accumulative pollutant and examine different ways this could be
done using a simple, partial-equilibrium dynamic model. We focus on phaseout measures in which the cumulative production and
release of the offending substance over the transition period is fixed. Once this cumulative volume is reached, users must
convert to a known but higher-cost substitute that is assumed to be benign. The key to the analysis is the observation that
the quota on cumulative production makes production of the toxic substance during the transition analogous to extraction of
an exhaustible resource with a higher-cost, nonexhaustible ‘backstop’ technology. Using this framework, we first describe
the cost-effective outcome when the ‘sunset’ date is chosen to maximize product market surplus subject to the cumulative production
constraint. This outcome is compared to one in which the regulator fixes the sunset date, and one in which the regulator limits
annual production as well as cumulative production out of concern for acute exposure effects. Finally, we discuss the kinds
of market-based policy instruments that would be appropriate for supporting a cost-effective outcome. |
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Keywords: | accumulative pollutants product bans dynamic policy design |
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