What is the best method of achieving the socially optimum level of pollution?

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Pollution can be defined as the 'harm or damage done to animals/plants and their ecosystems' . Pollution is an externality, the effects of which the costs and benefits are not fully reflected in potential or actual market exchanges. Since no-one owns the atmosphere, there is no market in it and therefore no market price for clean air etc. This means that firms have no incentive not to pollute. This means that forces outside the market …

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showed last 75 words of 2484 total
…lack of knowledge and loss of domestic competitiveness. The use of the more politically popular standards is a useful tool to reduce pollution, it is also simple and easy to implement. Yet it is difficult to enforce without high expense and is not cost effective. This leaves us with the hybrid market and command/control approach of tradable permits, which I believe is the most effective in practice, due to its simplicity and cost effectiveness.