Figure 17-2 The Optimal Amount of Pollution Abatement
The Optimal Amount of Pollution
Abatement
Notice from Figure 17-1 that the allocatively efficient outcome still has
some pollution being generated—simply because output is greater than
zero and each unit of output generates some pollution. It is virtually
impossible to produce goods and services without generating some
environmental damage. The economic problem is then to determine how
much environmental damage to allow or, equivalently, how much
pollution reduction to implement. In general, it is not optimal to eliminate
all pollution.
Reducing pollution involves both costs and benefits. Eliminating all pollution is generally not
allocatively efficient.The economics of determining how much pollution to reduce, and
therefore how much to allow, is summarized in Figure 17-2 , which
depicts the social marginal benefits and social marginal costs of pollution
abatement (reduction). The analysis might be thought of as applying, for
example, to water pollution in a specific watershed. It is drawn from the
perspective of a public authority whose mandate is to maximize social
welfare.