Marginal Benefit of Abatement
The downward-sloping curve in Figure 17-2 is the “demand” for
pollution abatement and reflects the marginal benefit of pollution
reduction. The curve slopes downward for much the same reason that a
typical demand curve slopes downward. Starting at any level of pollution,
people will derive some benefit from reducing the level of pollution, but
the marginal benefit from a given amount of abatement will be lower, the
lower the level of remaining pollution (or the higher the level of
abatement). Put another way, in a very dirty environment, a little
cleanliness will be much prized and have a high dollar value, but in a very
clean environment, a little more cleanliness will be of only small
additional value.
Optimal Abatement
The optimal amount of pollution abatement occurs where the marginal
benefit is equal to the marginal cost—where “supply” and “demand” in
Figure 17-2 intersect. Since the optimal amount of abatement is usually
not 100 percent, some pollution will exist at the optimal outcome. As we
said earlier, zero pollution is generally not allocatively efficient.
In trying to reach this optimum, the government faces three serious
problems. First, although Figure 17-2 looks like a supply-and-demand
diagram, we have already seen that the private sector will not by itself
create a market for pollution abatement. Hence, the government must