Ch 8- Assessing Costs For Env. Decision Making

Front 1

Incremental Costs

Back 1

the change in costs
arising from an environmental policy initiative

Front 2

Explicit (or monetary) costs
Implicit (or nonmonetary) costs

Back 2

Economic costs include:(2 types of cost)

Front 3

social

Back 3

Ideal measure of economic costs is the ______ cost of policy

Front 4

Explicit Costs

Back 4

These cost include Administrative, monitoring, and enforcement expenses incurred by the public sector plus compliance costs incurred by all sectors
Which can be broken down into capital and operating costs

Front 5

Implicit Costs

Back 5

These costs include Value of nonmonetary effects that
negatively affect society’s well-being
Examples included diminished product variety, time costs of searching for substitutes,
reduced convenience, etc.

Front 6

Capital (or fixed) costs

Back 6

Spending on plant, equipment, construction, and process changes for pollution abatement
(An Explicit Cost)

Front 7

Operating (or variable) Costs

Back 7

Costs of operating and maintaining abatement
processes
(An explicit cost)

Front 8

Social Costs

Back 8

Expenditures needed to compensate society for
resources used so that its utility level remains the
same

Front 9

Engineering Approach
Survey Approach

(Common to use a combination approach)

Back 9

Two methods used to estimate explicit costs:

Front 10

Engineering Approach

Back 10

Estimates abatement spending based on sleast-cost available technology

Front 11

Engineering Approach

Back 11

One aspect of this approach used to measure explicit costs is that it relies on experts in abatement methods

Front 12

Engineering Approach

Back 12

Drawbacks of this approach to measuring explicit costs are
-difficult to use for proposed policy due to uncertainty
-must be customized to suit each production setting or suffer from averaging
-unable to capture firm heterogeneity as a
generalized estimate
-likely understates true costs because it assumes all firms are cost-effective

Front 13

Survey Approach

Back 13

Derives estimated abatement expenditures from a sample of polluting sources via surveys

Front 14

Survey Approach

Back 14

Drawbacks of this approach to measuring explicit costs are
-assumes sources are sufficiently well informed
-polluters have an incentive to exaggerate costs to officials to increase the probability that the proposed regulation will be rejected

Front 15

By economic sector
-Shows cost distribution across public and private sectors

By environmental media
-Shows how costs vary across air, water,and solid waste abatement activities

Back 15

Two ways to classify environmental costs: