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15 Cards in this Set

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Incremental Costs
the change in costs
arising from an environmental policy initiative
Explicit (or monetary) costs
Implicit (or nonmonetary) costs
Economic costs include:(2 types of cost)
social
Ideal measure of economic costs is the ______ cost of policy
Explicit Costs
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
Implicit Costs
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.
Capital (or fixed) costs
Spending on plant, equipment, construction, and process changes for pollution abatement
(An Explicit Cost)
Operating (or variable) Costs
Costs of operating and maintaining abatement
processes
(An explicit cost)
Social Costs
Expenditures needed to compensate society for
resources used so that its utility level remains the
same
Engineering Approach
Survey Approach

(Common to use a combination approach)
Two methods used to estimate explicit costs:
Engineering Approach
Estimates abatement spending based on sleast-cost available technology
Engineering Approach
One aspect of this approach used to measure explicit costs is that it relies on experts in abatement methods
Engineering Approach
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
Survey Approach
Derives estimated abatement expenditures from a sample of polluting sources via surveys
Survey Approach
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
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
Two ways to classify environmental costs: