The minimum standards for maintaining environmental quality while keeping costs at the minimal can be established by considering sources of emissions and their concentrations. These air pollutants may be acceptable to a given degree after which they become unacceptable due to the consequences they have on nature.
It is important to determine the extent at which a given pollution is negligible and above which the damages are intolerable. In this case, there is an “important condition that market equilibrium coincides with the least-cost solution for attaining any predetermined level of environmental quality and does so for any initial allocation of licenses among polluters” (Krupnick, Oates, and Van De Verg, 1983, p. 234).
When considering this approach in environmental management, optimal standards should be introduced to regulate the polluting activities and the concentration of emitters in a given region.
All the polluting entities, regardless of the degree of emission, are regarded as accommodating to the environment. This is only if they do not act in violation of the standard optical measure on environmental quality. This implies that the cost of pollution remains equal for all entities.
Therefore, it creates room for increased pollution activities in relatively clean areas at no extra cost. This allows license trading in regions that are least polluted thereby degrading the environment further.
This will lead to a disabled equilibrium that should exist between environmental quality and abatement costs. There are biases in this model towards minimizing costs and thus insensitive to the environmentalists (Krupnick, Oates, and Van De Verg, 1983).
McGartland’s extension on Krupnick’s perspective regarding standardizing the measure for environmental quality introduces a predetermined optimal measure in environmental quality. Both the environmentalists and polluters seek to improve the environment and reduce abatement costs.
This perspective addresses each region on its own aiming at improving air quality level by the current status. This is done by ensuring that the predetermined standards are not exceeded. Therefore, the environmental quality standards are not uniform.
However, they are dependent on each region’s level of environmental degradation. That way, those that are already good will not deteriorate to reach the optimal standard established. In this case, it is not the optimal standard of emissions in any region that is assessed.
However, it is the optical amount of emissions of a certain region that measure whether the quality of the environment is maintained (McGartland & Oates, 1985). Unlike Krunpick’s assertions, there is no equilibrium between costs and environmental damages, it seeks to reduce costs and protect the environment whichever is more gain.
Thus, environmental quality will be maintained, if not improved, because there is insignificant possibility of increasing polluting activities in a clean environment. This is because it violates the predetermined amounts of emissions despite having minimal activities when compared to others (McGartland & Oates, 1985).
The system for pollution offsets that Krunprick was introducing is only applicable if other measures are taken. These measures include the introduction of measurable extents to which a pollutant cannot be allowed to exceed; the partitioning of regions according to the amount of emissions; and determining the number of pollution activities any region can sustain.
Maintaining equilibrium between environmental quality and cost is not efficient if all the polluting entities are treated uniformly despite the amount of emissions and concentration in a certain region.
Therefore, to ensure that regions with good quality environment are not subjected to degradation at extra costs, trade permits should be introduced. Nevertheless, the permits should reflect the unique needs of each region, as opposed to the optimal, standard measure for environmental quality. This way pollutants experience minimal costs while the environment gains better quality.
Krupnick, A.J., Oates, W.E. & Van De Verg, E. (1983). On Marketable Air-Pollution Permits: The Case for a System of Pollution Offsets. Journal of Environmental Economics and Management, 10, pp. 233-247.
McGartland, A.M. & Oates, W.E. (1985). Marketable Permits for the Prevention of Environmental Deterioration. Journal of Environmental Economics and Management 12, pp. 207-228.