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Introduction
approaches to correcting this market failure—command-and-control,
corrective taxes and subsidies, and marketable emission permits
(Dhanda 1999).
Command-and-control involves traditional regulatory action in
which the quantity of pollution emitted into the general environment
is directly controlled. It is the most commonly used approach
in both the United States and Mexico. There are a number of different
variations on command-and-control. Policymakers might require
polluters to meet a uniform design standard, referred to as the “best
available control technology” (BACT). Alternatively, pollution controls
may be directly applied to an emitter, thus limiting the quantity
of a certain pollutant per unit of time or per unit of production
(Dhanda 1999). A third approach to command-and-control is to
establish a minimum ambient air quality standard for a pollutant. If
the standard is exceeded, limits are placed on the actions of all emitters,
even to the point of forcing an emitter to cease production.
The main problem with command-and-control policies is that they
limit flexibility, thereby increasing abatement costs. There is no
guarantee that the measures mandated by regulators are the leastcost
method for achieving a given level of air quality. “One-size-fitsall”
policies may result in society incurring a higher cost than
necessary. Implementation regulations require that existing facilities
be retrofitted or that they be replaced with new facilities. However,
retrofitting is likely to be expensive and replacing existing facilities
means mothballing otherwise productive capacity, which is a waste
of capital. Recognizing this, regulators commonly grandfather existing
facilities, thus exempting them from new regulations. However,
grandfathering is also likely to be inefficient because polluters may
extend the life of a grandfathered facility precisely to avoid complying
with new regulations.
Specific command-and-control polices have problems. BACT
requires that regulators identify exactly which technology is best, a
prospect that can be problematic during periods of rapid technological
change. Moreover, BACT can inhibit research and development
of new technologies when adoption requires a lengthy and uncertain
regulatory approval process.
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