Applying Environmental Economics to Policy: Taxes, Fees, Cap & Trade

This lecture on Environmental Economics is for non-economists interested in socio-environmental science. It is one in a series of lectures by SESYNC visiting economists, Drs. Lisa Wainger and Doug Lipton. In this lecture, Dr. Lisa Wainger poses the question, “Why do we need environmental regulation?” One of the answers, she explains, is due to, “market failures" (where individual incentives for rational behavior do not lead to rational outcomes for the group). This then leads to negative externalities, e.g., plastic pollution. She notes various methods to address these market failures, with a special focus on economic, market-driven incentives: taxes, fees, cap & trade. Using these methods, Wainger then discusses how to minimize the costs of abatement and align these costs with social costs, for example, within utility fees. In conclusion, she says that economic analysis, including examining behavioral biases and market conditions, can be used to determine how best to address market failures efficiently, so that unnecessary costs are not imposed on businesses and individuals.