Cinzia Di Novi
(Università del Piemonte Orientale and HERMES)

Abstract - This paper presents a survey of methods of regulations with focus on pollution abatement and of various approaches to the issue of measuring quantities such as the marginal benefit of improved health that are crucial in view of implementing the regulation. Since pollution is a public bad, in general the efficient level of pollution can only be reached by way of some sort of public intervention. The paper’s focus is on so-called market-based mechanisms, which in turn are classified into price-based mechanisms (pollution taxes) and quantity-based mechanisms (tradeable permits). The basic framework for addressing the comparison between the two types of mechanisms is Weitzman (1974). In order to actually choose between regulation methods and to eventually implement chosen methods, estimates are needed of some crucial quantities, in particular of marginal costs and benefits of pollution abatement. The most problematic one is of course marginal benefit. Therefore the paper considers various approaches to the measurement of marginal benefits.