The control of industrial pollution: Implications for technology choice and growth

To reduce pollution, industrial enterprises can cut production or choose cleaner technologies. A rise in demand increases marginal revenue and, for given plant sizes and costs, profits. Abatement cost can therefore coincide with marginal profits. If economic growth implies a rising demand, then growth can increase incentive to pollute because, other things equal, it makes abatement relatively more costly. The choice of cleaner technologies may be the alternative. <P>Without official pollution control measures, profit-maximizing enterprises will choose polluting technologies. The control measures themselves imply different choice of technologies. Effluent charges and polluter subsidies induce similar responses by an enterprise, but in a competitive industry, the former will yield lower output and pollution levels than would occur under subsidies. Moreover, in certain cases the command-and-control measures can be more effective than incentive-based measures in controlling industrial pollution and promoting growth. A differential in information, monitoring and enforcement costs of different pollution-control measures does not alter the results.