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Identify market-based instruments for pollution controls and discuss their merits. (300words)

Identify market-based instruments for pollution controls and discuss their merits. (300words)

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Answer #1

The market based instrument that is used to control pollution are

Price based instrument and quantity based instrument.

Price based instrument : The price based instrument is in the form of taxes and subsidies. There will be pollution taxes on any production that cause pollution. There will be a government body who will check whether the pollution tax is applicable on the production or not.

Quantity based instrument: If any production is releasing a quantity more than the amount prescribed by the government than they will be penalized. Government will set the rules , regulation and it will inspect the production for seeing if they releasing more than the quantity they can release.

Using these two market instrument we can control pollution as production companies will have a fear that they have to pay taxes for pollution and also they will be penalized if the quantity of pollution is more than government regulation. So it will control pollution.

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