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3. Potential Cost Savings from Existing Economic Incentives

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Savings from Economic Incentives


A 1990 EPA report estimated that the total costs for all forms of pollution control were $26 million in1972 (0.9% of GNP) but would increase to $160 billion in the year 2000 (2.6 to 2.8 percent of GNP). (A summary of the report is also available for downloading.) With current interest in economic incentive approaches, it is natural to ask two related questions. First, how much do existing market-based (incentive) programs, such as the Acid Rain control program, reduce the cost of pollution control over what they would be with more traditional command and control approaches? Those issues are investigated in this section. The second question: If market-based programs were applied in every instance where they were more economically efficient, by how much would pollution control costs be reduced? Section 4 investigates these latter issues.

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