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Exam 15: Improving Water Quality: Controlling Point and Nonpoint Sources

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Question 1

Multiple Choice

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Giving states control of nonpoint source pollution

A) has no advantages
B) can be problematic because states generally have inadequate data to assess the problem
C) is advantageous because it results in greater consistency of control
D) was not the original intent of the 1987 legislation

E) B) and C)
F) All of the above

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Question 2

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A volume-based effluent fee is based on the degree of harm linked to the contaminant released.

A) True
B) False

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Question 3

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An advantage of the effluent limitations is that they are aligned with the national water quality objectives.

Suppose two point sources are discharging phosphorus into Wisconsin's Fox River and face the following abatement costs for this pollutant: Point Source 1: TAC₁ = 500 + 0.35(A₁)² MAC₁ = 0.7A₁ Point Source 2: TAC₂ = 750 + 1.05(A₂)² MAC₂ = 2.1A₂, where A₁ and A₂ represent the abatement of phosphorus effluents in pounds by Source 1 and Source 2, respectively, and TAC and MAC are measured in hundreds of dollars. Assume that the state environmental authority has set the total maximum daily load (TMDL) for the Fox River. To achieve this limit, 40 pounds of phosphorus must be abated across the two point sources. Use this information to answer the following questions. a. If a uniform abatement standard is used by the regulatory authority, what would be the dollar values of TAC and MAC for each source? b. Based on your answer to part (a), is there an economic incentive for the sources to participate in the trading program? Explain briefly. c. Quantify the cost savings associated with a cost-effective abatement allocation achieved through trading. d. What should be the price level of the tradable permits to achieve the cost-effective solution?

All point sources are subject to effluent limitations, which are imposed uniformly within each designated group.

According to the text application, mercury contamination is relatively easy to control because mercury emissions tend to remain close to the polluting source.

The effluent limitations are set to maximize net benefits.

Tradeable effluent permit markets can lead to cost savings as long as polluting sources face different marginal abatement costs to control the same pollutant.

Polluting sources have an incentive to abate up to the point where their Marginal Abatement Cost (MAC) equals the Marginal Effluent Fee (MEF), and to pay the fee beyond that point.

The National Pollutant Discharge Elimination System (NPDES) is a permitting system solely for publicly owned treatment works (POTWs).

Among the identified point sources contributing to the pollution of Puget Sound are Dow Chemical (D) and Chevron (C). Each firm's cost functions are shown below. MAC_D = 2.5A_D MAC_C = 3.75A_C TAC_D = 1.25A_D² TAC_C = 1.875A_C² To meet the effluent limits under the Clean Water Act, each firm has an NPDES permit to release some fixed amount of effluents, so each must abate 30 units. a. At the uniform abatement standard described above, find total abatement costs for both firms. b. Instead of a uniform standard, suppose each firm faces a volume-based, marginal effluent fee (MEF) of $90. How much will each firm abate? c.. If each firm's production is associated with the release of 50 units of effluent, how much will each pay in total effluent fees when facing the $90 marginal effluent fee?

The watershed approach

From an economic perspective, the zero discharge goal meets the efficiency criterion by accounting for both the benefits and costs of that objective.

If water quality law prevents the achievement of the efficiency criterion

The presidential Executive Order that is dedicated to the restoration of the Chesapeake Bay proposes a strictly command-and-control approach to restore and protect this natural resource.

Suppose that the costs and benefits of achieving water quality in New York are modeled as shown below. Use these relationships for any or all of questions . MSB = 80 - 2A MSC = 20 + 2A TSB = 80A - A² TSC = 20A + A², where A is the abatement level for conventional pollutants. -In this case, the abatement level associated with benefit-based standards would be:

Under U.S. law, the technology-based effluent limitations are

According to the textbook application, efforts to restore the Chesapeake Bay have been markedly successful.

According to available data, most water bodies in the United States have met the zero discharge goal.

Empirical research indicates that federal grants added dollar-for-dollar to POTW construction that would not otherwise have been completed at the local level.