 Thus, at Q3, one cold increase total

benefits simply by providing one less

unit; that is: MB(Q1) = MC(Q1) at the
point of maximum net benefit.

 Net benefit (=E in the figure) is

maximum at Q = Q1 because marginal
benefit at Q1 = marginal cost at Q1.
 The Efficient Level of Emission

 When emission of pollutant increases, the

resulting environmental damage is also
likely to be higher.

 Controlling the emission to a lower level

would also reduce the damage cost.

 But costs are associated with the control as

well.
 At no control case, the cost of abatement
(or control) would obviously be zero while
corresponding damage cost would be very
high.
 On other extreme, total control of the
emission would mean no damage cost.
However, the control cost in this case could
be very high.
 What level of Pollution (i.e., emission)
would be desirable then?
 The optimal (that is socially efficient) level of
pollution is at the level in which total cost of
pollution control required and damages
resulting from the emission discharged is
minimum.
 At the optimum (efficient) level of emissions
of pollutants (similarly, emission abated) the
marginal abatement cost (MCC) is equal to
the marginal damage cost (MDC), that is:

 MCC = MDC
 This is a necessary condition for optimal emission.
 MCC MDC
Cost

E
t*

Damage Control
Cost Cost
0 e*d e ed

Emission (discharged)

Figure 1(a)
 MDC
Cost MCC

E'
t*

Control Damage
Cost Cost

0 e*c e ec
Emission Abated
Figure 1(b)
Notations in Figure 1(a) and 1(b)

 ê = total emission level, w/o regulation/control

 ec = amount of emission desired to be

controlled which needs cost

 ed = emission release after control, discharge;

 ec+ed = ê