Professor Sterner discusses the topic of “The Distributions of the Costs” and shows two curves, one of the Environmental benefits and one of the abatement cost implied when you for example tax some emission. He explains why companies benefit on voluntary agreements and gives an intriguing example from Japan.
Sterner also gives theoretical examples from when it is reasonable that society takes the cost and help firms clean up emissions.
Sterner puts it into a historical context of property rights comparing countries. He also discusses the Polluter Pays Principle (PPP) and different scenarios for how payments can be divided.
Later on in part 1 Sterner discusses the importance of understanding when you should regulate emissions and when to use price type mechanisms. He refers to Weitzman’s article from 1974, comparing P and Q types of instruments. Adding the fundamental question of whether you think that the people or the polluter own the environment, a dimension often excluded in the debate or, when taken into account, misinterpreted as something which defines the instrument when they are really two separate aspects.