Lecture 6 presents the story of how sulfur and NOx emissions have been cut. Sterner starts his lecture by giving the example of acidification and how Swedish lakes died out mainly from German and British sulfur emissions while down on the European continent and in the UK the problem was slim. A situation originating from differences in bedrock and wind patterns. Through sulfur taxes Sweden basically eliminated their sulfur emissions and later managed to influence the other countries to cut their emissions as well.
Sterner goes on and discusses NOx, nitric oxide and nitrogen dioxide emissions. While for sulfur it is possible to count how much sulfur there is originally in the fuel and also how much that is being captured, thus by simply deducting the amount of sulfur captured from the amount of burned fuel one knows how much has been emitted and so it becomes easy to tax and put a price on emissions. NOx on the other hand is created from a side reaction due to the heat in the ovens and these reactions are nonlinear, increasing drastically with heat. There are well known methods to cut NOx emissions but it is very complicated to calculate how much is actually being cut and thus the emissions have to be measured, and measurements by them self are so expensive that it is not worth to install them on small plants.
The discussion in lecture 6 illustrates how taxes work fine to cut sulfur emissions while they are not as suitable to reduce NOx. So what is an appropriate policy instrument to reduce the NOx? Sterner shows what has been done.
And how are different markets affected by these different policies? What is the case for industries run by monopolies or oligopolies?