OECD Green Growth Papers
The OECD Green Growth Strategy, launched in May 2011, provides concrete recommendations and measurement tools to support countries’ efforts to achieve economic growth and development, while at the same time ensure that natural assets continue to provide the ecosystems services on which our well-being relies. The strategy proposes a flexible policy framework that can be tailored to different country circumstances and stages of development.
OECD Green Growth Papers complement the OECD Green Growth Studies series, and aim to stimulate discussion and analysis on specific topics and obtain feedback from interested audiences.
- ISSN: 22260935 (online)
- https://doi.org/10.1787/22260935
Estimating Shadow Prices of Pollution in Selected OECD Countries
Now that pollution is reaching worrisome levels in some countries and at the global level, there is a
growing consensus that it needs to be explicitly considered as a by-product of the production process and
incorporated in economic decisions. But this is not easy in the absence of markets and observable prices.
Shadow prices of pollution, the opportunity cost of abating pollution in the form of reduced output, have to
be estimated using specific techniques and serve several purposes. It’s a signal firms have to take into
consideration when they decide upon their investment decisions. Shadow prices can also inform
policymakers when they set policies. They can be used to assess policy ex ante by comparing the marginal
benefits of environment policies with the cost they involve for private firms. These prices can be seen as
benchmark for allowance price in emission market-based schemes or can be useful in designing optimal
environmental tax schemes. The indicator can also be used ex post and can be considered as a policy
indicator of pollution regulation and compliance to these regulations. More generally such prices are used
each time there is a need to value pollution...
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