Final answer:
Pigouvian taxes, such as a state emissions tax on carbon, are a market incentive based approach and provide a flexible, cost-efficient way to achieve environmental goals. Command-and-control methods, like setting car emissions standards, are less flexible and may not be as efficient. Market-oriented policies can help align private costs with social costs, promoting environmental protection.
Step-by-step explanation:
The question concerns the comparison of Pigouvian taxes and command-and-control mandates as methods for regulating energy consumption and reducing pollution. Here's how the various pollution-control policies mentioned fit into these categories:
- Market incentive based: A state emissions tax on the quantity of carbon emitted by each firm, and a city selling permits to firms that allow them to emit a specified quantity of pollution are both market-based methods, leveraging economic incentives to regulate pollution.
- Command-and-control: Requiring domestic auto companies to improve car emissions by a certain date and the EPA setting national standards for water quality are command-and-control methods, involving specific regulations that firms must comply with.
Pigouvian taxes, like the state emissions tax on carbon, fit within market-oriented environmental policies which provide the flexibility to achieve environmental protection efficiently. Such taxes internalize the external costs of pollution, thereby aligning private costs with social costs. Command-and-control measures, while ensuring certain standards are met, may not be as efficient and can lead to outcomes like 'choice M', representing a less efficient balance between economic output and environmental protection compared to market-based schemes like 'point Q' or 'point S'.
Federal payments to fishermen for conservation efforts illustrate the use of government incentives to encourage environmentally beneficial behavior, representing another form of market-oriented policy.