Tradable smoking pollution permits
Encyclopedia
Tradable smoking pollution permits were proposed by the economists Robert Haveman and John Mullahy of the University of Wisconsin–Madison
as an alternative to smoking bans to solve the problem of cigarette-smoking "externalities" in public bars and restaurants. The tradable smoking pollution permit systems work similar to other cap-and-trade emissions trading
systems successfully used by the United States Environmental Protection Agency
since the 1970s to curb other types of pollution
.
systems allow lawmakers to define the overall level of pollution that is socially acceptable, and then issue tradable permits corresponding to that amount, companies who wish to pollute must hold permits equal to their emissions. This market-based approach to pollution control provides firms with economic incentives to reduce pollution in the least costly way.
In the case of smoking permits, lawmakers would decide the optimal level of smoking establishments for an area. The total fire occupancies, or some proxy based on alcohol sales receipts for those establishments is totaled up, and smoking pollution permits are issued accordingly. Establishments are required to hold permits equal to size, either fire occupancies or level of alcohol receipts, if they wish to allow smoking. In essence, they are required to own the property rights over the clean air space of all occupants before any can smoke. Establishments with unused permits can sell them on the open market to smoking establishments, providing economic incentives to reduce smoking in bars and restaurants. A similar proposal allowing smoking permits as an alternative to outright smoking bans was also advocated by the editorial board of the Illinois News-Gazette in a 2006 editorial.
The theoretical background for tradable smoking pollution permits has been outlined by economist Ted Bergstrom of the University of California, Santa Barbara
. Bergstrom models the negative effects of smoking on others as an externality
problem that is caused by a "missing market" -- no market exists in which non-smokers and smokers can form agreements to internalize the external costs of smoking. In Bergstrom's model, governments fill in this missing market by introducing a new commodity, "smoking permits," along with a law requiring smokers (or smoke-emitting firms) to purchase permits. The government then produces a fixed supply of smoking permits and distributes them in some way among smoke emitters.
In practice, smoking pollution permitting systems have been introduced by some municipal governments in the U.S. For example, the city of Wichita, Kansas
introduced a smoking ordinance in 2008 that issues $250 smoking pollution permits to firms. A similar proposal was introduced by New York
State Assemblyman Howard Mills in 2003, which would have established a system of smoking permits for bars and restaurants, similar to the existing system for liquor licenses. . In the United Kingdom
, Julian Le Grand, chairman of the ministerial advisory board Health England, has proposed a smoking permitting system that would require individual smokers rather than firms to hold pollution permits.
University of Wisconsin–Madison
The University of Wisconsin–Madison is a public research university located in Madison, Wisconsin, United States. Founded in 1848, UW–Madison is the flagship campus of the University of Wisconsin System. It became a land-grant institution in 1866...
as an alternative to smoking bans to solve the problem of cigarette-smoking "externalities" in public bars and restaurants. The tradable smoking pollution permit systems work similar to other cap-and-trade emissions trading
Emissions trading
Emissions trading is a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants....
systems successfully used by the United States Environmental Protection Agency
United States Environmental Protection Agency
The U.S. Environmental Protection Agency is an agency of the federal government of the United States charged with protecting human health and the environment, by writing and enforcing regulations based on laws passed by Congress...
since the 1970s to curb other types of pollution
Pollution
Pollution is the introduction of contaminants into a natural environment that causes instability, disorder, harm or discomfort to the ecosystem i.e. physical systems or living organisms. Pollution can take the form of chemical substances or energy, such as noise, heat or light...
.
Background
Emissions tradingEmissions trading
Emissions trading is a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants....
systems allow lawmakers to define the overall level of pollution that is socially acceptable, and then issue tradable permits corresponding to that amount, companies who wish to pollute must hold permits equal to their emissions. This market-based approach to pollution control provides firms with economic incentives to reduce pollution in the least costly way.
In the case of smoking permits, lawmakers would decide the optimal level of smoking establishments for an area. The total fire occupancies, or some proxy based on alcohol sales receipts for those establishments is totaled up, and smoking pollution permits are issued accordingly. Establishments are required to hold permits equal to size, either fire occupancies or level of alcohol receipts, if they wish to allow smoking. In essence, they are required to own the property rights over the clean air space of all occupants before any can smoke. Establishments with unused permits can sell them on the open market to smoking establishments, providing economic incentives to reduce smoking in bars and restaurants. A similar proposal allowing smoking permits as an alternative to outright smoking bans was also advocated by the editorial board of the Illinois News-Gazette in a 2006 editorial.
The theoretical background for tradable smoking pollution permits has been outlined by economist Ted Bergstrom of the University of California, Santa Barbara
University of California, Santa Barbara
The University of California, Santa Barbara, commonly known as UCSB or UC Santa Barbara, is a public research university and one of the 10 general campuses of the University of California system. The main campus is located on a site in Goleta, California, from Santa Barbara and northwest of Los...
. Bergstrom models the negative effects of smoking on others as an externality
Externality
In economics, an externality is a cost or benefit, not transmitted through prices, incurred by a party who did not agree to the action causing the cost or benefit...
problem that is caused by a "missing market" -- no market exists in which non-smokers and smokers can form agreements to internalize the external costs of smoking. In Bergstrom's model, governments fill in this missing market by introducing a new commodity, "smoking permits," along with a law requiring smokers (or smoke-emitting firms) to purchase permits. The government then produces a fixed supply of smoking permits and distributes them in some way among smoke emitters.
In practice, smoking pollution permitting systems have been introduced by some municipal governments in the U.S. For example, the city of Wichita, Kansas
Wichita, Kansas
Wichita is the largest city in the U.S. state of Kansas.As of the 2010 census, the city population was 382,368. Located in south-central Kansas on the Arkansas River, Wichita is the county seat of Sedgwick County and the principal city of the Wichita metropolitan area...
introduced a smoking ordinance in 2008 that issues $250 smoking pollution permits to firms. A similar proposal was introduced by New York
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
State Assemblyman Howard Mills in 2003, which would have established a system of smoking permits for bars and restaurants, similar to the existing system for liquor licenses. . In the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
, Julian Le Grand, chairman of the ministerial advisory board Health England, has proposed a smoking permitting system that would require individual smokers rather than firms to hold pollution permits.