Don't pollution problems require government intervention?
As court-made law to settle conflicts over nuisances like pollution has been increasingly regarded as inadequate to deal with externalities, government interventions have typically taken three forms: command-and-control regulation, emissions taxes, and cap-and-trade systems.
Referring to the diagram in figure 1, there is no way to find the MSC, which means that the government can't know how high to set the tax, and a tradable permit system won't have useful information about how many permits should be created.
"But," Baumol contended, "If we permit ourselves to be paralyzed by councils of perfection we may have still greater cause for regret." In other words, it is better to do something to reduce pollution than to impose no pollution limits whatsoever.
If emissions permits under tradable permit systems are exchanged among polluters in different areas, the emissions will shift from one polluter's neighbors to another's with no compensation to these victims of pollution.
Government can't accomplish the improvement over market outcomes that emissions taxes and tradable emissions permits promise and could easily make matters worse.
As we have seen, the government doesn't have the information it would need to identify what level of pollution is efficient for an entire society, and government officials don't have the incentives to be particularly interested in efficiency anyway.
https://mises.org/wire/why-government-pollution-control-fails
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