Upstream Pollution, Downstream Waste Disposal, and the Design of Comprehensive Environmental Policies

Many policymakers are shifting their focus from media-specific pollution problems to product-specific, life-cycle environmental problems. In this paper, we develop a model of production and consumption that incorporates life-cycle externalities and use it to solve for alternative policies to achieve a social optimum. In general, we find that no single instrument can solve multiple problems, contrary to what some observers have suggested. However, we find that there are alternative ways of reaching the social optimum. We also discover that an “integrated” approach to policy appears to be important, no matter what policy options are adopted. And finally, we find that there is only a limited role for so-called product “life-cycle assessments.”