Transboundary pollution linked to electricity generation can be modeled as an international externality whereby the MSB is lower than the MEB of electricity.

Question

Quizplus · Accepted Answer

Transboundary pollution linked to electricity generation is an international externality where the Marginal Social Cost (MSC) of electricity is higher than the Marginal Private Cost (MPC) due to the external costs of pollution not being accounted for by the producers. The issue is not about the Marginal Social Benefit (MSB) being lower than the Marginal External Benefit (MEB), but about external costs not internalized in the production costs.

Transboundary Pollution Linked to Electricity Generation Can Be Modeled as an International