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    Coase theory: mandated mercury emissions

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    How would I use Coase theory to look at mandated mercury emissions? What do you think Coase would say to a supporter of "free market environmentalism" who invoked his work to argue against the need for government intervention to limit mercury emissions from power plants?

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    Step 1
    Coase's theory says that if trade in an externality is possible and there is no transaction cost, bargaining will lead to an efficient outcome regardless of initial allocation of property rights. The US EPA has proposed the first-ever national standards for mercury and other air pollutants. The standards will regulate coal using power plants in US. If the new standards are implemented it is expected that in U.S. 17,000 premature deaths from lung diseases, ...

    Solution Summary

    The solution offers cogent arguments relating to Coase theory.