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Homework answers / question archive / In the 1990s, the Mobil Oil Corporation acquired the rights to increase pollution by 900 pounds of sulfur dioxide per day at its Torrance, California, refinery
In the 1990s, the Mobil Oil Corporation acquired the rights to increase pollution by 900 pounds of sulfur dioxide per day at its Torrance, California, refinery. These rights were purchased from South Gate, California, at a price of $3 million after the latter acquired them from General Motors. As a result of this change, Mobil increased its output of air pollution in Torrance, California, by 900 pounds per day. Did pollution in California increase or decrease as a result of the sale of these pollution rights from South Gate to Mobil? Assume that South Gate is a corporation operating in California. Please explain.
Undoubtedly, the pollution would be increasing in California. Mobil is an oil corporation that needs specific rights for emitting the levels of pollution. The pollution is depicted as a negative externality. And the company is externalizing the loss by paying for the emission of pollution. Therefore, the company has an incentive to get involved in the production process freely. Hence, pollution would be rising for sure.
