Wastewater treatment costs and outlays in organic petrochemicals: standards versus taxes with methodology suggestions for marginal cost pricing and analysis

With the methodology recommended by Baumol and Oates, comparable estimates of wastewater treatment costs and industry outlays are developed for effluent standard and effluent tax instruments for pollution abatement in five hypothetical organic petrochemicals (olefins) plants. The computational method uses a nonlinear simulation model for wastewater treatment to estimate the system state inputs for linear programming cost estimation, following a practice developed in a National Science Foundation (Research Applied to National Needs) study at the University of Houston and used to estimate Houston Ship Channel pollution abatement costs for the National Commission on Water Quality. Focusing on best practical and best available technology standards, with effluent taxes adjusted to give nearly equal pollution discharges, shows that average daily treatment costs (and the confidence intervals for treatment cost) would always be less for the effluent tax than for the effluent standard approach