Environmental Standards Versus Emissions TaxesIn both panels, MBA shows the marginal benefit of pollution to plant A and MBB shows the marginal benefit of pollution to plant B. In the absence of government intervention, each plant would emit 600 tons. However, the cost of reducing emissions is lower for plant A, as shown by the fact that MBA lies below MBB. Panel (a) shows the result of an environmental standard that requires both plants to cut emissions in half; this is inefficient, because it leaves the marginal benefit of pollution higher for plant B than for plant A. Panel (b) shows that an emissions tax achieves the same quantity of overall pollution efficiently: faced with an emissions tax of $200 per ton, both plants reduce pollution to the point where its marginal benefit is $200.