What is a rational environmental policy? Which value does a certain environmental quality have to society? Which are society's costs for obtaining or maintaining this quality? In lack of market values for environmental services, ambient standards for the quality of the environment have been introduced. When deciding upon these standards, a special problem is to determine which emissions can be allowed if a desired environmental quality is to be maintained.
In the late 1960's a more active environmental protection policy was initiated in Sweden. The Environment Protection Board was set up in 1968, and more stringent emission standards were enforced. Since 1969, the government has subsidized emission control investments in order to reduce the economic consequences to the firms of the raised requirements.
The present study sheds light on some of the environmental policy problems by analyzing the costs of reducing discharges of industrial residuals. The study covers the first four years, 1969-1973, of the Swedish subsidy program. It is limited to the two industries which have received the largest subsidies, i.e. the iron & steel industry and the pulp & paper industry.
