A Classic Case of International Pollution With an Ideal Policy Solution
(Figure 12.5)

Figure 12.5 shows how we can determine the "right" amount of pollution, the amount that brings the greatest net gain to the world as a whole. The graph portrays Germany's benefits and Austria's costs from different rates of dumping waste into the Danube by a German paper mill. If left to itself, the German mill dumps as much as it wants into the Danube, ignoring the costs to Austria. It will pollute until there is no more that it wants to dump at zero cost. That will be at point A, with the paper company dumping 180 million tons of waste per year. Press "Show point A" to show the point on the graph. Point A represents a disaster for Austria, where the river damage rises along the marginal cost curve in the figure.
Press "Continue" when you are ready to move on. The "Reset" button will clear the graph.