A Classic Case of International Pollution With an Ideal Policy Solution
(Figure 13.5)

To get to the right solution, something must be done to make the German paper company recognize the costs of its pollution. The government could tax the paper company 400 euros for every ton it dumps into the river. The company will respond by dumping 80 million tons per year (at point B), since up to that 80 millionth ton the company's gain from putting each extra ton of waste in the river exceeds the 400-euro tax. Press "Show point B" to show the point in the graph.
The "Reset" button will clear the graph.