By contrast, a regulatory approach that fixes the price of pollution instead of the quantity – say, by imposing a predetermined proportional tax rate directly on the amount of pollution emitted by the plant – is more forgiving in the face of this kind of uncertainty.
This approach leaves the scrubber-installation decision to the manager of the plant, who can figure out what the scrubbers cost before deciding how to proceed. For example, if the scrubbers turn out to be unexpectedly expensive, the plant manager can install fewer of them.