Read the policy setup below and answer the following policy analysis question. In your answer to the question, I want you to provide three elements. First, I want you to provide a thesis statement which is a single sentence expressing your position. Second, I want you to provide a point-from outline for your justification. Finally, of course, you must provide a response.

Policy setup: an environmental protection agency (EPA) is taking unprecedented action to protect the environment under a new framework that sets a maximum amount of pollutant released by the iron ore mining industry. The new environmental framework would ensure mining firms reduce pollution during all environmentally sensitive periods. The framework is based on scientific research, which has established pollution levels that are dependent on climatic conditions, and are deemed necessary to ensure sustainability. All mining firms - whether new or existing - will have to work together to comply with the framework by production iron ore within prescribed pollution limits.

Policy analysis question: as a senior economist working for the EPA, your job is to propose a policy which implements these research-based limits, and to discuss the advantages and disadvantages of your policy. For the purpose of this exercise, assume that the scientists have provided you with an estimate of the efficient quantity of the pollutant to be released into the environment given climatic conditions. The rule is really simple: in each year, the pollution stock should never exceed E. In other words, the policy may have to get tighter if the stock of pollution is already high, and you should be able to account for that. If you wish to think of this in a graphical way, you might want to draw a marginal damage curve which is horizontal and equal to zero until the pollution stock is E and then vertical from that point. In other words, your policy will be efficient as long as the pollution stock is less than or equal to E. However, I only ask you to consider cost-effectiveness. You may choose any type of policy you wish, but I would suggest that you concentrate on pollution standards, taxes, or transferable permits. You should discuss how your policy addresses the entry of new participants into the industry, how your policy affects existing participants, and what incentives to innovate are provided to firms.