Chaper 13 Flashcards
We benefit from the environment in three ways:
As an amenity to be enjoyed.
As a source of primary products.
As a place where we can dump waste.
There are various factors that are helping to reduce environmental degradation
Technological developments.
Increased price of non-renewable resources.
Public opinion.
Sustainability
the ability of the environment to survive its use for economic activity.
We can identify four different approaches to the environment and sustainability
The free-market approach.
The social efficiency approach.
The conservationist approach
The Gaia approach
The conservationist approach
maintenance of the environment is seen as an ethical constraint on human activity.
The Gaia approach
the respect for the rights of the environment to remain unharmed by human activity. Humans should live in harmony with the planet and other species. We have a duty to be stewards of the natural environment so that it can continue to be a self-maintaining and self-regulating system
The market fails for various reasons
Externalities – MSC > MC to the polluter. The failure to the market system to equate MSC and marginal social benefit is due to either consumers or firms lacking the appropriate property rights.
The environment as a common source.
Ignorance – people causing environmental damage without even noticing it.
Intergenerational problems. The environmentally harmful effects of many activities are long term, whereas the benefits are immediate.
Three types of environmental policy
Those that attempt to work through the market by changing property rights or by changing marker signals.
Those that involve the use of laws, regulations and controls.
Those that attempt to combine the approaches.
Market-based policies
The policies that a government adopts to reduce pollution will depend on its attitudes towards sustainability.
Environmental charges
charges for using natural resources (water) or for using the environment as a dump for waste.
Green tax
a tax on output designed to charge for the adverse effects of production on the environment. The socially efficient level of green tax is equal to the marginal environmental cost of production.
command-and-control (CAC) systems
the use of laws or regulations backed up by inspections and penalties for non-compliance
There are three approaches to devising CAC:
Technology-based standards
Ambient-based standards
Social-impact standards
Technology-based standards
pollution control that requires firms’ emissions to reflect the level that could be achieved from using the best available pollution control technology.
Ambient-based standards
pollution control that requires firms to meet minimum standards for the environment.
Social-impact standards
pollution control that focuses on the effects on people.
voluntary agreements (Vas)
Vas will be helped if:
Companies believe that this will improve their image with customers and hence improve sales.
There is an underlying threat by the government of introducing laws and regulations should voluntary agreements fail.
There are financial incentives.
A policy measure that has grown in popularity in recent years is that of tradable permits, also known as cap-and-trade system
firms are issued or sold permits by the authorities that give them the right to produce a given level of pollution. Firms that do not have sufficient permits to match their pollution levels can purchase additional permits to cover the difference, while those that reduce their pollution levels can sell any surplus permits for a profit.
Grandfathering
where the number of emission permits allocated to a firm is based on its current levels of emission. A major crititsm on this method is that it seems unfair on those firms that have already invested in cleaner technology.
