Chapter 6 : The Market Approach

More like this

When did using factory farms become a widely used farming method, and what issues have occurred because of it (impacts on the environment and the animals etc.)?

by Adellina Sunseri

Output Devices

by Luke Hollands

Chernobyl

by Ansari Mohammed - T L Kennedy SS (2352)

Johannesburg, South Africa

by Joshua Hart

Chapter 6 : The Market Approach

Pollution Permit Trading Systems

Pollution Trading Systems in Practice

US has an allowance-based trading program to control sulfur dioxide emissions

Trading of greenhouse gas allowances are part of Kyoto Protocol

The systems will create pollution hot spots in the area where trading takes place

Potential for high administrative cost to keep records of trade and emissions

No tax revenues are generated

Trading system is flexible

Trading establishes the price of a right to pollute without government trying to search for a price

It is cost effective as MACs become equal for all firms

Pollution allowances

These are tradeable permits that indicated the maximum level of pollution that may be released

Pollution credits

These are tradeable permits issued for emitting below an established abatement standard

Establishes a market for rights to pollute by issuing tradeable pollution credits or allowances

Pollution Charge

There are 2 types :

Emission/Effluent Charge

Effluent charge in practice

London city imposes toxicity charge (T-charge) in certain zones on the usage of old cars

Some countries use effluent charges to control the noise pollution generated by aircraft

Cons

Firms might evade tax by illegally disposing pollutants

Monitoring costs potentially higher

Tax authority will not know where MACs are equal

Abatement statement is met

Cost-effective solution is obtained

MACs are equal

2 models to be analyzed:

Multiple polluter model

Single polluter model

Typically implemented through a tax

A fee imposed directly on the discharge of pollution

Product charge

Impose product charge as per unit tax on product

Fee added to price of pollution-generating product,which generates negative externality

Based on " Polluter-Pays Principle"(PPP)

Fee that varies with amount of pollutans released

Deposit/Refund Systems

Deposit/Refund Systems in Parctice

Other applications include systems used to promote responsible disposal of used tires,old cars and batteries

Are used worldwide

Assessing the model :

Pros

Help slow the use of virgin raw materials by improving availability of recycled materials

Requires minimal supervision by government

Promotes responsible behaviour

The deposit is intended to capture the MEC of improper waste disposal (IW) in advance

Targets the potential vs actual polluter

Market instrument that imposes an up-front charge to pay for potential damages and refunds it for returning a product for proper disposal or recycling