Quantity of pollution abatement, Public Economics

Assignment Help:

Quantity of Pollution Abatement

Let us explain the position through the below diagram using the typical economics analogy. On the x-axis we measure pollution abatement (that is, removal of pollution) by the factory and on y-axis we measure the level of pollution cost. The nearby community faces a downward sloping pollution abatement cost curve (AB).

It indicates that as pollution abatement increases (that is, more amount is pollution is removed or, less amount is pollution is present in the river), there is a decrease in the pollution cost to the community. Thus, when pollution abatement reaches the level 'OB' (that is, all the pollutants are removed from the river), the pollution cost to the community is zero. On the other hand, the factory has an upward sloping pollution abatement cost curve indicating the increasing marginal cost of abatement (OD). When pollution abatement is zero, no pollution cost is borne by the factory.

The factory would like to reduce its pollution abatement expenditure while the community would like the pollution level to be zero. Let us take the situation that the community is holding the property rights for clean environment. Hence, the community can dictate terms to the factory about the pollution load to be released to the river. In this situation, the factory is generating pollution and creating problems for a community that demands zero pollution. For various welfare reasons, the factory cannot be closed down and financial constraints have made the factory to apply limited pollution abatement measures.

In this context, negotiation is the only solution to resolve the conflict. In the negotiation, let us assume that the community can accept a slightly lower Level of pollution emission 'n'. At this level of pollution abatement, however pollution cost to the community is 'h' and pollution cost to the factory is 'g'. Hence, through negotiation, the factory is willing to give compensation up to the extent 'gh' to the community. The level of abatement reached through the negotiation in this case is anywhere between the optimum (t) and the maximum (B).

 

1200_Quantity of Pollution Abatement.png

Diagram: Quantity of Pollution Abatement

 

Let us take the other situation where factory has the property rights. Since the polluter has the property rights, the starting point for negotiation is zero level of pollution abatement. Obviously, for welfare reasons, the community would like the pollution level to be reduced by the factory, which in turn implies higher pollution abatement expenditure by the factory. Suppose the community wants the pollution abatement to be 'm'. At this level, the pollution cost to the community is 'f while pollution abatement cost to the factory is 'e'. It is, therefore, viable to the community to pay compensation to the factory to the extent of 'ef'.

We observe from the above diagram that it is expensive to abate pollution beyond the level 'q'. The government can regulate pollution abatement to be fixed at the level 'q' through command and control measures. Otherwise, it can impose taxes on the polluter (the factory, in this case) to the extent’t’, which is equivalent to the pollution cost on the community. The Coasean principle, however, provides an alternative to pollution tax. Here externality can be internalized through well-defined property rights and compensation.


Related Discussions:- Quantity of pollution abatement

Nations of the commonwealth, The international monetary fund and the World ...

The international monetary fund and the World Bank are the main lending financial institutions that give assistance to developing nations in the restoration of their economy. Wh

Journal of liberalism, how to make summarize the basic tenets of the argume...

how to make summarize the basic tenets of the arguments in the case of Mark Davis 2010 of journal of liberty?

Explain hoe perception affected theory symbolic interaction, Assignment Th...

Assignment This assignment will provide you with insight on how others perceive you. It will be particularly useful in situations in which you find differences in self-other resul

Enactment of social norms into laws, Suppose there is certain social norm. ...

Suppose there is certain social norm. Its enactment into statutory law lowers people's private cost of its enforcement because it creates the possibility that violation of norm wi

Environment economic, A dam is proposed on a stretch of wild river, a river...

A dam is proposed on a stretch of wild river, a river that is currently used for recreation. The dam will generate electricity. The dam will have a useful life of 50 years, after w

Distance education, strugling with research variables and problem

strugling with research variables and problem

Cable tax to the satellite tax, According to estimates by Goolsbee and Petr...

According to estimates by Goolsbee and Petrin (2004), the elasticity of demand for basic cable service is ?0.51, and the elasticity of demand for direct broadcast satellites is ?7.

Importance of heterogeneity, Q. Importance of heterogeneity? The import...

Q. Importance of heterogeneity? The importance of heterogeneity for public policy process can be summarized in two propositions. - Heterogeneity or conflict of interests is

Prepare a news release announcing the launch of network, The news release i...

The news release is the ‘granddaddy' of public relations writing vehicles. (a) As a PR student, show the main points you would consider when attempting to write an effective ne

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd