Environmental Management Measures (EMM)

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8 Νοε 2013 (πριν από 3 χρόνια και 8 μήνες)

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1

Environmental Management
Measures (EMM)

by

Prof. A.T.M. Nurul Amin

2

Introduction

The first principle of economics is that
free market with competition produces
socially and environmentally desirable
results.

But many do not know that economists
warn that this will not be the case if
competition does not prevail in any
market.


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Economists also concede that free markets
are associated with three major inherent
problems. These are:

Imbalances and inequities


(Disparities in income distribution internationally,
interregional and interpersonally and gender
-
wise)

Ups and downs in economic growth and business
cycles


(Boom, bust, recession, recovery)

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Externalities


(Problem arising from non
-
counting of some
costs and benefits by individual consumer and
producer. Such costs and benefits are accrued
to a ‘third party’, i.e., other than the consumers
and producers who are directly involved in the
production and consumption of a good or
service).


5

Economists have developed theories
and policy tools/instruments
corresponding to the above problems.

For example, the whole sub
-
branch of
development economics

has developed
to address the particular issue of
imbalances and inequalities, particularly
in the developing countries.

6

Similarly,
macroeconomics

has grown
and flourished to deal with the issues of
unemployment inflation/price level
associated with growth cycles.

Fiscal policy, monetary policy and
exchange rate policy are key policy
instruments that are used for ensuring
macroeconomic stability.


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Likewise,
environmental economics

has
grown and flourished to address the issue of
environmental problems that arise


economists believe


because existence of
externalities, open
-
access resource and public
goods.

In this lecture, we limit our elaboration to the
last theme, i.e., how economists have
articulated the environmental problems and
developed corresponding policy instruments
to deal with the observed problems.

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Economists’ Articulation of
Environmental Problems

Three environmental problems that fare
prominently in economic analyses are:

Pollution.

Destruction of natural resources.

Free
-
riding of environmental resources.

The above identification of environmental
problems and the corresponding economic
concepts used for their analyses have led
economists to suggest that:

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For dealing with the problem of pollution,
analyzed by the theory of externalities,
environmental policy needs mechanisms to
INTERNALIZE EXTERNALITIES
.



For dealing with the problem of destruction of
natural resources, which is seen to take place
because of their open
-
access characteristics,
what is needed is:
ENSHRINING OF
PROPERTY RIGHTS
.



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For dealing with the problem of free
-
riding of
environmental resources, which is explained
by their public goods characteristics, what is
needed is to find a mechanism to
: INFUSE
PRIVATE GOOD CHARACTERISTICS

so that
pricing of such good is possible and thereby
free
-
riding can be curtailed, if not totally
stopped.


Problem




Analytical

Tool


Solution


Pollution

(air, water,
waste, noise)




Externalities


Internalization of
externalities


Destruction of
Natural
Resources
(forest, water
bodies, ecology)




Open
-
Access
Resources


Enshrining
property rights


Free
-
Rider
Problem

(clean air, water,
green area)


Public Goods


Infusing private
good
characteristics


Analytical Tools for Environmental Problems

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Some Details on Externalities, Open
-
Access Resources and Public Goods

Externalities

External Costs


Cost, which do not show up in a firm’s profit
-
and loss statement.


They are “external” because, although they are
real costs to some members of society, firms
do not normally take them into account when
they go about making their decisions about
output to be produced and prices to be set.

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Internalization of External Costs

(Negative Externalities)

EC


MC
s
= Marginal Social Cost

MC
p
=Marginal Private Cost

EC=External Cost

P
m
=Market Price


MC
s
= MC
p

+ EC


MC
p


P
m


Price, Cost


Q
2

Q
1


Output


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External Benefits

The significance of this concept arises from
the fact that when the use of an item leads
to an external benefit, the market
willingness to pay for that item will
understate the social willingness to pay.


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Internalization of External Benefits

(Positive Externalities)

MB
2
= Marginal benefit including EB

MB
1
=Marginal benefit without EB

EB=External Benefit

P
m
=Market Price


P
m


Price, Benefit


Q
1

Q
2


EB


MB
2


MB
1


Output


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Externalities by Type, Example and Corresponding
Policy Goals, Instruments and Their Expected
Results

Externality
type

Example


Policy goals


Policy
instruments

Expected
results

Positive
externality


Education
, health
Recycling

Promote/

expand the
output/

service

Subsidy


More
production of
such goods
and services.

Negative
externality

Pollution

Reduce/

restrict the
production
or service
that
generate
pollution

Tax/

charges


Less
production of
goods and
services that
generate
pollution

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Open
-
Access Resources

An open
-
access resource is a resource or facility
that is open to uncontrolled access by individuals
who wish to use the resource.

Examples are:


Pasture that is open to anyone to graze animals


Forest where anyone may go and cut wood or


Public park, open to free access (Field & Field 2000,
pp.76
-
79).


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Public Goods

It is a good that, if made available to one
person, automatically becomes available to
others.

Such goods do not have exclusionary
characteristics.

Examples:



(1)

Lighthouse


(2) Radio signal


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Note
: public goods will not have to be
owned by public (government) sector. A
public good is distinguished by the
technical nature of the good


the non
-
exclusionary characteristic


not by the
type of organization making it available.


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Environmental Management
Measures (EMM)

Comprised of three sets:

Regulatory Instruments (RIs)/CAC

Economic Instruments (EIs)/MBIs

Moral Suasion


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Regulatory Instruments (RIs)

Regulatory forms:

Laws

Licenses

Permits

Registration

Administrative guidelines

Directives

Codes of practices.

22

RIs

Regulatory instruments

Emission of effluent standards

Environmental quality standards

Product controls

Process and equipment standards

Planning and building controls

Extraction restrictions.

23

RIs

Three main types of standards are:

Ambient standards

Emission standards

Technology standards

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RIs

Advantages/disadvantages of standards can
be noted as:

Advantages of standards are:


Directness (clearly specified targets),


Conformity with ethical sense (pollution is bad, thus,
need to be stopped).

Disadvantages include:


Complexity (in measuring and monitoring),


Problematic (directness and unambiguousness may be
misleading)


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Economic Instruments (EIs)

While subsidy (to give incentive) and
taxation/pollution charges (to create
disincentive) are the two fundamental
policy instruments, market
-
based
economic instruments include:

(emission) charges

(Abatement) subsidies

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EIs

Market
-
creation


Tradable/transferable emission trade permits


Market intervention


Liability insurance

Financial enforcement

27

Moral Suasion (MS)

Basic principles of these measures are:

Reliance on voluntary compliance by polluters
motivated either by the thereat of adverse or
the prospect of favorable publicity

Environmental education and awareness
raising are key elements of any policy
designed around suasive measures.


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MS

Requirements for suasive measures to work:

Free flow of information

Right to know

Demand for quality environment

Recent development centering:

Voluntary environmental certification

Strategic environmental management


W
A
T
E
R


Environmental
Media

Focus in
Environmental
Policies



WATER





SANITATION




LAND




SOLID WASTES


AIR


NOISE
QUALITY


TRAFFIC
CONGESTION





Application of EMM

Spatial Scale of
Pursuing
Environmental
Policies


NEIGHBOURHOOD


COMMUNITY


METROPOLITAN


COUNTRY

HOUSEHOLD/
WORKPLACE


GLOBAL



REGION

Spheres of
Pursuing
Environmental
Policies


POPULATION

NATURAL
RESOURCES


TECHNOLOGY


CONSUMPTION


TRANSPORTATION