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

Side payments, 3 voters, A, B, and C, will decide by majority rule whether ...

3 voters, A, B, and C, will decide by majority rule whether to pass bills on issues X and Y. Every of the two issues will be voted on indiviually. The change in net profits (in dol

Collectivist enforcement, The coordination problem relates us to not only t...

The coordination problem relates us to not only the levels of activities like research and developments (R&D) and investments but also to the behaviour of institutions that charact

Policy agenda for the next decade, While getting introduced with various co...

While getting introduced with various concepts, it would strategically be unfair to venture in to the analysis of on going policies unless a reasonable conceptual coverage has been

What can we do then while aiming at the public policy, Q. What can we do th...

Q. What can we do then while aiming at the public policy? From the above, one task emerges immediately, that is of quantifying all economic and non economic effects of a certa

Personal income tax, How does it work? how is its basic structure?

How does it work? how is its basic structure?

Discuss basic features of international policy coordination, Discuss the ba...

Discuss the basic features of international policy coordination. There may be two sources of interdependence between national economic policies, club goods and horizontal spill

Regulations and competition policy - privatization, One of these is deregul...

One of these is deregulator or privatization of public enterprises or utilities. Deregulation is a world wide phenomenon. But experience of power failure in California and Mumbai r

Provide individuals with various ways of controlling , Basic floor plan: T...

Basic floor plan: There are no security guards on duty at any given time. There are three ATM's on site but none of them can see who comes and goes through the building. Cameras a

Flaws in conventional system - focus, Normal 0 false false ...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

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