Kajikinos Internet Explorer Firefox Chrome. Specific functional forms are used so that calculations are transparent and easy to follow. It is about the way human decisions affect the quality of the environment; about how human values and institutions shape our demands for improvement in environmenfal quality; and, most especially, about how to design effective public policies to bring about these improvements. Environmental Economics — Barry C. Field, Nancy D. Olewiler — Google Books New material is added to update environmental policy, especially policies to mitigate the emissions of greenhouse gases and the use of economic instruments such as carbon taxes and emission trading.
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Environmental regulatory policies such as taxes, subsidies, and transferable discharge permits are somewhat less decentralized because they involve more government intervention in the form of setting tax rates, subsidy levels, or the number of permits to trade.
However, they still allow economic agents to decide for themselves how they wish to respond to the policy—for example, how much to reduce emissions. Environmental standards are a very centralized policy: governments set the emission level and polluters have no options but to meet the standard or face penalties for non-compliance. We start with the techniques that are at the decentralized end of the continuum from decentralized to centralized, then examine policies involving more government involvement in the chapters that follow.
Consider a simple example. Suppose there are several industrial plants around the lake. One is a food-processing plant, and the water of the lake is an important input in its operation. The other is an industrial operation that uses the lake for waste disposal. How can the pollution damage suffered by the first firm be balanced with the abatement costs of the second?
A very decentralized approach to finding the efficient level of ambient water quality in the lake is simply to let the two plants work it out between themselves. They might do this either through informal Barry C. A more centralized approach would involve government involvement—ranging from levying taxes on waste discharge to setting water-quality standards. Decentralized approaches can have several advantages over other types of public policy: The parties involved are the ones producing and suffering the environmental externalities.
They therefore have strong incentives to seek solutions to the environmental problem. The people involved may be the ones with the best knowledge of damages and abatement costs and therefore best able to find efficient solutions. Property rights must be defined and distributed before any sort of decentralized process can occur.
In the case of the environment, the basic decision that must be made by society through its governments and legal system is who should have the right to environmental quality. As you might expect, it is difficult to define this sort of right. But the basic issue is whether people have the right to a particular level of environmental quality or whether those who discharge wastes can do so freely. Once this decision is made, the next decision is how rights will be protected: through liability laws or property rights.
We begin with liability laws because they are familiar to most people. Liability Laws Most people have an intuitive notion of liability and compensation. To be liable for some behaviour is to be held responsible for whatever untoward consequences result from that behaviour. Compensation requires that those causing the damage compensate those damaged in amounts appropriate to the extent of the injury.
Questions of liability and compensation are usually worked out in the courts. The party claiming damage proceeds against the party it believes to be responsible, and judges and juries decide according to whatever provisions of common and statutory law are applicable. The courts will also decide the value of the damages. One approach to environmental issues, therefore, is to rely on liability laws.
This would work simply by making polluters liable for the damages they cause. The purpose of the laws is not just to compensate people after they have been injured, though that is important. The real purpose is to get would-be polluters to make careful decisions.
Knowing that they will be held liable for environmental damages in effect internalizes what would otherwise be ignored external effects. An example illustrates the principles involved. Example: Chemical effluent damages fishery A chemical factory discharges waste products into a river. These wastes kill many salmon that are swimming upstream to spawn. While there will no doubt be other ecological damages from the chemical effluent, we focus on those of the fishery.
Let E be tonnes of chemical effluent discharged per month. Then the marginal damage to the fishery measured in terms of lost salmon stocks is shown by the MD function. The chemical factory can reduce its effluent flows by treating its waste products. If no emissions are controlled, MAC will equal zero and the level of emissions will be 80 tonnes per month.
Barry C. Imposition of liability will provide an incentive for the chemical factory to reduce its emissions. They will minimize their total payments of damage compensation plus total abatement costs if they release effluent at the socially efficient level of 50 tonnes per month.
How does liability for damages affect pollution levels? Suppose first that there is no liability law that holds polluters responsible for the damages they inflict. The chemical factory discharges 80 tonnes per month. Call this amount E0. At E0, the salmon fishery is incurring total damages TD equal to the total area under the MD curve from 0 to 80 tonnes.
The effect of the law is to internalize the environmental damages that were external before the law. They now become costs that polluters will have to pay, and so will want to take into account when deciding on their emission rate. Total damages are therefore the area of the triangle under the MD curve. Will the chemical factory change its emissions levels in response to liability laws? The polluter can reduce its compensation payments by reducing emissions.
The factory then incurs abatement costs as shown by its MAC curve as it reduces its emissions. But as long as the marginal abatement costs are less than marginal damages, the chemical factory will have an incentive to move to the left; that is, to reduce its rate of emissions.
A system of decentralized courts and liability laws that would permit those damaged by pollution to seek compensation for damages suffered is what is required.
Steps: 1. This is a problem at the end of the chapter. Theoretically, the existence of liability laws appears to address the incentive question—getting people to take into account the environmental damages they may cause—as well as the question of compensating those who are damaged.
This would be discovered as a result of the interactions between polluters and those damaged in court. Both sides would present evidence and claims that, assuming the court is impartial, would lead to something approaching the efficient level of emissions.
To recap, liability laws can lead to the socially efficient level of pollution because they provide an incentive for polluters to reduce emissions so as to minimize their total costs—total abatement costs plus compensation to pollutees. In common-law countries such as Canada outside of Quebec , the United States, and the United Kingdom, doctrines of nuisance and liability have been developed through the evolution of court decisions.
This law now recognizes the difference between strict liability, which holds people responsible for damages regardless of circumstances, and negligence, which holds them responsible only if they did not take appropriate steps to avoid damage.
A firm disposing of hazardous materials might be held strictly liable for damages done by these wastes. Thus, any damages that resulted, regardless of how careful the firm had been in disposing of the waste, would require compensation.
On the other hand, negligence would hold it responsible only if it failed to take appropriate steps to ensure that the materials did not escape into the surrounding environment.
In civil-law countries and jurisdictions, such as Quebec, liability requirements may be written into the appropriate parts of the code. And in any country environmental laws may specify conditions under which polluters may be held liable for damages.
Several international conventions have been devoted to specifying the liability requirements of companies whose tankers release, accidentally or not, large quantities of oil into the sea. One particularity of oil tanker spills is that it is very difficult to Barry C. It is an episodic emission, so there is no continuous flow to measure, and spill probabilities depend on many practices navigation, tanker maintenance, etc. Millions of litres of oil were released into the ocean before was able to stop the flow of oil.
While polluter behaviour is extremely difficult to monitor, we nevertheless would like to know that the polluters have undertaken all appropriate steps to reduce the probability of accidents. To provide the incentive for this, the most appropriate response may be to rely on a system of strict liability. The critical factors in a liability system are where the burden of proof lies and what standards have to be met in order to establish that proof.
In Canada, those who believe they may have been injured by pollution must file an action within a specified time period, and then in court must establish a direct causal link between the pollution and the damage. This involves two major steps: Burden of proof requires injured parties to show 1. Both steps are difficult because the standards of proof required by the courts may be more than current science can supply.
Consider the first step. Most chemicals, for example, are implicated in increased disease only on a probabilistic basis; that is, exposure to the substance involves an increased probability of disease, not certainty. In parts of rural Ontario, contamination of well water was estimated by some epidemiologists to have contributed to excess cases of leukemia in the areas affected.
But under traditional standards of proof, a plaintiff could not conclusively prove that a specific cancer was caused by the water contamination. In other words, without being able to show explicitly how the polluting material operated in a particular body to produce cancer, the plaintiff cannot meet the standard of proof historically required in our courts.
But in many cases this direct linkage is unknown. In Montreal or Toronto, which specific industrial plant produced the SO2 molecules that a particular person may have breathed?
In cities and towns that take their drinking water from Lake Ontario, which specific companies were responsible for the chemicals that showed up in the water supply? Without being able to trace a polluting substance to specific defendants, those who have been damaged by it may be unable to obtain compensation.
This brings up an additional problem with using the legal system to address environmental problems. If people Barry C. This is the legal doctrine of standing. A private citizen may bring suit on environmental cases if that person is able to show that he or she is in fact being damaged by the activity in question. Consider some of the following hypothetical situations. People in Victoria pollute the waters of their harbours, but may residents in Edmonton claim that they have been damaged?
If fishers in Newfoundland and Labrador exhaust the cod stock to support their families, can people in Winnipeg justifiably claim that they have been damaged? For these hypothetical cases, it would be unlikely that standing would be granted by the courts, because it would be difficult to show that individuals in a distant city were damaged.
However, a resident of Victoria who operates a tourist business that has been adversely affected by the presence of sewage in Victoria waters would be more likely to be granted standing. A person may feel worse off if fish stocks have been depleted or oceans polluted. They might even be willing to pay some dollar amount to help reduce pollution.
Free Textbooks — Environmental Economics Canadian edition by Barry...
Togar Internet Explorer Firefox Chrome. The emphasis is on links between theory and policy, with more Canadian examples. Canadian case studies bring the real world into the text. Data on environmental indicators is provided to not only provide a snapshot of the state of the environment, but also to facilitate discussion. Economic Connect is available for students to purchase separately, or available as an option to package with the print text.
ENVIRONMENTAL ECONOMICS FIELD AND OLEWILER PDF