Question that Ms J posted to us on 130712.

With reference to examples. how sustainable are the national efforts to reduce pollution compared to international efforts?

 

1. Environmental Economics and the Economics of Pollution Control

Environmental economics views the real economy in which we all live and work as an open system. This means that in order to function, the economy must extract resources (raw material and fuel) from the environment, process these resources, and dispose of large amounts of dissipated and/or chemically transformed resources back into the environment. The process starts with the extraction of resources, which can be exhaustible (fixed in overall quantity) or renewable ( resource grows through time). Pollution is waste that has been disposed off in the air, in water or on land, and that reduces the value of those resources in alternative uses. Resource depletion and environmental pollution are key factors in determining the natural capital of a nation and achieving sustainable development.
 Environmental economics uses cost-benefit thinking to deal with environmental problems and issues. Benefits and damage assessments are used to integrate the un-priced but valuable functions of natural environments into cost-benefit analysis of real world projects, and to illustrate the kinds of economic damage done to national economics by resource depletions and pollution.  
Empirical evidence indicates that after substantial amount of polluting emissions have been reduced, extra waste reduction is much more costly than previous reductions. There is a point beyond which the costs of further reducing pollution by far exceeds the increase in social benefits and what people are willing to pay. The benefits of pollution control are measured by the reduction in damages caused by pollution to human health, and to material, natural and agricultural resources.

2. Mechanisms to achieve pollution reduction

Production or consumption of goods and services often results in costs or benefits to people other than the buyers and sellers. For example, if an industry disposes of wastes in a stream, it imposes costs to people who want to use the stream for other purposes, such as drinking water. People who live in that municipality will have to pay to clean up the water if they want to drink it. The cost of cleaning the stream is a hidden cost of the production of goods by the industry. This hidden cost, which will be assumed by taxpayers, is referred to in economic terms as a negative externality.
Free market transactions are usually unregulated in the sense that there is no mechanism for charging polluters a fee to correct for the damage done by their emissions. Once society has decided on an acceptable level of environmental quality, it is necessary to adopt measures that will change the behavior of producers and consumers. This could be achieved through government intervention, by setting command and control regulations and market-based incentives.
For example, air pollution episodes in major cities across the United States, led to the United States government to the establishment of strong emission standards for industry and automobiles. The Clean Air Act of 1970, empowered the federal government to set emission standards that each state was required to enforce. The Clean Air Act was revised in 1977 and in 1990 to include incentives to encourage companies to lower emissions of chemicals responsible for the production of acid rain. The Act today identifies 189 pollutants for regulation.
Similarly, by early 1970s water pollution had reached crisis proportions in the United States. Congress responded in 1972 by passing the Clean Water Act, whose main objective was "to restore and maintain the chemical, physical and biological integrity of the Nation’s waters." "In order to achieve this objective it is hereby declared that, consistent with the provisions of this Act —

(1) it is the national goal that the discharge of pollutants into the navigable waters be eliminated by 1985; (2) it is the national goal that wherever attainable, an interim goal of water quality which provides for the protection and propagation of fish, shellfish, and wildlife, and provides for recreation in and on the water be achieved by July 1, 1983;
(3) it is the national policy that the discharge of toxic pollutants in toxic amounts be prohibited."

It should be noted that in the case of air and water pollution, the damage is done because they are open access resources. This is why the phenomenon of global climate change has come about, which has motivated governments to act.

Regulatory and Incentive-based Policies
The techniques used by regulatory agencies, such as the Environmental Protection Agency (EPA), to control pollution range from charges for the right to pollute to regulations that impose limits to the amount of a pollutant. Among these are the following:
Emission Charges
Emission Charges are prices established for the right to emit a unit of a pollutant.
Example: In the United Sates industrial polluters pay effluent fees for the right to dump waste in municipal water treatment plants.
Advantage: Directly internalizes a negative externality by pricing the use of the environment to dispose of waste.
Emission Standards
Limits established by government on the annual amounts and kinds of pollutants that can be emitted into the air or water by producers or users of certain products.
Example:
EPA places limits on the number of grams/mile of hydrocarbons, nitrogen dioxide and carbon monoxide emitted per automobile. The automobile industry satisfies these standards by equipping cars with catalytic converters. In turn, this device raises the cost of cars.
Disadvantages:

- Allow emission of less than the standard free of charge;
- Firms are restricted in the method of compliance;
- Does not take into account differences among firms;
- Does not take into account differences among regions.

Pollution Rights
A government-issued permit allowing a firm to emit a specified quantity of polluting waste.
Example: Michigan's Air Emissions Trading Program.
Advantages:

- Pollution permits are tradable at free market prices.
- Regulatory authorities can control the amount of pollution by limiting the number of certificates.
- Provides a choice: purchase permits and pollute or reduce pollution and save the cost of permits.
- Provides an incentive to reduce emissions in order to sell previously purchased pollution rights.

  3. Reducing Pollution at the Global level

We have addressed techniques to control environmental pollution at the national level. In some instances, however, pollution is the result of activities at the global level and nations may be required to implement international agreements that address current pollution practices. As environmental problems become global in scope, international cooperation is needed to solve them. International and regional organizations may play a key role in developing a consensus on what types of collective action should be pursued. Although the role of international organizations is extremely important, one should not forget that environmental problems require action at the national and local levels.
An example of a global environmental issue is the depletion of the stratospheric ozone layer, which will increase exposure to solar UV radiation, thereby increasing the incidence of cancer and cataracts.