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Market based instrument for pollution control
- 1. Market based instrumentfor pollution control Submitted by- Abuzer Ansari M.Sc. Final Roll No. 36 IES, KUK 1
- 2. CONTENT 1. Introduction 2. Market,Government and instrument for pollution control i) Command and control ii) Economic instrument a) Price based instrument b) Quantity based instrument iii) Mixed instrument iv) Community action or people participation 3. India’s industrial pollution 4. Institution for industrial pollution abatement in India 5. Penalties for certain acts 6. Case study 7. Conclusion 8. References 2
- 3. INTRODUCTION Environment pollution isan economic externalities caused by the activities related to production and consumption of good and services in the economy. Positive Externality; e.g-Fruits farming. Negative Externality; e.g- Loud music. Pigou, 1920; Dales, 1968; Baumol, 1972; 3
- 4. Market, Government andinstruments for pollution control i) Command and control ( non-market policy instrument). ii) Economic instrument (market based instrument). 4
- 5. Command and control TheCAC instrument are in the form of- -fines, -penalties and -threats of legal action for closure of the factories, imprisonment of the owner. They can be used either for- -Facilitating -environment management -Realization of specific environmental standards. 5
- 6. Economic Instruments Economic instrumentscan be divided into: price based instrument, quantity based instrument and 6
- 7. Price based instrument Theprice based instrument were first suggested by Pigou in 1920. -In the form of taxes and subsidies. Example: Pollution taxes on a polluting commodity either through its production or consumption, or on a polluting input. 7
- 8. MCA MD B O E* Em R S MCA (MarginalCost of abating pollution) MD (Marginal damage cost) E t 8
- 9. Quantity Based Instrument D.H.Dales (1968) has suggested an alternative to the pollution tax, a system of tradable pollution right for the management of environment. Example: In case of air pollution. 9
- 10. A B C DEO MCA MCA t Emission MixedInstruments 10 Mixture of both command and control and economic instrument.
- 11. Community action orpeople’s participation The Coase Theorem is a proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own. 11
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- 13. India’s Industrial Pollution •India’s rapid industrialization, since mid-fifty has created enormous pressure on environmental resources. • By the time government of India has realized the need for environmental regulation as an integral part of it’s strategy for rapid industrialization. • All project above a certain size and located in the environment fragile areas have been asked to obtain the clearance from the MoEF. 13
- 14. Institutions for IndustrialPollution Abatement in India The enactment of environmental laws, • Wildlife Protection Act, 1972; • Water (Prevention and Control of Pollution) Act, 1974;amended in 1986; • Water (Prevention and Control of Pollution) Cess Act,1977;amended in 1988; • The Forest (Conservation) Act, 1980; • The Air (prevention and Control of Pollution) Act, 1981; • The Environment (Protection) Act, 1986; • Motor Vehicle Act, 1938, amended in 1988; • The Public Liability Insurance Act,1991. 14
- 15. Penalties for certainActs • Whoever – -damages any works or property belonging to the Board, or “shall be punishable with imprisonment for a term which may extend to three months or with fine which may extend ” 15
- 16. CASE STUDY The DebateOver Technology Policy – Government intervention in the economy that aims to promote technology-enhancing industries • Patent laws are a form of technology policy that give the individual (or firm) with patent protection a property right over its invention. • The patent is then said to internalize the externality. • The patent system gives firms a greater incentive to engage in research and other activities that advance technology. 16
- 17. CASE STUDY Why IsGasoline Taxed So Heavily? • Why are gasoline taxes so common? • They are a Pigovian tax aimed at correcting three negative externalities: – Congestion – Accidents – Pollution • The tax makes the economy work better. 17
- 18. Conclusion • In theera of economic and industrial development it is very important to implement market based instruments to curb the menace of environmental pollution. Better enforcement of environmental regulations will help to improve the overall environment of the country. 18
- 19. References • Baumol, W.J., and W. E. Oates. 1988. The Theory of Environmental Policy. Cambridge: Cambridge University Press. • Coria, J. 2009. “Environmental Policy, Fuel Prices and the Switching to Natural Gas in Santiago, Chile.” Ecological Economics 68 (11): 2877–84. • Montgomery, W. D. 1972. “Markets in Licenses and Efficient Pollution Control Programs.” Journal of Economic Theory 5 (3). • Sterner, T. 2003. Policy Instruments for Environmental and Natural Resource Management. Washington, DC: RFF Press. 19
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