Environmental Economics-Negative Externalities
Environmental economics may by be best defined as the branch of economics that deals with the environment and environmental issues and their relationship with economies. International, national and local policies that have to do with the environment are examined under environmental economics as regards to their influence on the economics of a particular region and sometimes even globally. This paper is concerned with the concept of negative externality or the external costs suffered by many groups of people as a result poor environmental practices by others in the process of their business activities. Focus is placed on air, water and soil pollution. The economic implications of the same are examined. A discussion son possible cost-benefit analysis strategy is done. The paper looks at possible policy solutions to the problems including environmental policy regulations, imposition of taxes and tariffs, clear definition of property rights and the implementation of tradable emission permits. Finally recommendations are given.
Pollution as a Negative Externality
External cost or negative externality in environmental economics refers to a situation where by individuals or groups not party to certain economic activities are forced to bear the non-price costs of those business activities. In environmental economics, those costs that are incurred through the environmental impact of certain regions and the resultant effects of those that live in that region and interact with that environment ( Burmingham and Davies 5).
Pollution is one of the greatest external costs suffered by populations globally. Pollution is a non-price costs or consequence that is borne by large groups of people largely as a result of activities related to other people’s business activities. Environmental Pollution mainly takes the form of air pollution, water pollution, and soil pollution. All these forms end up in one way or another contaminating an area of the environment that forces those who depend on it to bear the negative effects of the same. Sometimes it robs entire populations of habitats and sources of food and economic subsistence. Although those affected by the externality that is environmental pollution do not have to pay a monetary fee for such activities, many times the price paid will eventually impact the economy of an area indirectly. In this light, external cost has the potential to make some economic activities non-viable in the weight of external costs they burden people with.
Air Pollution
Air pollution is the introduction in to the atmosphere of various impurities that contaminate its natural composition, consistency and purity and eventually resulting in negative health implication for its users such as human beings, animals, plants and the entire environment, such impurities may include industrial or biological emissions (Hill 7).
Major air pollutants in the world today include but are not limited to: manufacturing facilities, waste incinerators, power plants, transport vessels such as motor vehicles, marine vessels, aerosol and other sprays, biomass waste emissions and drillers and most other economic activity that involves the emission of gaseous chemicals into the atmosphere. Most of these emitted gases are usually by products in the production of certain goods or in the obtaining of goods from their environments such as the drilling of oil. Gases emitted by vehicles also pollute the air. The release of these chemicals in to the air often interferes with its purity and usually bears negative health implications for animals and plants who inhale it and use it for their biological activities. Impure air many times compromises smooth biological functioning and result in decreased efficiency various natural processes in plants and animals, notably human beings. Polluting gases include sulphur oxides, nitrogen oxides, carbon monoxides, carbon dioxides, volatile organic compounds, toxic metals, ammonia compounds, radio-active pollutants and odors (Hill 118).
Major health issues related to pollution include: cardiopulmonary complications and diseases, such as pneumonia, asthma, heart attacks. It may include others such as stroke, cancer, various hormonal complications.All these are implications and costs forced on others by those involved in activities that head to air pollution and may be considered as external costs. Increased ill health results in decreased production and economic output from a population which compromises the economy of that area. The resultant high cost implications for healthcare are also costly for those economies.
Water pollution
Water pollution is the introduction of foreign harmful compounds into water systems such as rivers and oceans, which results in a harmful effect on all living organisms directly or indirectly dependent on those water sources. These impurities may include effluence from industries, manufacturing or other facilities, pathogens such as bacteria, viruses and other harmful microorganisms. Water pollution may also be in change of water temperature permanently or its acidity levels (Hill 117).These changes usually directly or indirectly affect the users of water in making it harmful for use. For human populations affected by water pollution, water is usually rendered unsafe to drink or use for hygienic purposes or for growing crops. Human ingestion of such water result sin diseases and many times results in fatalities. Many basic and economic human activities depend on the availability of water. Its availability dictates the potential of a place to become a human habitat or otherwise,. Its absence or pollution therefore has the potential to impact economies either making the population unproductive due to diseases, increase the costs of obtaining pure water, increase the costs of healthcare, decreased water-related food production (fish) or have an effect of water –related tourism among other effects. In this light, a cost-benefit analysis should be done by concerned stake holders in economic activities that involve water pollution.
Soil Pollution
Pollution of the soil involves the direct or indirect introduction of foreign usually man-made substances in the soil that contaminate it and decrease its efficiency in supporting healthy plant life ( Hill 10).Industrial effluence, agricultural chemicals and improperly disposed materials are the major soil pollutants. Major chemicals contained in pollutants include various harmful hydrocarbons, pesticides, toxic metals like lead, and industrial solvents (Hill 11 )
Soil pollution acts as an external factoring environmental economics by its direct or indirect effect on populations. Among the diseases that may come up as a result of soil pollution are congenital disorders and chronic conditions. Ingesting food contaminated by soil may result to mal formation of fetuses ( Hill 12). Negative externalities may be experienced through the health risks that it poses through direct contact with the soil or vapors from the soil contaminants, pollution of crops growing on the soil or indirectly by the contamination of water sources lying under the soil. This results in decreased productivity due to diseases as well as increased costs of uncontaminated food. Economies are affected by the financial and time costs incurred in cleaning up the soil.
Current state of affairs and scientific factors.
The state of pollution in the world has increased in some areas and decreased in others. However most countries and regions have prevailing environmental pollution issues that still need to be addressed. The increased concern about the need to curb environmental pollution both as a social issue and as an economic factor has continued to grow since world war two when it first came to light. Many countries have passed legislation in support of decreased environmental pollution activities both to keep its citizen safe and to protect their economies. However much still needs to be done. Scientific research is continually seeking fro better ways to curb environmental pollution nor to provide alternatives to environmental polluting activities (Burmingham and Davies 4 ). It is imperative that knowledge acquired from comprehensive studies be allied with current technological developments and economic studies to facilitate efficient mitigation of the pollution externality. The resultant solutions need to be contextualized and communicated efficiently to policy makers and stakeholders so as to make sure they appreciate the risks and rewards from pollution to their economies (Burmingham and Davies 14).
Economic Analysis of Pollution as a negative externality
Works Cited
Burningham, David and Davies John. Environmental Economics.Oxford: Heinemann Educational publishers, 2004.1-32. Print.
Hill, Marquita K.Understanding Environmental Pollution.Cambrideg: Cambridge University. Press, 2010.Print
Appendix 1
Graph showing negative externality accommodation in costing.
Market equilibrium only reflects on the private cost. The negative impact is not accounted or. As such the equilibrium is not true. The market is therefore inefficient. The point where total benefit is maximized is at the optimum, the ideal equilibrium.
