12: Environmental Protection and Negative Externalities
- Page ID
- 181244
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)- 12.0: Introduction
- This page discusses the controversial Keystone XL Pipeline, focusing on economic advantages and environmental risks. Supporters claim it boosts the economy and reduces foreign oil reliance, while critics warn of potential harm to water and ecosystems. The chapter highlights the tension between economic growth and environmental protection, comparing regulatory methods and providing historical pollution examples to illustrate global environmental management challenges.
- 12.1: The Economics of Pollution
- This page addresses learning objectives about externalities, equilibrium prices, and market failures, notably highlighting the U.S. progress in reducing pollution while growing economically from 1970 to 2020. It defines externalities and details how negative ones, like pollution, can lead to market failures by misaligning private and social costs, resulting in overproduction.
- 12.2: Command-and-Control Regulation
- This page discusses command-and-control regulation, a pollution control method initiated in the U.S. in the late 1960s. Although it has improved environmental conditions, it suffers from issues such as rigid regulations, lack of incentives for better performance, and political compromises that create loopholes. The text proposes that market-oriented tools may offer more effective pollution reduction strategies.
- 12.3: Market-Oriented Environmental Tools
- This page examines market-oriented environmental policies like pollution charges and marketable permits that incentivize firms to reduce emissions and trade pollution allowances. It underscores the significance of clearly defined property rights in managing externalities and conflict resolution among landowners.
- 12.4: The Benefits and Costs of U.S. Environmental Laws
- This page evaluates the economic implications of environmental protection, highlighting the balance of compliance costs, which may exceed $200 billion yearly, against the substantial benefits of cleaner air and water, showcasing a favorable cost-benefit ratio.
- 12.5: International Environmental Issues
- This page emphasizes the necessity of global collaboration to tackle environmental challenges such as climate change and biodiversity loss, noting the differing priorities of high- and low-income countries. It references the Paris Climate Agreement's goal of CO2 reduction and its challenges, particularly under the Trump administration.
- 12.6: The Tradeoff between Economic Output and Environmental Protection
- This page explores the tradeoff between economic output and environmental protection using the production possibility frontier (PPF), highlighting the need to evaluate choices carefully. It specifically addresses the Keystone XL project, discussing the balance of economic benefits and environmental costs. The summary notes that various administrations have approached this issue differently, reflecting the complexities of measuring these trade-offs effectively.
- 12.7: Key Terms
- This page defines key economic concepts concerning externalities and market failures, detailing their impact on third parties and biodiversity. It distinguishes between negative and positive externalities, discusses international externalities, and explores marketable permit programs.
- 12.8: Key Concepts and Summary
- This page discusses the environmental impact of economic production due to externalities, highlighting that negative externalities harm production incentives and positive ones lead to underproduction without compensation. It critiques command-and-control regulations for their inflexibility and contrasts them with market-oriented approaches like cap and trade. While U.S.
- 12.9: Self-Check Questions
- This page explores exercises on externalities, pollution control policies, and their market implications, including examples of positive and negative externalities, supply curve shifts, and the impact of regulations on prices. It contrasts command-and-control with market incentive approaches and analyzes marginal costs and benefits of pollution abatement, alongside international agreements framed in a prisoner’s dilemma.
- 12.10: Review Questions
- This page covers externalities in economics, including definitions and examples of positive and negative externalities, private vs. social costs, and unregulated market dynamics. It discusses command-and-control regulations and their inefficiencies, while exploring pollution charges, marketable permits, and property rights.
- 12.11: Critical Thinking Questions
- This page discusses environmental economics, focusing on the valuation of carbon emissions' external costs, the effectiveness of command-and-control pollution policies, and the protection of endangered species like elephants. It questions the feasibility of zero pollution as an optimal goal, the rationale for mandatory recycling, and examines the correlation between high pollution and economic growth in affluent nations.
- 12.12: Problems
- This page examines market equilibrium concerning products with negative externalities, particularly second-hand smoke from cigarettes and environmental pollution. It emphasizes external costs that aren't captured in market prices, advocating for a socially optimal output and price. The analysis includes tables on manufacturing externalities, sewage emissions, and pollution reduction vs. economic output, while questioning efficiency and policy strategies for addressing environmental impacts.