Economic Analysis of Pollution Essay Example | Topics and Well Written Essays - 750 words

Economic Analysis of Pollution - Essay Example Many individuals as well as international organisations have been involved in advocating for ethical ways of conducting human activities geared towards mitigating the effects of these activities to the environment. It is important to consider the fact that, economists have also been involved in this advocacy. This paper contrasts the relative merit of taxes, legal regulatory limits and tradable emissions in controlling pollution using an economic analysis. Taxes In an economics perspective, taxes can be used as mechanisms or tools for the control of pollution. Levies known as green taxes can be imposed in an attempt to prevent and as well mitigate the consequences of pollution. These taxes can also be referred to as environmental taxes. In definition, green taxes are defined as levies and can be imposed on industries and countries or nations that produce high levels of emissions. The extent of damage to the environment is a significant factor in considering and determining the amount of levies that a country should impose. Unleaded petrol and use of vehicles amounts to the highest levels of environmental pollution hence industrialised countries generate a higher amount of revenues from taxes imposed on these commodities. Commodities that have less impact on the environment in terms of emissions generate low or decreased amounts of revenue. Emissions in terms of green taxes are easier to monitor and quantify as compared to tradable permits (Norregaard and Reppelin-Hill, 2000). Imposing green taxes in these developed and industrialised countries have significantly contributed to the decrease in the amount of emissions that leads to the warming of the environment. In the industrial sector, green taxes have focused on levies imposed based on the amount of carbon dioxide produced by a specific industry. Due to the fact that it is very hard to quantify the amount or level of carbon dioxide produced by a certain industry, estimates are used. The higher the carbon diox ide produced and released to the atmosphere, the higher the taxes. This helps in discouraging industries to use fuels that generate large volumes of gases particularly carbon dioxide and subsequently adapt cleaner sources of energy. Studies done over the recent past have indicated the fact that imposing green taxes can change consumption patterns of most commodities. Imposing high taxes on unleaded petrol force individuals to change to cleaner fuels as they attract fewer taxes. This in the long run cuts significantly the amount of dangerous gases such as carbon dioxide in the atmosphere. Taxes and tradable permits have divergent merits. According to Norregaard and Reppelin-Hill (2000:7), â€Å"Taxes minimise ex-post efficiency losses if the marginal cost function is steeper than the marginal damage function, while tradable permits are better if the damage function is steeper† Tradable permits Some countries some as the US have adapted the incorporation of tradable permits in the fight against environmental pollution. In contrast to green taxes, permits do not attain better and enhanced results on pollution control as they encourage industries to connive. In general, tradable permits are used with the main objective of managing and regulating the use of substances that contribute to increase in the level of emissions in the atmosphere. It is important for countries adapting this system to ensure they assess the significance and objective of these tradable permits and the benefits they will bring to the management of the environment. Plans of actions also need to be implemented to observe and monitor these emissions to the atmosphere. Permits should not be granted in a manner that would lead to