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Increasing the costs of polluting will discourage polluting, and will provide a "dynamic incentive", that is, the disincentive continues to operate even as pollution levels fall. A pollution tax that reduces pollution to the socially "optimal" level would be set at such a level that pollution occurs only if the benefits to society (for example ...
A visual comparison of the free market and socially optimal outcomes. It is possible to use environmental economics to determine which level of pollution is deemed the social optimum. For economists, pollution is an "external cost and occurs only when one or more individuals suffer a loss of welfare".
From an economic aspect, congestion is a negative externality, for drivers can affect other drivers' costs of travel, such as costs of time, miles, or gasoline. [28] Therefore, in 1920 A. C. Pigou published the first edition of The Economics of Welfare and tried to solve the congestion problem.
Abatement cost is the cost of reducing environmental negatives such as pollution. Marginal cost is an economic concept that measures the cost of an additional unit. The marginal abatement cost, in general, measures the cost of reducing one more unit of pollution. Marginal abatement costs are also called the "marginal cost" of reducing such ...
Pollution control costs have an impact at the margins, where they exert some effect on investment decisions and trade flows. Pollution control costs are important enough to measurably influence trade and investment. Countries set their environmental standards below socially-efficient levels in order to attract investment or to promote their ...
Market-based instruments are also referred to as economic instruments, price-based instruments, new environmental policy instruments (NEPIs) or new instruments of environmental policy. Examples include environmentally related taxes , charges and subsidies , emissions trading and other tradeable permit systems, deposit-refund systems ...
Free-market environmentalism argues that the free market, property rights, and tort law provide the best means of preserving the environment, internalizing pollution costs, and conserving resources. Free-market environmentalists therefore argue that the best way to protect the environment is to clarify and protect property rights.
Other market-based approaches include baseline-and-credit, and pollution tax. They all put a price on pollution (for example, see carbon price), and so provide an economic incentive to reduce pollution beginning with the lowest-cost opportunities. By contrast, in a command-and-control approach, a central authority designates pollution levels ...