General Environmental Pollution and the KyotoProtocol

What is environmental pollution?It force out be defined as the act of environmental contamination, usually caused by man-made wastes.The environment and Opportunity CostAt first thought, these two concepts seem to be fairly unrelated.However, both of these concepts come surmount to one single principle Scarcity. As economists, we have seen that society tries to make the best arrangements between various resources in order to gain maximum benefit. Unfortunately, these arrangements which bring home the bacon maximum benefit to an individual or planetary house can have detrimental side events to some other individuals and/or firms.Environmental problems would not originate if there was a superabundance of resources. There would be no worries about running out of supplies. Most waste products could be easily and harmlessly outspread if there were boundless oceans and atmosphere. Many of our environmental problems occur simply because we have tended to treat world resources as i f they were limitless.Scarcity forces upon us the necessity of making choices by comparing alternatives.We are all aware that if limited resources are fully employed, an increase in the output of one commodity or service can only be achieved by having less of another more resources being used to clean-up the environment will mean fewer resources available for consumer goods.(Explain opportunity woo and trade off)(Explain solecisming of PPC inwards in long run due to unhealthy workforce and hence less productivity of workforce should we locate at A or at B? Most developed nations would aim for B whilst most developing nations would really mother at A)(Explain minimum usance limited why points below/above are unachievable)Economic Causes of Environmental PollutionEnvironmental pollution is basically caused due to economic actions of a firm i.e. merchandise of a good or service. Environmental pollution is a form of a negative impertinentity.Most economic actions of firms con tribute towards some out-of-door bell. This is illustrated below.The cost of producing oil, to a firm is C. However, this is only the private cost of production of oil i.e. the cost of manufacturing oil to the firm, which includes its fixed and variable costs.The firm pays C to produce an output of Q. However, it does not issuance into account the social cost of producing oil. The social cost is the private cost plus any external costs. In this case, the external cost is the vertical distance between the two supply curves, E1T. The oil factory emits harmful chemicals which damages the environment. This, in the long run, causes health problems for the local residents, as it contaminates the air, soil and water. These infected inhabitants will need to be treated at the NHS. This is ultimately funded by the politics, who pays the cost of cleanup.In order to bare this cost on the firm, the government mustiness try to equate MPC with MSC, as the product is currently being overprodu ced, from societys point of view. In order to do this, it must qualify policies to shift the MPC curve leftwards to the MSC curve, by basically reducing supply. At this point, the cost to the firm will be C1 at an output level of Q1. At this minify output level, a social optimum point will be reached.However, reducing production can lead to a firms cost increasing, as it moves leftwards on the AC curve.If such an increase in costs comes from a more vital product, say oil, it can cause cost-push inflation in the economy.We shall now take a real-life example of the French oil industry and a French oil company called TotalFinaElf. TFE has consistently been leading the list for the worst French polluters, followed by other French oil firms. The French government, a couple of years ago decided to implement more stringent policies in order to overthrow pollution and environmental damage.The policies that were implemented have been discussed below.1. The first insurance policy implemen ted was a flat rate appraise.The tax leads to an increase in the cost of production, a reduction in production and hence a reduction in pollution. The social optimum point of production is at OQ, where the firm pays tax cost to EQ. This is equal to its marginal profit in pollution and hence there is no profit on the last unit.However, the French government soon realise that such a policy was not very effective for a number of reasons.It placed the same amount of tax on producers regardless of their size of it and regardless how much they individually polluted the atmosphere.It was very difficult to place a monetary value on the extent of the damage and hence the tax rate.Oil is a necessity and has an inelastic motivation. For this reason, the oil producers were able to pass on most of the tax cost onto the consumer and hence it had no effect on reducing pollution caused by these firms.2. Another policy that was thought of, but not implemented was a form of regulation.Under this policy the French government would allow production of oil of OQ barrels.Beyond this limit, the French government decided to ban production of oil. However, this policy was not put into effect because of the fact that demand for oil is inelastic. Reducing supply, would lead to an increase in price and hence cost-push inflation. (Draw diag.)The French government has still not decided on an appropriate policy to implement. The French government is trying to implement a policy which combines property rights and environmental taxes. They have realised that it is very difficult to extend property rights and expose the polluter.The Kyoto ProtocolThe policies implemented by various nations, to limit greenhouse gas emissions have had a fairly adverse effect on their economies and industries. The Kyoto Protocol was set up to alleviate these adverse effects and to continue pursuing the goal of reducing pollution and environmental degradation. The purpose of the mechanisms described in the p rotocol, entails channeling investments in verve efficient and energy conservation to countries and projects where the cost per unit of emissions reduction is lowest. This concept would entail a large-scale resource transfer from relatively energy-efficient, high cost countries to energy-inefficient, low cost countries.The pact requires industrialised countries to reduce their greenhouse gas emissions by 8% of the 1990 levels between 2008 and 2012The establishment of emissions reduction targets was a very obscure issue in the early phase of the international negotiations. Many countries could point to special circumstances that justified a more lax treatment of them compared to other countries. This argument was accepted to a limited extent. Notably, Russia and the Ukraine were given a zero target as opposed to the western industrialized countries that would have to reduce their emissions by 2010. The Kyoto Protocol uses a system of pollution permits which can be traded on an inte rnational market.The USA is opposed to this treaty, because it claims that it will have a devastating effect on its economy. It claims that it will lead to serious job losses, inflation and a fall in GDP. How We have seen that pollution occurs because of overproduction and over consumption. Reducing production will lead to more factors of production becoming unemployed, and also a fall in GDP.This has brought various criticisms, especially from the UK. All nations claim that the USA, by a large margin, is the worlds largest polluter and hence should sign the treaty for the well-being of future generations.The US contains 4% of the worlds population but produces about 25% of all snow dioxide emissions. By comparison, Britain emits 3% about the same as India which has 15 times as many peopleSource BBCPresident Bush Under the Protocol, the U.S. is conjectural to cut its greenhouse gas emissions by seven percent. With four percent of the worlds population, the country accounts for a bout 25 percent of the Earths greenhouse gas emissionsEuropean Environment Commissioner Margot Wallstrm says But this ignorant, short sighted and selfish politician, long since firmly jammed into the pockets of the oil lobby, clearly couldnt care less. The talks in Bonn in July must now concentrate on world action independent of the U.S.