Environment and Economic Growth - Term Paper Example

Articles Commentary. Name: Institution: Tutor: Date: This article gives the economic perspective of environmental matters; using economic tools that make use of environmental variables to identify problems and suggest probable solutions. This approach gives the article a theoretical viewpoint. It identifies pollution as the main causal factor of environmental degradation as well as mitigation measures. It rightly identifies the perennial debate that pits polluters against the subsequent victims of pollution. The author seems to suggest a vicious cycle that places everyone both as victims and villains of environmental degradation. This is an important point to make when effecting formulated policies as it emphasizes the need for collective responsibility when tackling environmental issues. There is a strong point in examining the trade-off between these desirable and undesirable aspects by employing the use of cost-benefit analysis to determine the viability of economic activities that may have an impact on the environment. This approach sidesteps the often emotional moral debate that arises when these economic activities are undertaken. The article points out the inevitability of environmental degradation whenever an economic activity takes place and therefore the need to find ‘acceptable levels’ of pollution that will achieve optimality for these ventures without adversely posing negative consequences on the environment (Goodstein, 2010, p. 156). This is where marginal analysis (examining the incremental effects of cost versus benefit) comes in as an economic tool. The problem here, however, is identifying these costs and benefits to society in totality so as to obtain clear cut variables to use in the analysis. The author’s example of sulfur dioxide pollution for illustrative purposes does little to better the reader’s understanding of the whole idea of marginal analysis. More examples would have been appropriate. It would also be interesting to explain, for example, use of marginal analysis to determine the trade-off of cost and benefits of waste emissions by factories into water bodies. The author also intimates that environmental depletion is likely to decrease in the future due to technological advancements. These two aspects are viewed as reinforcement to the economist’s opinion on formulation of environmental policy. They endeavor to ascertain degradation reduction levels that match costs and benefits while enabling technological advancements that reduce the cost of pollution minimization and maintain material well being of the society. To achieve these, the author advocates for utilization of economic incentives based policies. He proposes the use of emission taxes and transferable permits as effective tools for management of the amounts of pollutants emitted by factories. However, the author fails to point out the fact that taxes alone cannot bring about the needed long term effects, as tax checks on the amount of emission of single firms and excludes the total quantity produced by the industry ( Goodstein, 2010, p. 289 ) . An example is a case in which if the organizations produced a portion of their initial production, and the number of firms increased, the levels of degradation will still rise. In order To offset this discrepancy critics have suggested prospective strategies that can limit the number of organizations operating in an industry. COMMENTARY ON ECONOMIST; Are you being served? The author of this article identifies deforestation as one of the major causes of environmental degradation. He gives an example of deforestation of the Panama Canal and the consequent effects of the activity. He notes that due to depletion of forests around the canal, the water levels have been reduced and suggests possible solutions to the problem that will benefit both the shipping lines and the Panama society. These include the introduction of forestry insurance and planting of forests along the canal with the aim of trading forest bonds with the shipping companies using the passage. The economist further notes the high cost of deforestation, destruction and pollution of several ecological systems and the consequent effects on human populations across the world. He identifies the pollutants of rivers, lakes and other water bodies as sediments from farmlands and wastes from factories. He gives an example of how New York City has changed its farming policies and relocated farmers from the city’s water source at Catskill hills. He does not however, let the reader understand the relocation costs which are practically the advantages provided by the new site and are improbable to match those of the initial site. Cap and trade has also been highlighted as a tool to help in checking the levels of carbon emissions by industries. It is suggested that farmers and owners of forest lands should conserve forests and trade carbon, transpiration and pollination credits with carbon dioxide emitting factories and other farmers. The method of calculating these credits is, however, not mentioned and also there is no mention of the polluter’s willingness to pay for the destruction ( Endres, 2010, p. 361). To improve the evaluation of the ecological system tools such as constructed market technique should be employed. This technique is used to measure the willingness of the polluters to pay by clearly bringing out consumer choices. It tends to be beneficial in calculating Hicksian welfare measures, presenting the best theoretical gauge for readiness to bear the costs ( Thampapilla, 2002, p. 96 ). Another instrument that can enhance accuracy in the evaluation of ecosystems is the contingent valuation method. This calls for the formation of hypothetical markets to bring forth respondents readiness to incur the costs. This method of calculation has been noted as the only one that can evaluate option and existence value and give a realistic measure of economic value. Commentary on Green Taxes. This article identifies the challenge of protecting the environment while at the same time attempting to improve the tax system. The writer acknowledges green taxes as a source of double dividends. He affirms that green taxes do not only reduce levels of emissions to efficient degrees but also develops the revenue structure by reducing dependence on the other forms of taxes. He argues that pollution taxes are sources for improved environmental quality and a better tax system. Economists support this statement on the basis that optimal environmental charges are below marginal environmental damages. This has, however, been criticized by other economists maintaining that it is not realistic as the system of double dividends does not literary mean higher taxation on carbon whose tax rates they believe should be lower. And that the system can only be achievable if recycling of revenues is carried out through reduction of other forms of taxes which until today has not been carried out ( Thampapilla, 2002, p. 109) The system also makes an assumption that there are no income raising taxes in the economy, and that the revenues collected though environmental levies are restored into the economy in a lump-sum manner. Pigouvian tax was equivalent to the entire revenue needed by government. This will ensure total eradication of other forms of taxes. However, restoration of income from green taxes into the economy would necessitate distortionary taxes and would in turn increase income and lower welfare as a result of distortion that is due to the levy system ( Goodstein, 2010, p. 354). The author identifies green taxes and income raising taxes as complementary instruments used by authorities in the provision of communal goods with revenue inclined taxes and safeguarding of quality environment with counteractive taxes. He also highlights the impacts of imposition of these taxes. However, he fails to bring out the fact that levies meant to raise the revenues deters utilization of goods and services, Increase in levies and decrease in commodity demand reduces the degree of pollution in the economy. Therefore merging green taxes and income raising taxes will ultimately reduce the levels of pollution as compared to lack of income raising taxes ( Endres, 2010, p. 321). Commentary on Corporate Average Fuel Economy. According to the writer, carbon dioxide emission from vehicles is another challenge to the conservation of the environment. He isolates fuel economy standards as a solution to the problem stating that this will decrease the rates of pollution and dependence on oil. The goals of these controls are to upgrade the fuel economy of new motor vehicles and are not meant to inspire conservation or impact on other sectors. Direct levies on fuel and carbon discourage driving by both owners of new and used motor vehicles thereby reducing emission. The other argument is that the solution is likely to address the stalls misperception of consumers on the advantages of enhanced energy efficacity. Fuel economy standards are depicted as more politically conformable than tools such as fuel levies and vibratory systems. The author addresses the impact of the Corporate Average Fuel Economy but fails to address the effect of such controls on human health and also on employment in the motor vehicle production industry as implementation of such controls have led to loss of lives and jobs as increasing miles per gallon (mpg) of the vehicles lead to proliferation of prices thereby limiting consumers’ choices of vehicles. The article does not tackle the cost of increasing mpg which in turn decreases per mile cost of using vehicles and increases the mileage covered thereby overriding advantages of CAFÉ. The other instruments that author list includes; engineering approach system which is used in the assessment of costs and the amount of fuel saved per mile covered and the market modeling approach. The two approaches are basically used in the determination of the costs of fuel economy standards. In order to improve the efficiency of fuel economy standards, considerations the effects of these tools in the economy and human health should be made ( Goodstein, 2010, p. 512). A method that factors in and harmonizes the costs and effects of the emission of carbon dioxide and the material well being of the community while at the same time conserving the environment should be formulated. Reference list. Thampapillai D, 2002, “Environmental Economics; concepts, methods, and policies”, Oxford University Press, Oxford. Endres, A, 2010, “Environmental Economics: Theory and Policy”, Cambridge University Press, Cambridge. Goodstein, E, 2010, “Economics and the Environment”, John Wiley and Son, Hoboken. Read More