THE MARKET AS
A TOOL FOR ENVIRONMENT
DEFENCE
Who pollutes pay
1.
THE MARKET AS A SYSTEM LIMITS:
Recalls
2. THE MARKET AS A SYSTEM FOR
ENVIRONMENTAL DEFENCE
2.1 The ineffectiveness of the command and control
methods
2.2 The market incentives
2.3 The PIP
2.4 The perfect level of pollution
3. THE RESOURCE LIMITS TO THE MARKET
As we know, generally the
mechanism of market, however
efficient in many contexts, in the
case of environmental property
induces an excessive consumption
of those resources whose price is nil
or inferior to the
social cost
How is it possible “to restructure” the
system of the market exchanges in a way
to assure a most efficient management of
the environmental resources?
To pass the resource through
the market (tariff of access,
laws of buying / selling)
Interfere the market “from the top“
modifying the prices of the environmental
resources use (incentives based on the
market)
The market incentives are alternative
solution, method of command and
control
fixation of standard authority and
prohibitions that the economic
agents have the obligation to
respect.
Many economists sustain that
the command and
control method is inefficient
for the following reasons:
If we returned to the market, we could
raise this knowledge modifying the
calculation of polluters, without necessity
to acquire information directly !
 Every polluter sustains different costs to
reduce his pollution
Fixing a standard is done of
“every grass a bundle”
imposing valid rules for everybody.
The market recourse would allow every one to
grade his level of pollution according to his
cost structure, suggesting the efficient
formalities to reduce the pollution.
The market resource consists in fact of
the creation of a system of burdens
that allows everyone to choose how to
conform to the standard of
environmental quality.
Who can avoid polluting
resorting to alternative
technologies
with reasonable costs …
The state has to fix rules and to verify its
following
The efficient polluters
will prefer to pay
the tax or to close instead
The market resource is particularly
attractive as more the economic
system is complex and
how much higher they would be the
(bureaucratic) cost of acquisition….
… And for information elaboration
from a public authority
that want to check the activity
of every agent directly .
FUNDAMENTAL PRINCIPLE OF
ENVIRONMENTAL POLICY OF THE OCSE
(Organization for Economic Cooperation and
Development):
who pollutes pay (PIP) ,
or …
… The market price of a property or service
must reflect
its total cost of production
or
the cost of
all resources utilized
In this sense, the use
- and therefore the deterioration of the air, of water or of any other
natural resource must be valued
from the fact that such
resources exits in market !
The PIP forces the polluters
To internalize the costs of the used
resources and therefore
To economize the use
Naturally, because this is feasible to
international level a notable coordination is
needed :
applying such measures would reduce in fact
the competitiveness regarding the economics
that they don’t do!
And also possible exceptions related to
contingent reasons should be very
limited and temporary…
The PIP has been known from European
Economic Community since 1975.
If the polluters must take into
consideration real environmental damages
produced by its activity…
He will have incentive to reduce the
damage to the level in which the
marginal cost of the reduction of the
pollution becomes equal to the
marginal cost of the damage
provoked by the pollution
By this we will reach the perfect level
of pollution (generally positive)
While usually the producer care about
the difference between
his private marginal profit
and
his private marginal cost
continuing to produce until this
difference remains positive …
… Now it is necessary that such
difference is not only positive but
also superior to the cost of pollution
for every united date if the enterprise
bears such cost!
However, how do we apply this logic to the
emission of dangerous substances that
maintain their harmful effects in time ?
How to keep track of the complicated
interactions between more harmful
substances emerged contemporarily
from one or more manufacturer ?
How to identify quickly the polluting
emissions recognizing its harmful nature
that cause appreciable or environmental
danger ?
Also, measuring the exact economic
cost of a polluting emission
is very difficult.
In practice it is determined
at a rate of constant emission
for every pollution unit
Finally, the principle can be interpreted more
extensively taking into account great or small
measure of the complex of the environmental
relapses of a polluting emission.
A modern economic system and
unfortunately incompatible with the idea
of a void environmental risk.
We have to operate an acceptable
compromise between costs and benefits
of the pollution.
The approaches more followed are two:

The principle precaution

Analysis cost – benefit