Environmental Management Measures EMM

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Environmental Management Measures (EMM)

• by
• Prof. A.T.M. Nurul Amin

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Introduction

• The first principle of economics is that free
  market with competition produces socially and
  environmentally desirable results.
• But many do not know that economists warn that
  this will not be the case if competition does not
  prevail in any market.

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• Economists also concede that free markets are
  associated with three major inherent problems.
  These are
• Imbalances and inequities
• (Disparities in income distribution
  internationally, interregional and
  interpersonally and gender-wise)
• Ups and downs in economic growth and business
  cycles
• (Boom, bust, recession, recovery)

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• Externalities
• (Problem arising from non-counting of some costs
  and benefits by individual consumer and producer.
  Such costs and benefits are accrued to a third
  party, i.e., other than the consumers and
  producers who are directly involved in the
  production and consumption of a good or service).

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• Economists have developed theories and policy
  tools/instruments corresponding to the above
  problems.
• For example, the whole sub-branch of development
  economics has developed to address the particular
  issue of imbalances and inequalities,
  particularly in the developing countries.

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• Similarly, macroeconomics has grown and
  flourished to deal with the issues of
  unemployment inflation/price level associated
  with growth cycles.
• Fiscal policy, monetary policy and exchange rate
  policy are key policy instruments that are used
  for ensuring macroeconomic stability.

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• Likewise, environmental economics has grown and
  flourished to address the issue of environmental
  problems that arise economists believe
  because existence of externalities, open-access
  resource and public goods.
• In this lecture, we limit our elaboration to the
  last theme, i.e., how economists have articulated
  the environmental problems and developed
  corresponding policy instruments to deal with the
  observed problems.

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Economists Articulation of Environmental
Problems

• Three environmental problems that fare
  prominently in economic analyses are
• Pollution.
• Destruction of natural resources.
• Free-riding of environmental resources.
• The above identification of environmental
  problems and the corresponding economic concepts
  used for their analyses have led economists to
  suggest that

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• For dealing with the problem of pollution,
  analyzed by the theory of externalities,
  environmental policy needs mechanisms to
  INTERNALIZE EXTERNALITIES.
•  
• For dealing with the problem of destruction of
  natural resources, which is seen to take place
  because of their open-access characteristics,
  what is needed is ENSHRINING OF PROPERTY RIGHTS.

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• For dealing with the problem of free-riding of
  environmental resources, which is explained by
  their public goods characteristics, what is
  needed is to find a mechanism to INFUSE PRIVATE
  GOOD CHARACTERISTICS so that pricing of such good
  is possible and thereby free-riding can be
  curtailed, if not totally stopped.

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Analytical Tools for Environmental Problems
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Some Details on Externalities, Open-Access
Resources and Public Goods

• Externalities
• External Costs
• Cost, which do not show up in a firms profit-and
  loss statement.
• They are external because, although they are
  real costs to some members of society, firms do
  not normally take them into account when they go
  about making their decisions about output to be
  produced and prices to be set.

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Internalization of External Costs (Negative
Externalities)
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• External Benefits
• The significance of this concept arises from the
  fact that when the use of an item leads to an
  external benefit, the market willingness to pay
  for that item will understate the social
  willingness to pay.

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Internalization of External Benefits(Positive
Externalities)
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Externalities by Type, Example and Corresponding
Policy Goals, Instruments and Their Expected
Results
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• Open-Access Resources
• An open-access resource is a resource or facility
  that is open to uncontrolled access by
  individuals who wish to use the resource.
• Examples are
• Pasture that is open to anyone to graze animals
• Forest where anyone may go and cut wood or
• Public park, open to free access (Field Field
  2000, pp.76-79).

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• Public Goods
• It is a good that, if made available to one
  person, automatically becomes available to
  others.
• Such goods do not have exclusionary
  characteristics.
• Examples  
• (1) Lighthouse
• (2) Radio signal

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• Note public goods will not have to be owned by
  public (government) sector. A public good is
  distinguished by the technical nature of the good
  the non-exclusionary characteristic not by
  the type of organization making it available.

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Environmental Management Measures (EMM)

• Comprised of three sets
• Regulatory Instruments (RIs)/CAC
• Economic Instruments (EIs)/MBIs
• Moral Suasion

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Regulatory Instruments (RIs)

• Regulatory forms
• Laws
• Licenses
• Permits
• Registration
• Administrative guidelines
• Directives
• Codes of practices.

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RIs

• Regulatory instruments
• Emission of effluent standards
• Environmental quality standards
• Product controls
• Process and equipment standards
• Planning and building controls
• Extraction restrictions.

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RIs

• Three main types of standards are
• Ambient standards
• Emission standards
• Technology standards

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RIs

• Advantages/disadvantages of standards can be
  noted as
• Advantages of standards are
• Directness (clearly specified targets),
• Conformity with ethical sense (pollution is bad,
  thus, need to be stopped).
• Disadvantages include
• Complexity (in measuring and monitoring),
• Problematic (directness and unambiguousness may
  be misleading)?

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Economic Instruments (EIs)

• While subsidy (to give incentive) and
  taxation/pollution charges (to create
  disincentive) are the two fundamental policy
  instruments, market-based economic instruments
  include
• (emission) charges
• (Abatement) subsidies

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EIs

• Market-creation
• Tradable/transferable emission trade permits
• Market intervention
• Liability insurance
• Financial enforcement

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Moral Suasion (MS)

• Basic principles of these measures are
• Reliance on voluntary compliance by polluters
  motivated either by the thereat of adverse or the
  prospect of favorable publicity
• Environmental education and awareness raising are
  key elements of any policy designed around
  suasive measures.

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MS

• Requirements for suasive measures to work
• Free flow of information
• Right to know
• Demand for quality environment
• Recent development centering
• Voluntary environmental certification
• Strategic environmental management

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Application of EMM
WATER
 
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