Question

1. (A) Explain why you cannot buy or sell, make payment to use, or receive a payment for producing a public good such as air/water quality, biodiversity, carbon sequestering, etc.

(B) Explain why you can buy or sell, price, make payment for use, and receive payment for producing goods such as lumber, food shoes, books, etc.

(C) Explain how credits and permits create a payment for improving environmental quality (sequestering more carbon, greater biodiversity, etc. ) and increasing the quantity of that public goods. Explain all the institutional changes that may be necessary for credits, permits, licenses, rights, etc. to be established.

(D) Explain why producing “environmentally friendly” or “sustainably produced” goods (organic food, certified lumber, etc.) end up costing more if their production is accomplished sustainably or includes production of environmental (public) goods as opposed to the more conventional ways in which they are produced.

€ Why do sustainably produced goods rely on certification to sell their goods and why is such certification necessary for such private good producing businesses?

Answer 1

Solution A:

Air, Water, biodiversity are all public rights and free goods and cannot be charged for usage and hence no payment can be received or charged for it.

Solution B

Private products are limited in supply and have varying demand upon consumption patterns and hence chargeable as they add economic benefits and to avoid excessive consumption by one particular individual it is charged or bought or sold.

Solution C:

Credits give corporate to enabke CSR activities and abidi environment norms and strictly follow them. Also permits are only given when environmental norms and regulations are in place which makes sure that undue advantages are not taken. If laws are nit complied then seeious penalties are imposed.

Solution D

Organic foods generally cost more because of low availability and high transportation and production costs. Also economies of scale is not achieved because very limited consumers buy them and hence prices stay higher. Such sustainable goods rely oj certification because ingredients are checked and tested before marketing them and to verify and distinguish itslef from inorganic goods. Its the trademark which helps consumers identify its USP and then pay substantial price for it.