In: Economics
intervention measures available to limit externalities by a country with example
Country and its government can take intervention measures to limit and control the externalities. For this, the government has to first identify the nature of externality, then intervention measures are taken by the government of the country. If there is a negative externality created by pollution, then to control it, the first intervention measure is to put the pollution tax. An example of one pollution tax is a motor fuels excise tax that is applied by the government in the USA. It is a pollution tax to control the negative externality created by the pollution. The second example of limiting the negative externality is to make interventions in the form of cap and trade programs. Under this program, the government issues pollution emitting allowances that are fixed for each firm. Now, any firm not using the allowance due to clean and green technology, can trade and sell their allowances to other firms. It helps earn money and promote clean an green technologies to be used by the firms. For example, many European countries have implemented cap and trade programs to control the pollution level and its arising externality.
If there is a positive externality, then it is the subsidy as a intervention measure by the government of the country to limit this type of positive externality. For example, the government gives scholarships and financial assistance to students as well as free lands, resources to university and colleges to offer higher education. Here, these benefits to students and universities and colleges work to get more students opt for the higher education and or a reduction in the tuition fees. It is a measure to limit the positive externality.