Question

Consider the environmental damage that results from the emissions of coal-fired power plants. These plants produce pollutants such as sulfur dioxide (SO₂) and nitrogen oxide (NO_x), which combine with hydrogen to make acid rain. They release mercury into the environment and emit other particulate matter such as soot, as well. Which of these externalities are highly localized, and which are borne by society at large? Explain

Answer 1

When a cost or benefit is received by third party which has no control over the creation of that cost or benefit, we term it as externality.

Externalities are of two types- positive (benefit are received by third party) and negative (costs are incurred by third party).

Externalities are localised if it's costs are borne by local group (people close to the source of externality). Externalities can also be borne by society at large when it effects the overall environment we reside in.

In the given example, soots are the externalities that are localised because they are faced by areas that are close to the power plant. It effects the local environment and local people around the power plant.

However, the pollutants like sulphur dioxide and nitrogen oxides which creates dangerous substances and create acid rain are not localised. These pollutants effect the overall atmospheric situation and acid rains would not be observed only near to the power plant but far from the source. Thus, these pollutants's dangerous effects would be faced by society at large rather than just those people who are living nearby.