Question

In class we discussed 8 different market means to address externalities. Not all means were applicable to all situations. Please answer the following questions based on those discussed market means. a. Which of the 8 can be used to address non-point source pollution. b. Define a market permit. c. Define a deposit-refund system.

Answer 1

a..What is nonpoint source pollution?

Nonpoint source pollution generally results from land runoff, precipitation, atmospheric deposition, drainage, seepage or hydrologic modification. Nonpoint source (NPS) pollution, unlike pollution from industrial and sewage treatment plants, comes from many diffuse sources. NPS pollution is caused by rainfall or snowmelt moving over and through the ground. As the runoff moves, it picks up and carries away natural and human-made pollutants, finally depositing them into lakes, rivers, wetlands, coastal waters and ground waters.

Nonpoint source pollution can include:

• Excess fertilizers, herbicides and insecticides from agricultural lands and residential areas
• Oil, grease and toxic chemicals from urban runoff and energy production
• Sediment from improperly managed construction sites, crop and forest lands, and eroding streambanks
• Salt from irrigation practices and acid drainage from abandoned mines
• Bacteria and nutrients from livestock, pet wastes and faulty septic systems
• Atmospheric deposition and hydromodification

States report that nonpoint source pollution is the leading remaining cause of water quality problems. The effects of nonpoint source pollutants on specific waters vary and may not always be fully assessed. However, we know that these pollutants have harmful effects on drinking water supplies, recreation, fisheries and wildlife.

Nonpoint Definition Related to Point Source

The term "nonpoint source" is defined to mean any source of water pollution that does not meet the legal definition of "point source" in section 502(14) of the Clean Water Act. That definition states:

The term "point source" means any discernible, confined and discrete conveyance, including but not limited to any pipe, ditch, channel, tunnel, conduit, well, discrete fissure, container, rolling stock, concentrated animal feeding operation, or vessel or other floating craft, from which pollutants are or may be discharged. This term does not include agricultural storm water discharges and return flows from irrigated agriculture.

Permit markets

The concept of using a permit market to control pollution levels was first developed by Canadian economist John Dales and American economist Thomas Crocker in the 1960s. Through this method, pollution permits are issued to firms in an industry where a reduction in emissions is desired. The permits give each firm the right to produce emissions according to the number of permits it holds. However, the total number of permits issued is limited to the amount of pollution that is allowed throughout the industry. This means that some firms will not be able to pollute as much as they would like, and they will be forced to either reduce emissions or purchase permits from another firm in the industry

C..A deposit-refund system (DRS), also known as deposit-return system, advance deposit fee or deposit-return scheme, is a surcharge on a product when purchased and a rebate when it is returned. A well-known example is when container deposit legislation mandates that a refund is given when reusable packaging is returned. Deposit-refund system are a market-based instrument to address externalities. As with Pigovian taxes a DRS aims to limit pollution of various types by creating an incentive to return a product.^[1]

While most commonly used with beverage containers it can be used on other materials including liquid and gaseous wastes.^[2] Deposit-refund systems are used on products such as batteries, tyres, automotive oil, consumer electronics and shipping pallets.