Question

Environmental Economics; Two part question: Assume that the government has chosen to close high polluting power plants and some factories. Explain how the government would evaluate benefits versus how an individual worker would evaluate the benefits 2. Do you think that the impacts of the program to control automobile pollution are progressively or regressively distributed? Explain

Answer 1

Social benefits are a sum of private benefits and external benefits. Similarly, Social costs are a sum of private costs and external costs.

Polluting firms and other companies have following costs and benefits:

Private costs: Raw materials, land aquisition, labor costs borne by factory owners

Private benefits: Profits earned by factory owners

External costs: Polluting firms damaging health of the people living nearby area

External benefits:Employment generated, social welfare programs undertaken y these companies.

Now, while closing factory must have thought that social benefits will be more than social costs if we close this unit because health problems, environmental degradation is causing more problems than employments generated and other social welfare programs by these companies.

An employee may think of salary, perks and other wage-non wage factors for him/her. He may look at company as sure source of income.

2. I think it is regressively distributed as burden will be more on poor people. It would have been better if govt. had asked them to install pollution control technology or imposed carbon taxes or asked them to take part in cap and trade scheme where pollution targets would be given. This would have been progressive way to correct it.