Question

Briefly explain

a. the significance of prevention of significant deterioration (PSD) areas to the setting of air

quality standards.

b. From an economic perspective, explain the paradox associated with setting standards in PSD areas versus nonattainment areas. Show how an inefficient result may arise using an MSB-MSC model.

Answer 1

1. Industrialisation and Air quality standards are both interconnected although, paradoxically development in one leads to fall in the standards of the other—if we want fresh air , we need to go away from the huge cities to calmer places where there are no huge factories , loud machines and so on.

On the other hand, if we want to develop, it necessarily comes with a cost—the cost of polluting the environment—especially in the precincts around.

The objective of PSD or prevention of significant deterioration is to ensure that ‘air quality’ standards are enforced and maintained by the industries around, in various areas. It seeks to highlight the importance of maintaining ‘clean air’ surroundings and ‘lower levels of emissions’ since a drop in air quality will not only affect the environment around but also places faraway since the toxic particles are carried by air to far off places—like may be , woods and forests – which bear the brunt of the industrialisation in the urban areas.

PSD is hence important to protect the social welfare of the community and time and again reinforce the concept ‘sustainable development’ since destroying resources and lower quality standards will ultimately be self-defeating in their purpose of development.

In certain situations, the production process might require some amount of emissions to be released and in such cases the PSD will set the standards under which such emissions can take place as well as ‘publish’ such information in order to create an awareness about the ‘air quality levels’ and the drop in such levels.

The PSD though may allow for certain ‘leeway’ and give permission for firms to increase the level of emissions up to a certain level. However there is a maximum limit beyond which emissions are not permitted.

The PSD regulation are significant since they seek to address the issues regarding ‘ air quality’ in various areas—these could be concerning sensitive areas like forests or national parks, to agricultural lands and so on. A drop in the air quality in such areas is likely to aggravate the situation and may become a cause for national concern, in some cases if the emissions and fumes cross the border –between countries--r then the issue could become a cause for international debate.   

b.

1. From an economic point of view , a discussion on setting air standards in PSD and non-attainment areas is significant, since non-attainment areas are those that have been earmarked for exceeding the permitted levels of pollution –air pollution , specifically these could be areas where the industrial development and development of economic infrastructure has been growing at an accelerated pace.

The attainment areas are those where the level of pollution is slightly lower as compared to the national permissible levels of air pollution . While in non-attainment areas these levels are high and have far exceeded the permissible limit—set as per the national standards for air quality.

It is important for the non attainment areas to improve the air quality standards , reduce emissions and move towards the ‘attainment areas’ while in the attainment areas it is important for firms to be consistent in their emissions if not able to lower them.

In attainment areas there are PSD requirements or regulations that aim to prevent the designated area towards shifting to no n-attainment status.

However in non-attainment areas, there are stringent rules regarding the emission levels and hence the firms are required to adhere to the m strictly. Also the policy requires that the firms in non – attainment areas use the best possible technique which is also ‘environment friendly’ .

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In the above diagram, quantity is taken on the x-axis and the cost and benefit ( both private and social ) are taken . D curve represents the demand curve or the MSB--the marginal social benefit accruing to the society as a result of consumption of the commodity. The MPC curve shows the cost of production incurred by the producers in order to produce the commodity.The market equilibrium will be at price P1 and quantity Q1,

However , there is a divergence as shown by the S (MPC) curve, which depicts the 'price' in the market and the actual marginal cost borne by the society as a result of consuming the product--it involves all the stake holders involved those who are buying the good, those who are inhaling  the toxic fumes that there being emitted as a result of the production of the good and so on. The divergence between the MPC curve and the S (MPC) curve shows that the social costs on the society are more than the benefits of producing and consuming it. This results in market failure.

It also shows ‘inefficiency’ in the system. The optimum point is therefore at price ‘P’ and quantity ‘Q’ where the given the MSB=MSC or the marginal social benefit is equal to marginal social cost. It should be noted that at output level ‘Q’ less amount of good is produced and consumed resulting in lower levels of emissions—lesser pollution and the society is efficiently allocating its resources ‘sustainably’.

The non-attainment areas are those that are producing at OQ1 amount of output and hence they have to be regulated and ensured that they reduce their levels of emissions to fall into the ‘safety’ limit.

The attainment areas are those which are regulated by the government rules and have to ensure that they do not cross the ‘safety limit’ output of ‘OQ’.