Chapter 16 Discussion: Costs of Pollution

The costs of pollution are obvious. What would we have to do to achieve zero pollution? Do
economists want to achieve zero pollution? Why or why not?

According to the Coase theorem, efficiency can be reached even in the presence of externalities,
provided transaction cost is low. High transaction cost prevents the polluters and individual from
dealing with externalities (pollution). Therefore government solutions are next. The three
methods of government policy commonly used to combat pollution are environmental standards,
emissions taxes, and tradable emission permits.

1.     Environmental standards: are rules established by a government to protect the

environment by specifying actions by producers and consumers.
2.     Emissions taxes: taxes that depend on the amount of pollution a firm emits or produces. A
tax imposed on an activity will reduce the level of negativity of that activity.
3.     Tradable emissions permits: license to emit limited quantities of pollutants that polluters
can buy and sell. 

High transaction cost prevents the polluters and individual from dealing with externalities
(pollution). The three methods of government policy commonly used to combat pollution are
environmental standards, emissions taxes, and tradable emission permits.
Estimated that the actual environmental cost of carbon emissions ranges from $50 - $100 per ton
as of 2017 and may climb as high as $400 by 2050. Economists estimate that the actual cost of
greenhouse gas emissions (pollution) is far higher than the current market price. Moreover,
when the direct health costs from fossil-fuel air pollution are taken into account, the losses from
runaway climate change climb significantly. The World Health Organization estimates that 4.6
million people die annually from air pollution caused by burning fossil fuels. Nearly 1. 25
million "excess" deaths are estimated to occur each year in China alone from fossil-fuel-fouled
air. The health benefits of switching to clean energy are estimated to be as much as 5% of global
GDP.
Economists generally recognize that the direct costs of fossil fuel consumption far underestimate
social costs. Reducing greenhouse gas emissions to sustainable levels requires comprehensive
structural changes in the economy, which inevitably impacts growth rate and consumption. As a
result, some argue that attempts to mitigate climate change should be abandoned because the cost
to consumers is too high.
However, this argument fails in cost-benefit analysis. In reviewing the latest scientific evidence,
the Intergovernmental Panel on Climate Change found that achieving the goals of the Paris
Agreement; global consumption would reduce by 3-11% by 2100 compared to the current
situation. However, given that the global economy has continued to grow at an average growth
rate of about 3% in recent years, that number is a reasonably modest loss. As mentioned earlier,
global losses by 2100 from runaway climate change are estimated at 20% of GDP.
It has been reported that the actual environmental cost of emissions has been the US $ 50-100
per ton since 2017, with market prices expected and may climb as high as $400 by 2050.
Economists estimate that the actual cost of greenhouse gas emissions (pollution) is far higher
than the current market price. They claim that the cost of fighting climate change is too high is
unbearable for scrutiny. Climate change causes enormous costs and pain, impoverished
countries. If climate change remains uncontrolled, federal reports estimate a loss of up to 10% of
US GDP in 2100. Another study estimates a loss of up to 20% of global GDP. Considering the
direct health costs of fossil fuel air pollution, the losses of uncontrollable climate change are
significantly increased. The World Health Organization estimates that 4.6 million people die
each year from air pollution caused by burning fossil fuels. In China alone, fossil fuel-
contaminated air causes an estimated 1.25 million "redundant" deaths each year. The health
benefits of switching to clean energy are estimated to be up to 5% of global GDP. In addition,
climate change mitigation cost estimates do not consider the sharp drop in prices of clean energy
sources due to technological advances.

References:

 Air pollution. (2005). ScienceDaily. https://www.sciencedaily.com/terms/air_pollution.htm

 Yoram. (2020, December 30). Grading Economics Textbooks on Climate Change – 2020

Update. The Standup Economist. http://standupeconomist.com/grading-economics-

textbooks-on-climate-change-2020-update/

 Optimal Pollution. (n.d.). Academic.udayton.edu.

https://academic.udayton.edu/PMIC/Exercises/Exer6-1.htm

 The economics of pollution. (2016). The economics of pollution. Khan Academy.

https://www.khanacademy.org/economics-finance-domain/microeconomics/market-failure-and-

the-role-of-government/environmental-regulation/a/the-economics-of-pollution-cnx

 Solving the paradox. (2000, September 23). The Economist.

https://www.economist.com/special-report/2000/09/23/solving-the-paradox

 Macmillan. (n.d.). Achieve.macmillanlearning.com. Retrieved November 30, 2021, from

https://achieve.macmillanlearning.com/courses/p69vso/e-book

High transaction cost prevents the polluters and individual from dealing with externalities
(pollution). The three methods of government policy commonly used to combat pollution are
environmental standards, emissions taxes, and tradable emission permits. They estimated that the
actual environmental cost of carbon emissions ranges from $50 - $100 per ton as of 2017 and
may climb as high as $400 by 2050. Economists estimate that the actual cost of greenhouse gas
emissions (pollution) is far higher than the current market price. Moreover, when the direct
health costs from fossil-fuel air pollution are taken into account, the losses from runaway climate
change climb significantly.

Economists generally recognize that the direct costs of fossil fuel consumption far underestimate
social costs. Reducing greenhouse gas emissions to sustainable levels requires comprehensive
structural changes in the economy, which inevitably impacts growth rate and consumption. As a
result, some argue that attempts to mitigate climate change should be abandoned because the cost
to consumers is too high.

However, this argument fails in cost-benefit analysis. “In reviewing the latest scientific evidence,
the Intergovernmental Panel on Climate Change found that achieving the goals of the Paris
Agreement; global consumption would reduce by 3-11% by 2100 compared to the current
situation” (Macmillan, n.d.). However, given that the global economy has continued to grow at
an average growth rate of about 3% in recent years, that number is a reasonably modest loss

“It has been reported that the actual environmental cost of emissions has been the US $ 50-100
per ton since 2017, with market prices expected and may climb as high as $400 by 2050”
(Yoram, 2020). Economists estimate that the actual cost of greenhouse gas emissions (pollution)
is far higher than the current market price. They claim that the cost of fighting climate change is
too high is unbearable for scrutiny. Climate change causes enormous costs and pain,
impoverished countries. If climate change remains uncontrolled, federal reports estimate a loss of
up to 10% of US GDP in 2100. Another study estimates a loss of up to 20% of global GDP”
(Yoram, 2020). Considering the direct health costs of fossil fuel air pollution, the losses of
uncontrollable climate change are significantly increased. The World Health Organization
estimates that 4.6 million people die each year from air pollution caused by burning fossil fuels.
“In China alone, fossil fuel-contaminated air causes an estimated 1.25 million "redundant" deaths
each year. The health benefits of switching to clean energy are estimated to be up to 5% of
global GDP. In addition, climate change mitigation cost estimates do not consider the sharp drop
in prices of clean energy sources due to technological advances” (Macmillan, n.d.).
References:

 Air pollution. (2005). ScienceDaily. https://www.sciencedaily.com/terms/air_pollution.htm

 Yoram. (2020, December 30). Grading Economics Textbooks on Climate Change – 2020

Update. The Standup Economist. http://standupeconomist.com/grading-economics-

textbooks-on-climate-change-2020-update/

 Optimal Pollution. (n.d.). Academic.udayton.edu.

https://academic.udayton.edu/PMIC/Exercises/Exer6-1.htm

 Macmillan. (n.d.). Achieve.macmillanlearning.com. Retrieved November 30, 2021, from

https://achieve.macmillanlearning.com/courses/p69vso/e-book