Question

Throughout this course we have talked about how governments can intervene in creating markets that achieve an efficient and equitable level of environmental quality. Discuss five ways where government intervention could yield a more efficient or equitable outcome. For each type of government intervention:

• describe how the governments can improve environmental quality and achieve an efficient outcome.
• why only governments can be successful in making these improvements.

Use economic arguments.

We all know that governments play a major role in TEPS systems and Pigouvian taxation. You may only include only one of these as one of your five types of intervention.

Answer 1

Answer)

Governement can adopt following intervention to achieve an efficient and equitable level of environment quality:

a) Pigouvian tax- Government can levy pigouvian tax on the entity creating negative externality for the society such as in terms of pollution which deteoriates environmant quality and creates health issues for general masses. The Firm is cherged to pay tax amount that equates marginal external cost of externality.

b) Pollution permits- Firms can be given permit to pollute upto a level which is environmently optimal and these permts can be sold to other firms to and earn money. This incentivizes firms to not use minimum permits

c) Subsidy- Subsidy is generally paid to entities that create positive externality. In some cases government can provide subsidies to firms which damages environment less than level optimaly described.

d) Command and control regulation- Government specifies a certain limit on pollution emissions  and require firms to take measures to take social cost of pollution into account. Firms are eneraly required to install anti pollution equipments.

e) Pricing approach- It is kind of hybrid approach, as it involves uniform waste disposal/ pollution emission standard imposed on all entities but those exceeding the set limit will have to pay unit tax for each increased unit of emission.