How Workable Are Market-Based Solutions to Environmental Problems - Report Example

How workable are Market-based Solutions to Environmental Problems? Introduction In the recent decades, the world has seen the overwhelming response of nature to the environmentally-adverse human activities. The world’s environmental make-up has been in a constant degradation, which goes with the rising energy consumption, deteriorating pollution and waste management, and the increasing concentration of carbon dioxide in the atmosphere. Global warming and climate change are only two of the many environmental issues that humanity is trying to find solution for nowadays; nevertheless, the perennial tessellation of ecological health to politics and economics remains a constant source of humans’ failure to rid jeopardizing environmental issues in that governments are placed in a framework in which they have to give more favor to economic and political interests over the preservation of nature. Environmental agencies and governments around the world are striving hard to look for ideal solutions on how to take care of the environment while sustaining economic activity and strong diplomacy. One of the most highlighted solutions to environmental problems is the implementation of Market-Based (MB) economic instruments in environmental policy. Market-Based (MB) economic instruments embrace an array of policy tools such as carbon credits, pollution taxes, performance bonds, and marketable permits among others. The regular feature of MB economic instruments is that they maneuver on a distributive level through their influence on market signals. In most cases, MB economic instruments transfer the costs and accountability linked with pollution back to those causing it. This paper attempts to explore the workability of Market-Based (MB) economic instruments to solve environmental problems with emphasis on its effectiveness in the field of forests preservation. What are Market-Based (MB) economic instruments? Generally, Market-Based Instruments or MBIs are viewed as a non-scientific approach to dealing with environmental problems. Unlike science which seeks to provide direct solutions to environmental problems, MBIs utilize market, price and certain economic variables in order to give inducement or incentives to polluters, especially large-scale industries that contribute to the largest proportion of carbon dioxide sources in the atmosphere. This incentive scheme is devised in order to cut down or rid the environmental externalities like pollution and its subsequent effects such as global warming and climate change by means of adding in the external cost of production through taxes or fees in the processes of goods or products or by initiating property rights. MBIs are still in its infancy nowadays in terms of implementation as CACs or command and control approach to environmental problems is more extensively used among countries. Command and Control (CAC) depends on “mandated technologies and/or pollution reduction targets applied universally across polluters” (UNEP 2004). At face value, both approaches appear quite in contrast to each other, but in actuality both approaches are actually working together in order to solve environmental concerns. For example, governments may authorize limits on allowable pollution for a certain location and utilize market-based policy instruments like tradable permits to apportion the acceptable emissions in a cost-effective and ecologically aware manner. While MBIs presents significant help in mitigating the deterioration of the environment, there are few reasons that could be cited for the predating dominance of CACs and the less popularity of MBIs to solve environmental problems: (1) insufficient understand and appreciation of Market-Based economic instruments to solve environmental problems; (2) political interests that aims to reduce control costs by means of regulations; (3) inclination to sustain and keep the status quo (UNEP 2004). Let us go over these three reasons in order to get a substantial thought of how workable MBIs are in solving environmental problems. First, there is an insufficient understanding of MBIs and how it protects the environment. Generally, environmental problems are attributed to excessive concentration of carbon dioxide in the atmosphere due to pollution. This scenario is often viewed more as a scientific problem rather than economic problem so policy makers are addressing the problem more in the context of science rather than in the context of market or economy. Governments are constantly mandating scientific organizations to find efficient solutions to the degrading ecological make-up of the planet thereby affecting various populations and crippling economic activities. Sadly, it seems that none of these scientific solutions is working in that the degree in which the consequences of environmental issues such as global warming and climate change is taking place is at extreme levels (Balint 2011). Seen this way, policy makers are obviously overlooking the main cause of every environmental problem we have today: industrialization. Everyday, oil and large-scale manufacturing industries are emitting high volumes of carbon gases to the atmosphere (Balint et al. 2011) thereby contributing to the high concentration of carbon dioxide in the atmosphere. The problem with policy makers is that they are two overwhelmed by the dominance of scientific perspective on environmental problems that they tend to ignore the fact that factors influencing ecological health simply crop up from industries, both great and small. If the government is able to control polluters by imposing caps on allowable pollution, it would certainly improve our ecological setting (Barry 1999). This is where the appreciation of MBIs should dominate, much less should take place, in that the real case of environmental problem lies in how responsible large-scale industries are in preserving the environment. Another reason why MBIs are less appreciated is the political interests that aim to reduce control costs by means of regulations. How can politics be green when it takes the ridding of black trades benefiting politicians? While it is impossible to form valid arguments criticizing the government’s downright partiality for large-scale industries, it is rather apparent that most governments are giving in to the inducements of economic prosperity, not just of their own society but also of their own pockets (Connelly et al. 2012). As we know, MBIs tend to set caps on allowable pollution, which means that polluters involved in massive production of goods and prime commodities are forced to either reduce production or resort to manufacturing methods that utilize sustainable materials. The dilemma of politicizing policy making in order to give way to political interest dumps the feasibility of implementing Market-Based economic instruments considering that some political leaders are protecting the operational rights of industries who are contributing massive carbon gases to the atmosphere. Although this may appear subjective in that no real evidence can be gleaned, this reason for not being able to implement MBIs is manifested in the ongoing operations of large-scale companies, emitting high volumes of Carbon dioxide in the atmosphere but are still left untouched and in continuous operation. Of the three reasons presented in this paper, this is perhaps the hardest to solve. Lastly, policy makers have the inclination to keep the status quo. Whatever the reasons may be, it is relatively tacit that policy makers are immobile when it comes to innovating environmental policies for better outcomes – policy makers tend to view environmental problems as purely scientific and therefore there is no need to take the case into an economic or market-based perspective (Axelrod et al. 2004). After all, there is never any direct connection between market, prices, and other economic variables to the degradation of the environment; much less, there is no line that directly connects global warming and climate change to money. However, the problem with this perspective is that policy makers are left with the kind of thinking that generalizes environmental problems as an issue to be solved by science not by policy makers or the government for that matter. Benefits of Market-Based Economic Instruments Economic instruments, particularly MBIs functions by realigning rights and responsibilities of firms, groups or individuals in order for them to receive incentive and the control to act in a more responsible manner (UNEP 2004). MBIs are not trying to eliminate or reduce the financial incentive of those who are responsible for massive pollution; MBIs are only providing the financial incentive in order to act in a more responsible manner by means of implementing mechanisms like carbon permits, changes to property rights, emissions or access charges and many others. These incentives are provided in order to induce industries to become more concerned about the condition of the environment. MBIs work at its most ideal level by “internalizing environmental costs and externalities through increasing the prices the individuals must pay to use resources or to emit pollutants” (UNEP 2004). In other words, polluters are legally mandated to emit pollutions according to how much they could shell out monetarily. What happens is that when emitting pollutions become more expensive, consumers of the products produced by these large-scale polluters will receive more incentives monetarily because they would slow down using the products due to increasing prices. Also, by means of conservation, replacing materials with more ecologically aware profile or decreasing consumption. Market-Based economic instruments also protect consumers from taking on taxes through the polluter pays principle (PPP) in which all transition costs from policy changes are turn back on to the polluters and not to the taxpayers (UNEP 2004). How workable is it? The benefits and challenges in implementing Market-Based economic instruments have already been laid down and looking at the feasibilities, it is more likely that the benefits will be overshadowed by the challenges. First, we are aware that while there is a huge amount of time to learn about MBIs and adopt it as a new solution over CACs, many policy makers believe that environmental problems are purely scientific and have nothing to do with market, prices, and other economic variables. If this is the kind of perspective that governments have, the chances are they would neglect the possibility that the cause may be coming from environmental policies and how much they are controlling polluters. Even with this argument, we all know that, as a second reason, policy makers and political leaders benefit from large-scale polluters in forms of kickbacks and “incentives”; hence, it would nearly be impossible for them to eradicate a mechanism that graces their own pocket even at the expense of the environment. Bibliographic Entry Axelrod, R; VanDeveer, S and Downie, D., 2010. The global environment: institutions, law, and policy. 3rd ed. Thousand Oaks: CQ Press. Balint, P.J., Steward, R.E., Desai, A., and Walters, L.C., 2011. Wicked environmental problems: Managing uncertainty and conflict. Washington D.C.: Island Press. Barry, J., 1999. Rethinking green politics: nature, virtue, progress. Thousand Oaks: SAGE. Connelly, J., Smith, G., Benson, D., and Saunders, C., 2012. Politics and environment: from Theory to practice. 3rd ed. London: Routledge. United Nations Environment Program, 2004. The use of economic instruments in environmental Policy: opportunities and challenge [pdf] UNEP. Available at: < http://www.unep.ch/etb/publications/EconInst/econInstruOppChnaFin.pdf> [Accessed 6 January 2014]. Read More