Environmental Economics and Natural Resource Management - Assignment Example

Question 1: This case is important in that it informs the general public and policy makers about the prevailing situation in Australia pertaining to use of plastic bags. While some people innocently use plastic bags due to their convenience, the article informs them about the problems caused by plastic bags. Furthermore, it explains to users of plastic bags, the increase in prices of plastic bags, and the reduced used of plastic packing bags at supermarkets. The article in one way reiterates the need for green living which has grown in popularity in recent times. The fact that the public is informed of the detrimental effects on plastic on the environment is likely to easily convince environment-conscious individuals to reduce usage of plastic bags and recycle them where applicable. While the article indicates that the current market practices in regards to use of plastic bags have little regards to the environment, the article carries with it some degree of moral persuasion to plastic bag users. This is achieved by highlighting the huge costs incurred in running land fills, recycling the bags and the huge threat that these plastic bags pose to the environment including a threat on aquatic life. The article is very useful for academic purposes. The theory of market failure is very useful in this age of globalization and free market global economy as it clearly pin points the custodian role of the government that might be necessary despite a laissez fairez policy. Taylor (2006) writes that, if an economy follows free market policy, it does not mean that there is no role for the government but rather, it indicates that the role of the government is restricted to certain areas. This article provides a good example of how a government can get involved in a free market economy. In this particular case, the Australian government banned plastic bags and imposed hefty fines on defaulters. Government involvement in a free market economy as is the case with the Australian government in this study is not without effect. The Australian government went ahead and banned the use of plastic bags in the country despite [previous studies that had shown that such a move would create more chaos. The article explains, “the marginal social costs of further reductions in the use of plastic bags exceed the marginal social benefits” (Sloman, Norris and Garratt 2010) Banning use of plastic bags altogether thus accelerates the marginal social cost. So is this decision harsh? Going by the figures presented by Anderson (2010) in an analysis of recycling costs in New York, the decision is debatable. According to a report in 2002, it cost the New York Municipal government $240 per ton to recycle glass, metal and plastic while it costs only $87 per ton to recycle paper. However, while recycling glass, metal and plastic cost the same, the social benefits of recycling plastics are higher. Furthermore, banning plastics diminishes the social benefits of recycling. Recycling, whether for plastics of other materials, creates a culture of environmental consciousness which engages participants in environmental stewardship. Exposing children to recycling and re-use of plastics teaches them a lot in terms of resource scarcity which is a useful lesson today and for future generations. By banning the use of plastics, the government has denied the public a chance o keep track of their waste. Recycling informs people about the level of waste they generate not only in plastic but other areas such as water. Furthermore, recyclers derive a good feeling from doing what is environmentally right. This is very important especially for OECD countries keen on reducing carbon footprints (Anderson 2010). Such wasted opportunities show that banning of plastics is indeed a waste of resources. The country is losing a valuable chance to create a culture of recycling in the most convenient manner for the public. Recycling and reusing of plastic would potentially encourage re-use and recycling of other wastes. I personally use plastic bags, not to enjoy the act of recycling per se, but out of their convenience. As a person keen on environmental conservation, I have taken a keen interest on the alternatives to plastic bags. The most common are natural fiber made bags mainly from papyrus reeds, trees, or even plastic boxes. The first two alternatives have a far reaching negative environmental impact in my opinion as they directly involve destruction of plants compared to plastics which if managed well do not impact the environment to such an extent. There are numerous externalities caused by disposal of plastic bags. Disposal through landfills causes aesthetic damage. In fact, plastics take very long to degrade and hence they overload landfills with the rate of waste generation ever growing (Flores 2008). Impact on marine life. Flores (2008) writes that 60-80% of marine debris along ocean shores comprises of plastics. These plastic residuals range from tiny microscopic particles to large pieces and paper bags. These pose a threat to marine life incase through entanglement and incase of ingestion (i.e. some plastic chemicals are harmful to living things) Hazardous Emissions of Plastics. Plastics are generally incinerated either for disposal or for recycling. In terms of carbon emission, incineration of plastics is better compared to coal plants. However, the gases released upon combustion which include cyclic chlorinated hydrocarbons and hydrogen chloride, are very harmful to the environment as they are toxic to some animals and even increase the acidity levels the environment (Flores 2008). Aesthetic damage. Many urban centers around the world and Australia are faced with the menace of plastic waste especially in tourists’ destinations. While tourists are largely blamed on creating the mane, the local authorities are charged with the work of maintaining the destinations. In the long run, the work of cleaning the plastic waste may overtake the work of marinating the tourist destination and even make the less cost effective (Flores 2008). Q. 2. A voluntary code of practice is an agreement amongst industry players that serve as a constraint on how they carry on their activities. In most cases, the voluntary code of practice complements the law (Tussest 2008). Several industries and associations have voluntary code of practice which members themselves create and everyone is expected to abide by it. While these practices act as constraint to industry players, they also protect consumers. For industries that directly handle consumers, there are voluntary codes of practice. For instance, the British Codes of Advertising and Sales Promotion binds all advertisers in various industries to creating legal, decent, honest and truthful advertisements. As such a voluntary code of practice in a unified code of ethics by several players that commits them to a particular way of doing things irrespective of competition. In the case of the Australian National Retailers Association, the members had agreed to “creating awareness of the costs of plastic litter, encouraging the use of alternative bags and increasing the recycling of bags” (Sloman, Norris and Garratt 2010), in realization of the externalities caused by use of plastic bags. This initiative achieved considerable success shown by the reduction in plastic waste by around 45% between 2002 and 2006. However, the government did not fully appreciate the achievements of the Australian National Retailers Association as it went ahead and enacted a ban on plastics. The potential of the Australian National Retailers Association’s voluntary code of practice was not given enough time to live to its full potential. This voluntary code of practice in one way or another could maintain if not increase the marginal social benefits of recycling plastics as earlier mentioned in the paper. The alternative option to this voluntary code of practice, which is the government’s ban on plastic bags, reversed the achievements of Australian National Retailers Association. Q 3. The industry players under the umbrella body of Australian National Retailers Association understand that use of plastic bags has negative externalities. This is indicated by their commitment to educate the public on recycling and waste through the voluntary code of practice. The equilibrium price and quantity are at point A where mb=mc, i.e. At Q1 and P1. If there are no externalities involved in the consumption of plastic bags, s is in the equilibrium point A, then the aggregate total benefits to consumers and suppliers would be the total area in blues lines added to that area shaded by green lines. However, inclusion of externalities gives rise to a new supply curve that includes costs to the society as shown by the yellow line. With inclusion of the costs to the society, there is a new supply curve as shown by the yellow line to give rise to a new equilibrium point B. With costs to the society factored in, the total benefits to the suppliers and buyers would be the area of the part shaded in blue only. Movement along the demand line with inclusion of costs to the society gives to give the optimal output of Q1 gives rise to the negative externalities shown by the area of the part shaded in red. The actions of the Environment Protection and Heritage Council (EPHC) which is banning plastic bags will influence the supply of the paper bags negatively, i.e decrease. This will have the same effect as the externalities which shift the supply curve even further outwards from the black to the yellow curve and even further to green curve. Consequently, the benefits to suppliers and consumers will be minimal as show by the blue shaded are above the green curve and below the red demand curve. On the other hand, the externalities and hence social cost increases to the area shaded in purple plus the original externality area shaded in red. As such the ban on plastics by EPHC increases the social cost and lowers the social benefits. As such, the public is suffers in terms of welfare. Q4. Banning the use of plastic has a number of opportunity costs to consumers. First and foremost, the lost chance to live green. Consumers will have lost the chance to recycle plastic bags and achieve emotional satisfaction of being stewards of the environment. Consumers will have to pay more for paper bags and other alternative bags for their shopping. The reason many consumers go for plastic bags is because they are cheaper. The ban on plastic bags is meant to clean up the environment and prevent further pollution. The cost of effecting the ban can be assessed using the pollution abatement approach (Anderson 2010). Pollution abatement is the process by which pollution is reduced. The cost of pollution abatement thus refers to the cost of cleaning up. In the initial stages, there are a lot of plastics in the environment to clean up. Economists argue that there is an economically efficient level of pollution which should not be surpassed for economic reasons. The horizontal axis shows the amount of pollution cleaned up while P is the fixed amount of pollution (plastic bags) in the environment. If P = 0, it means there is no pollution abated. If A* = P, all the pollution is abated. Due to technological restrictions, the marginal benefits of abatement are declining as shown by the curve MB. In the initial stages of clean up/ abatement, the marginal benefits are high which decrease as the environment becomes cleaner gradually. Again, at the initial stages of clean up, costs are low as not highly sophisticated equipments are required. On the other hand, the marginal costs of cleaning up increase gradually as more and more sophisticated equipments are employment in the process. With a relatively cleaner environment, the marginal costs of abatement go up rapidly as it nears point P. The optimal level of abatement is A* where MC = MB. Any abatement beyond point A* in uneconomical as MC > MB. Therefore, the cost of the plastic ban in Australia will be lesser is the short term and increase gradually in the midterm but increase rapidly in the long term. Given that the point of optimal abatement is at A*, it means that there will still be use of plastic bags which is by P – A*. Attempts to remove this minimal use of plastic bags will be uneconomical. Therefore, what is being witnessed in Australia is market failure and government failure. Government measures which are expected to correct market inadequacies are insufficient too. References Anderson, D 2010, Environmental economics and natural resource management. Sydney: Taylor & Francis Flores, M C2008, Plastic materials and environmental externalities: structural causes and corrective policy. Lethbridge Undergraduate Research Journal, Vol. 3 No. 2. Taylor, J 2006, Principles of Macroeconomics, Sydney, Cengage Learning Lancaster, S 2011, Green Australia, A Snapshot. Sydney, Wakefield Press Sloman, J, Norris, K & Garratt, D 2010, Principles of economics, 3rd edn, Pearson Australia, Frenchs Forest NSW. Tussest, B. (2008). Theory and practice of economic policy. tradition and change, Selected Papers from the 9th Aispe Conference. London: FrancoAngeli. Read More