Environmental Pollution, Concept Of Externalities

Environmental pollution, concept of externalities

When we talk about pollution we refer to the introduction of substances or other physical elements in a medium that cause it to be insecure or not suitable for use, that is, the introduction of any element that is harmful to the health and well -being of theliving beings that can be affected. Depending on the affected medium, pollution is called different forms: water pollution (water), air pollution (air) and soil pollution. The cause of the current deterioration of air quality is pollutant emissions to the atmosphere. High levels of pollution can cause very important negative effects on human health and in the environment, especially in large cities.

The main causes of air pollution are related to fossil fuel burning. The combustion of these raw materials occurs in the processes or in the operation of the sectors and the road transport, mainly.

In fact, it is a very serious problem, although on many occasions you do not take into account the problems that can lead to the long term. According to INE data and the Ministry of Environment, in a decade 93 have come to be counted.000 deaths due to factors associated with air pollution. WHO estimates that about 7 million deaths that occur in the world have as a common denominator air pollution.

two. The externalities and public solutions of this problem

Concept of externality

Despite being a concept whose importance is vital to understand the reason for today’s situation in relation to environmental pollution, according to some economists such as Scitowsky, it is one of the most vague concepts of economic literature since its definitions are fewand unsatisfactory.

We will stay with this where externalities are defined as: effect that the action of an economic agent (consumer or company) has on another agent and does not pay and is not paid. And we must take into account that when there are externalities, indirect effects are triggered that have an impact on third party consumption and production opportunities, but the price of the product does not reflect these externalities. When a free advantage or disadvantage occurs, a damage without monetary compensation we are talking about an externality.

We must understand that externalities are a market failure because the agents that produce them do not take into account the effects of their utility functions (consumers) or benefits (companies) of other agents therefore it is possible to say that there is no efficient allocationof resources.

Externality classes

We can subdivide them into two groups:

Negative:

• Of consumption: are those that have a daily character, that is, that they develop in our daily work. Eg.: The noisy holidays.
• Production: Aircraft noise, contamination by the production of our factories.

Positive:

• Of consumption: are those benefits obtained in a common way. eg.: When you put a flu vaccine all the others that relate to you benefit.
• Production: They are less common than negative. eg.: Honey production produced by bees and their benefit for fruits production.

Public sector solutions to externalities

At this point we will discuss the possible solutions that the public sector can give to solve the problem of externalities which we provide from the legal point of view, financial law, quasi-mercies and we will propose other existing alternatives.

We will start with the solutions from the legal system:

1. Extra -contractual responsibility

The art. 1902 of the CC collects that: the one that by action or omission causes damage to another, intervening guilt or negligence, is obliged to repair the damage caused. Following the provisions of this article we can deduce that we consider as an extra -contractual civil liability all damage, regardless of any pre -existing legal relationship between the parties. And it is that externalities are a clear example of extra -contractual civil liability since the offender moves its action in the form of damage that produces in other agents (since they will have to compensate them). The main problem that arises in this type of assumptions is to identify who is the holder of law by the difficulty of identifying it.

two. Ecological crime

Another way to avoid the contamination that is produced by the effects of externalities is through penalty to all those who carry out environmental crimes. The different assumptions that are collected are in Title XVI: of the crimes related to the ordination of the territory and urbanism, and the protection of historical and environmental heritage.

3. Class actions

This is a more novel type of assumption to be a non -traditional litigation procedure that allows a representative with typical claims to demand or defend in the name of, and appeal in court for a class or group of people when the matter or issues are ofcommon interest and there are a large number of involved.

4. Pigouvian taxes

Pigouvian taxes are those that are intended to correct a negative and/or positive externalality. This is therefore achieving a tax proportional to the amount produced that makes the private CMG equal to the social CMG.

5. Subsidies

In this case one of the solutions that arises is that of the subsidy to the cause of the damage to cover the costs of adopting a less polluting technology (or behavior).

The main inconvenience posed by this behavior is that we are assumed that the pollutant has the right to pollute. Another problem that can be raised is that pollution per unit of product is reduced, but the company produces more and contaminates more, although for that we must also take into account what is the type of subsidy that is granted. A clear example is the Green Energies subsidy granted to companies.

Consequences of externalities

Our study will focus on the problem of pollution and it is not that it is only an economic inconvenience but from all aspects, but we will focus on the first. It is an economic problem that consists in balancing the benefits and costs. In a market without regulations with an externality, the pollution created depends on the market balance amount of the good produced.

• A private production cost is a cost that falls to the producer of a good, and the private marginal cost (CMG) is the deprived of producing one more unit of a good or service.
• An external production cost is one that does not fall on the producer, but in others. The external marginal cost is to produce one more unit of a good or service that falls to others that are not the producer.
• The social marginal cost is the marginal cost incurred by the entire society, by the producer and all the one over whom the cost falls, and is the sum of the private marginal cost and the external marginal cost.
• Private marginal cost, external marginal cost, and social marginal cost increase production.

The balance in the presence of external costs occurs when the amount produced in the private marginal cost is equal to the marginal benefit. The producer does not take into account when making his decisions the external cost. In this situation, the marginal benefit is less than the social marginal cost, therefore, this market balance is inefficient. The market is located at point A, while the efficiency situation would occur at point C. The area located between ABC points is a loss of social welfare.