What forms of government intervention might help to correct the market failure from negative externalities?
To many economists interested in environmental problems the key is to internalise external costs and benefits to ensure that those who create the externalities include them when making decisions.
How to deal with the mountain of waste?
Despite a decade of soaring recycling rates, the UK still landfills more rubbish than any other country in Europe. Each landfill site releases huge amounts of methane – a greenhouse gas 20 times as damaging as CO2 – into the atmosphere. Reports suggest the UK is now running out of places to bury its waste – one study found every landfill site will be full by 2018.
Under severe pressure from the European Union to cut the amount of rubbish it buries, the British government introduced a landfill tax for local authorities that mean the amount they must pay per tonne rises with every passing year. From a base rate of £7-per-tonne in 2000, the charge has now hit £56 – and will rise to £80 by 2014.
To get to a 'zero waste' economy local authorities will have to persuade people and businesses to create less waste in the first place, as well as re-use and recycle more. Where it's not possible to turn waste into new products, it makes more sense to use it to generate power for homes and businesses, rather than send it to landfill. So enters the spectre of the incinerator, long associated in this country with dirty, industrial plants spewing out toxic smoke.
But new technology allows for other ways of dealing with waste. Anaerobic digesters are another option, taking green and organic waste and using biological processes to turn it into electricity.
Burning rubbish is such old technology," said an anti-incinerator campaigner. "If you burn things, there have to be emissions.
Source: News reports
Evaluation: Problems with Environmental Taxes
Pollution taxes can lead to government failure
Externalities and Regulation
The government can intervene in a market using regulations and laws. For example, the Health and Safety at Work Act covers all public and private sector businesses. Local Councils can take action against noisy, unruly neighbours and can pass by-laws preventing the public consumption of alcohol. The British government introduced a ban on smoking in public places from July 2007. The European Union has introduced directives on how consumer durables such as cars, batteries, fridges freezers and other products should be disposed of. The onus is now on producers to provide facilities for consumers to bring back their unwanted products.
Examples of regulations to address negative externalities
Alternative to taxing the bad - subsidising positive externalities
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