Environmental Engineering Reference
In-Depth Information
Social Costs
Most countries rely on commercial exploitation of natural resources such as miner-
als, forests, fish, and soils for a significant proportion of national income. Usually natu-
ral resources are owned by the State; therefore, formulation and analysis of public policy
over natural resources and the environment (so-called 'green' issues) is crucial. At the
same time, countries are also trying to encourage greater investment in industrial activities
as part of a broad economic development programme. These changes are placing more
urgency on 'brown' issues such as air and water pollution. Countries also are increasingly
becoming part of the global community. Economic reform programmes being imple-
mented by governments are exposing countries to global competition. International eco-
nomic, sectoral, and environmental policy is now an important factor shaping national
policies for economic and social development, and environmental management.
Most economic arguments for government intervention are based on the idea that the
marketplace cannot provide public goods or handle externalities. Public health, educa-
tion, national and domestic security, and a clean environment, air and water, have all been
labelled public goods. Public goods have the distinct aspect of 'non-excludability'. Non-
excludability means that non-payers cannot be excluded from the benefits of the good or
service. Externalities occur when one person's actions affect another person's well-being
and the relevant costs and benefits are not reflected in market prices. A positive externality
arises, for example, when non-paying spectators benefit from a fireworks display. (Note
that the free-rider problem and positive externalities are two sides of the same coin.) A
negative externality arises when one person's actions harm another. When emitting SO 2 ,
mining companies may not consider the costs that SO 2 pollution imposes on others.
Policy debates usually focus on free-rider and externalities problems. Some public
good problems can be solved by defining individual property rights in the appropriate
economic resource, a less effective solution for environmental problems involving air or
water. Property rights to air and water cannot be defined and enforced easily. It is dif-
ficult to imagine, for instance, how market mechanisms alone could prevent depletion of
the Earth's ozone layer or combat global warming. In such cases economists recognize the
likely necessity of a regulatory or governmental solution.
Negative externalities impose costs on society for private gain. This asymmetry means
some pay much of the costs and receive few of the benefits. Externalization of social and
environmental costs is bad economics, intensifying poverty and hindering sustainability.
Externalized costs also too often fall disproportionately on the poor who least can afford to
pay them. Consequently, there is also the argument that externalization means developing
countries are subsidizing the development in the rest of the world. Minerals extraction and
production often incur social and environmental costs, which should be internalized by the
industry and accounted for in prices. Good economics, internalizing externalized costs, is
the best and fastest way of approaching sustainability. Thus as part of a new mine develop-
ment, proponents should routinely carry out economic analyses, as well as financial ones,
in order to clarify how they contribute to development goals. This is in the company's self-
interest as well as the interest of the host country.
Negative externalities impose
costs on society for private gain.
Best Available Technologies
Legislative criteria have developed worldwide on the basis of those provided by 'Best
Available Technology (BAT)', sometimes modified by economic and managerial factors
to 'Best Available Technology Not Entailing Excessive Cost' (BATNEEC). Such criteria
can provide a comprehensive system for the control of process emissions to the environ-
ment to levels which have a rational basis and are as low as can be achieved with modern
technology, as long as the term 'technology' is understood as embracing planning, design,
 
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