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5 (Pigouvian taxation, Coase, international agreements, innovation,…
5
Pigouvian taxation
calculate SMC of pollution, optimal pollution where MB=SMC
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where does tax go?
- cut alternative? doubt dividend
- compensate victims - can lead to perverse incentive as people move to area for payment
requirements
- information on costs and benefits
- competitive markets
- uniformly mixed pollutants
Examples
- Plastic bag tax
- carbon taxes
- air passenger duty
if social cost of pollution is greater than private cost to polluter, should impose tax to make polluting more expensive so pollute less.
produce where SMC = MB
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advantages:
- cost - C&C does not differentiate different abatement costs, whereas market incentives allow polluters to abate in least cost way
- innovation incentive
- revenue potnetial
disadvantages:
- geographically varying damage = inefficiency
- damaging avoidance or side effects
- regressive - high proportion of low income household income spent on petrol - prices may rise
- impacts on international competitiveness
- cannot achieve deep decarbonisation
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Coase
examples
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PES, debt for nature swaps,
Integrated Conservation for Development projects
PES
- beneficiaries pay for ecosystem services
- conditional payments
- additionality - would not exist without deal
- voluntary
difficulties
- low additionality
- transaction costs
- monitoring and enforcement
- perverse incentives
- generating income to pay
- time delimination
- leakage
China Grain for Green
- paid farmers to maintain forest cover dn prevent floding
- targeted easy access farms that were not contributing to flooding
Amsterdam airport bought homes nearby due to noise
Berlin airport compensates residents for noise pollution
institutional market based solution to externalities
reciprocal nature of externalities
government intervention not required
efficient property rights:
- exclusive - costs and beenfits fro owner only
- transferable (ideally no transaction costs)
- enforceable
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high transaction costs can hinder negotiation and can justify government intervention
TC mean that the initial allocation determines the end result
assignment of property rights crucial in social cost
without property rights there will always be a socially inefficient amount of pollution and both parties will think their position is justified
if pr are well-defined and transaction costs low, parties will negotiate to create an efficient outcome
Wealth effect - income from bargaining can increase demand, therefore final outcome can depend on initial allocation
free entry - wealth from bargaining can induce others to enter market and increase demand for emissions.
Coase implies that rents are great enough to pay for bargaining - not true in long run perfect competition
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international agreements
problems:
- global commons
- hetrogenous states
- free riding
- national sovereignty
- penalties not enforcible
framework:
acknowledge heterogeneity, voluntary, and independent interests
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Montreal Protocol - regulation of Ozone depleting substances cfcs
- limts on emissions
- sanctions
- limit tightened over time
- successful in healing Arctic ozone layer
Kyoto protocol - CO2 emissions reduction
- no penalties
- large-scale exceptions
- no incentive to comply as costs were too high
Paris agreement - keep temperature 2 degrees below:
- nationally determined contributions
- projections not below 2 degree target
innovation
porter hypothesis - polluting firms can benefit from regulation through innovation that can enhance productivity.
triggering experimentation can held reach optimum.
policy does not hinder but enhance competition
Pollution haven - production moves ot nation with less stringent policy
Weitzman optimal search rule - firms will keep searching until MC = expected MB
do people optimise? Tube forced experimentation
Romer - people dont always maximise profits - people are loss adverse and lack analytical tools.
difference between static and dynamic efficiency
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Innovation systems -
- research dn devleopment
- market formation
- diffusion
- feedback loops between stages
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Gersbach solution to free riding
- allocation - each country allocated a share of emissions permits
- revenue from permits distributed, but countries that have offered others a share of licences for an innovated product receive a larger share
- devleoper either sells tech to other countries, or offers for free with funding from agency
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Asymmetric information
adverse selection:
- high and low cost abates
- average tax rate - low cost abates too much, high cost abates too little
- under quantity - high cost produce too little, low too much
- forced exit - overall welfare lower?
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hybrid system - set quantity, tax above, subsidise below
Moral hazard
regulator can observe equipment, but not effort in care and maitainance
wants optimal level F* for given A'
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Midnight dumping - illegal waste disposal
under moral hazard, regulation indices illegal activity
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proxy for effort - maintain staff, pollution level
Risk
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regulation
- ex-ante - issues of asymmetric info
- ex post - criminal and tort law
- insurance
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behavioural insights
system 1 - uncontrolled, fast
system 2 - controlled, slow, effortful
crowding out - rewards can undermine voluntary action
- control aersion
- reduced satisfaction
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salience - increased prominence - fades over time
e.g. Larcon - summer heatwave 2018 increased [erceptions on resource scarcity
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purpose of enviro econ
- identify economic cause of problems
- evaluate importance of problems from econ lens
- policy recommendation - pr
Law
Waste management
through energy recovery, we can extract value from waste disposal
EU Waste Framework Directive 2008/98
- 1975 - focus on disposal - encourage reuse
- 1991 - introduce hierarchy (prevention and recovery)
- 2008 - mandatory hierarchy
- 2018 - circular economy
hierarchy - prevention, re-use, recycling, recovery, disposal
Extended producer responsibility - financial nd organisational e.g. WEEE 2013, Packaging regs
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UK:
- waste disposal licences e.g. Deposit of Poisonous Waste Act 1972
- Environmental Protection Act 1990
- Landfiill Tax 1996
- End of Vehicle producer responsibility regs 2005
- Waste regulations 2011
- Waste electrical and electronic equipment regs 2013
- Environmental Permitting Regulations 2016
- Producer Responsibility Regs 2024
Waste colonisation
Basel Convention - movement can take place if conditions met
Hazardous exports banned between UK and non-OECD
need consent
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UNEP plastics Treaty Negotiations 2024
- no agreement found in Dec 2024 negotiations
- will continue in 2025
- oil producers e.g. Saudi want waste management
- EU want plastic ban
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command and control v market
- C&C concerned with waste management e.g. Elecronic equipment regs 2013
- market incentivise sustainable practises e.g. Landfill Tax, Packaging Tax
Basel Convention 1989 - banned shipment of hazardous waste from OECD to non OECD + must obtain consent
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Water pollution
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Causes:
- industry 35%
- farming 40%
- urban areas 18%
- abandonnes mines
- accidents
can be point or diffuse source
regulation techniques:
- permits and licences to prevent point source pollution
- Bioregionalism - basins rather than admin. boundaries
- bans
EU
Water Framework Drective 2000/60/EC
- bioregionalism - river basin management plans (public involved)
- objective to protect and enhance all sources of water - assess ecological and chemical status (in England no surface water body has good chemical status) 'aims to achieve good surface status' (different to Bathing Directive)
- difficult to understand relation to other directives
- bare minimum targets attainable, but not above
Urban Wastewater Treatment Directive
- minimum standards for treatment
- controls collection, treatment and discharge
Drinking Water Quality Directive
- protect human health from contamination
- improve access
Bathing Water Directive
- classification based on bacteria
- states duty to monitor
- supply public information
- 'requirement, as an objective, good status
Nitrates Directive
- Nitrate Vulnerable Zones
- establish codes of good agri practise
UK
Water Environment Regulations 2017
- follows Water Framework Directive (assimilated)
- permits and lisences
- basins- holistic approach to regulation
- EA in charge
enforcement:
- Criminal prosecution last resort
- Civil sanctions e.g. monetary penalties and notices
Water and Wastewater services:
- privratized in UK
- Water Industry Act 1990
- WaterAct 2014
Urban Wastewater Treatment Regs 1994
- meet minimum standards of Directive
Bathing Water Regulations 2013
- Bathing season May-Spt
- side designation by DEFRA
- monitor and classify quality
- inform public
Nitrate pollution prvvetino regs 2015
- nitrate vulnerable zones in UK where excessive nitrate
- prescribe where certain fertilisers can be used
- create action plans - mandatory
- no compensation for farmers
- 2024 case - courts relctant to intervene
- 58% of UK
Environment Act 2021
- identifies water as priority areas
- SS to implement long term targets for quality to be met by 2038
- Management plan where 75% of water to be close to natural
UK focus on limiting discharge and quality regulation, not preventing unwanted substances
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offence - person knowingly permits discharge except where authorised by permit
1995 case - only requires liklehood of harm, not actual harm
Rights of rivers - legislation that rivers have right to flow, host wildlife and be pollution free
e.g. in New Zealand
can use litigation in name of river
Principles
single European Act 1972 - precautionary, rectification at source, polluter pays
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Nature conservation
Convention on Biological Diversity 1990
- protecting intricacy value of biological diversity
EU Biodiversity Strategy 2030 (2020)
- network our protected areas (more ambitious than NAtura)
- for sustainable development
- firms rely on nature for production e.g. medicines
- 50% GDP depends on nature
International law:
- moved from individulal species (e.g. Whaling regulations) to habitats e.g. Convention of Biovisersity 1992
EU law
Wild Birds Directive 2009 - conservation of all naturally occurring birds in EU
- creates Special Protection Areas SPAs
- maintain existence of Article 1 birds
Habitats Directive 92
- creates Special Areas of Conservation SACs (can be conrolled by NGOs)
- assessment of projects that may harm SACs
- 1999 case confimred that states have discretion in boundaries
Natura 2000
network of SACs and SPAs - covers 18% of EU land
Strategy to 'halt biodiversity loss by 2010' - not ment - only 15% of sites in favourable condition
UK law
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SSSIs - established under legislation in 1949
natural England notify owner, planning authority and SoS
indicate how to manage SSSI
land owner must give NE proposal of operation on SSSI
60% of sites currently in 'recovering' condition rather than favourable
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history:
- Victorians reacted to specific problems e.g. Sea Bird Protection Act prevented slaughter
- evolved to designation of protected areas - RSPB established 1920s
- Legislation began in 1940s
- current emphasis on protection of entire ecosystems
Conservation of Habitats and Species Regulations 2017 - replace EU directives
Previous sites labelled 'European sites' and maintain adherence to directives
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Air pollution
pollution
- 52% of countries do not meet WHO pollution recommendations (stringent)
- several sources e.g. transport, industry, agri, residential
- several harmful pollutants
- human and environmental effects
- transboundary
- air is not owned
regulation:
- technical standards
- air quality standards
- monitoring and assessment
- Market mechanisms
international law
First case: Trail Smelter 1941
- created no-harm rule for transboundary pollution
- developed into prevention principle of Stocklolm declaration
UN protocols
1979 Long Range Transboundary Air Pollution Convention:
- framework convention creating objectives
Following Protocols:
- 1985 Sulphur Protocol - reduce emissions but no flexibility
- 1988 NOX Protocol - more flexibility in base year, 'economically feasible'
- 1991 volatile organic compounds protocol - choice of reduction obligations
- Gothenburg Protocol - adress seeral pollutants
LRTAP adapted over time, increased flexibility and compliance, no full participation
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montreal Protocol for Ozone Depleting substances
2021 Global Assessment of Legislation - 64% of countries have air quality standards, but in 34 of these, this was only a declaration, not a policy
EU law
Ambient Air Quality Directive 2008&2024
- covers several pollutants
- Air quality assessments
- air quality management - Crete plans where levels exceed limit
National emissions ceiling directive:
- implements Gothenburg Protocol - several pollutants
- obligations for national emissions reduction commitments 2020-29
- discretion in implementing
- most states not complying
- 22 states requested extension from 2010-2015
- for Italy, defence of temporary compliance difficulties accepted, but not systematic failure defence
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UK regulation
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UK did not apply for extension to 2010 Emissions Ceiling Directive compliance
ClientEarth case - SC issued mandatory oder for SoS to prepare air quality plans for no later than 2015
in 2018, ClientEarth challenged revised plans: 2017 Air Quality Plans required LAs to create feasibility studies for clean air zones
- held insufficient government action - cannot discharge duty - need to balance national and local authority
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current issues:
- separating scientific and policy feasibility
- which pollutants? hard for new ones to be legislated on
- pollutant effects do not have limit values or ceilings
- disparaties in distribution
- multi-level coordination required
Values - what people believe to be important
changing values changes law
- Plastic straws regulations 2020 - David Attenborough effect
Anthroprocentrism - environmental protection for the utility of humans. there can be junstifcation for damage.
attracts more attention
- stockholm convention on human environment
- 1979 UN defined pollution as 'substance..endanger human health'
Ecocentrism - natural has intrinsic value that should be preserved regardless of humans
- high seas treaty - marine protection
- Ecuador - rights of nature in constitution in 2008
sustainable development - balancing econ growth, enviro and present and future generations
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sources of law
UK:
- primary and secondary legislation
- courts
- government bodies
EU:
- council - agrees on legislation
- commission - proposes legislation
- parliaments - budgets, adopt legislation
- courts
Regulations - instruments that bind states
directives - binding result, discretion
CJEU - interpretation, infringement procedures
ETS
advantages/uses:
- market mechanism to reduce emissions
- cost effective
- induce innovation
- adherence to Kyoto Protocol
- single market EU application
- Flexible
- create leading carbon market in EU
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history
devleloped incrementally
in UK began as public health controls following revolution e.g. Public Health act 1875, Alkalai Act 1863
not integrated - ad hoc
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modern:
- Great Smog in London1952
- Silent Spring book 1962
- Greenpeace founded 1969
- Stockholm Conference on human environment
- Intergovernmental Panel on Climate Change 1988
- Rio conference 1992
- Paris agreement 2015
human rights has integrated with enviro law to emphasis the need to preserve nature for human health
shift to anthroprocentrism
Stockholm convention places environment as a human concern
non-humna interest not included
first establishment of human right to environmental quality
EU law beyond borders
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inclusion of aviation in ETS held to be lawful in litigation by US Air Association since objective to fulfil Kyoto obligations
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Corporate Due Diligence Directive 2024
- requirement for companies to carry out due dilligence in supply chain
- humans rights and environmental harm
- carry out measures to mitigate adverse impacts
- cane held bale for damages
- obligation for climate transition plan
revision:
- remove obligation to assess beyond direct suppliers
- remove obligations for climate transition plan
- liability limitation
- extra transposition time
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signal that laws volatile, but businesses need stability to invest in EU
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Cotonou agreement 2000
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promote trade, development and environmental protection
trade affects the environment
environmental regulation affects trade
physical environmental change impacts trade
Brussels effect
- EU law can impact internationally due to significant market size
Scott (2014) Territorial Extension
- measure abroad triggered by connection
- legal
- border mechanism designed to adhere to WTO and extraterritorial law
WTO
- EU measure acceptable if no unjustifiable discrimination, and where necessary to protect humans and plant life.
- there is a thin line between protectionist measures that are dressed as environmental and actual environmental
Climate change
International law
UNFCCC 1992 framework at Rio Convention
- no targets
- framework for future action
- common but differentiated responsibility
- set out principles and objectives
Kyoto protocol 1997:
- set out binding emission reduction targets for developed nations
- market mechanisms and joint implementation
- incentives low as costs high
- no penalties
Paris Agreement
- developed and developing nations - prioritises participation rather than differentiation
- temperature goals
- net zero goal
- countries to give 'Natonally Determined Contributions' - each more ambitious
- no sanctions
World is based on an economy of GHG emissions and fossil fuels - Ukraine war demonstrates global volatility when this distribution is disrupted
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in 2007, Dutch government was found to be in breach of human rights obligations due to failure to meet international climate change targets under Kyoto P
EU law
European Climate Law framework - includes 20 regulations and directives
- goal of 50% emissions reduction from 1990 by 2030
Renewable energy directive
- target 42% renewable energy by 2030
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EU wants to be a climate leader but adopts a learning by doing approach e.g. ETS initial phase unsuccessful - is this sufficient for neutrality goal?
UK climate law
Climate Change Act 2008
- established Independent Committee on Climate Change - assess targets and progress - UK met target for 2008-2022, but if off track following
- created emissions reduction targets - net zero 2050
- no express sanctions
friends of the Earth - 2 challenges 2022 and 2024 of the Net Zero Strategy - claims that SoS did not gather adequate evidence before approval
UK traditionally focused on supply side - restricting emissions from sources
But household and transport emissions on demand side are also high
Politicaly difficult as could require free rights restrictions
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legal challenge
law is based on stability, but climate change is disruptive
- by allowing a new climate case, is this disrupting law?
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Challenges in regulation:
- longtime frames, action needed now
- evolving scientific insights and uncertainty
- polycentric problem
- dynamic
- several sources and impacts
- international
Framework Climate Laws
- set general targets and obligations
- overall governance framework
- widespread across 60 countries - all different
- e.g. UK Climate Change Act
Impact assessments
EU EIA Directive 2011
Article 1
- preparation of an environmental statement
- consultation and publication
- examination by the decision maker
- conclusion by decision maker on impacts
Schedule 1 project - requires mandatory EIA - large scale projects e.g. roads, power plants, refineries
schedule 2 projects - EIA only required when likely significant harm on environment by virtue of size or location (something more than a bare possibility)
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Kazakstan
- chosen to avoid downstream emissions in EIA so not to interfere with natinal ETS
- any benefit of EIA will allow others to pollute more
procedural environmental law
Collect information, evaluate and mitigate the impact of climate change of a project before planning decision is made.
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