Degradation of the environment produces damages whose control coordinates between emission and marginal cost. Benefits of improved environment result from a reduction of harm. Measuring emissions, determining resulting ambient, estimating human exposures, measuring impact and calculating the value of these effects are steps to follow in the measurement of emission damage function.
Their methods of valuation are categorized into direct and indirect methods
Direct methods (Market price used)
Change in productivity: Health effects of pollution, Impact of the pollution on agriculture and natural resources
Health care costs: Health effects of pollution
Loss of human capital: Health effects of pollution
Restoration of damaged properties or enterprises: Ecosystem damage and polution damage to structure.
Indirect approaches (Willingness to pay inputted)
Contingent valuation: Current and future environmental quality and all forms of pollution
Preventive expenditures: Water pollution, air, noise, visual, effect on consumers, industry and ecosystem damage.
Surrogate markets Travel cost and "green goods": Recreation benefits of quality improvement, environmentally friendly products as substitutes for polluting goods.
Contingent valuation method
CVM enable analysts to estimate a variety of commodities that are not existent in the trade market line health and public goods, e.g., scenery and clean air. In the 1970s and 1980s the method revolutionized by theoretical and empirical refinement making it widely accepted (Hanley, 1963).CVM seeks to inquire and persuade the customer's willingness to pay and or willingness to embrace change in environmental service flow in the well-coordinated open market.
Problems associated with CVM and their solutions
Solution: Respondent to be encouraged to give an exact valuation even if they do not agree with the scenario
Time allocated for the client to reply affects their answers
Solution: All customers can be assigned the same amount of time or requested to respond immediately
Choice of welfare measures
Solution: Willingness to accept should be equal with the desire to pay.
Biased estimation of values
Solution: elimination of the bias
Difficulty in verifying survey response
Solution: Comparison with actual behavior should be made after the survey
Customization of the questionnaires and training of researchers
Solution: The questionnaire should be customized to fit the economy in question and the personnel to receive adequate training.
The choice to settle on this technique had advantages, and this includes:
It allows for individuals to consider the actual cost to themselves of a particular impact Values into account
It gives room for customization to allow inclusion of variables that are relevant to the study
CVM also puts non-use
The various studies show that CVM has repeatability when it comes to results in different environments using test-retest methodology. CVM is dimmed to harbor a great potential in the willing to pay for environmental interventions, and it has been applied in numerous developed countries.
Apart from Air pollution, benefits of non-utilized and future damage cost refrained from must be considered in the valuation of stratospheric ozone depletion and climate change. CMV highlight current value and it became difficult to estimate future costs saved due to uncertainties about the cost of healthcare and health impact. The rise in sea level means a decline in property value at sea level.
Policymakers have many choices to make when it comes to solving environmental problems. Many questions surround the choice for stringent measures or incentives, and clearly, there is no a clear answer for all. Many factors are put into consideration before deciding whether it is economic stimulus (EI) path to take or exercise direct regulation commonly known as command-and-control (CAC) policy. The core determinants include government policies and regulatory infrastructure as well as the nature of the environmental problem. CAC policies also have a higher administrative cost.
Recent researchers have established that most of the policies had elements of the two approaches. What leads to them being categorized as EI or CAC is the dominant approach. This puts emphasis on the need to merge the two methods to counter environmental impacts.
EI instruments are thought to be more efficient than CAC because their resultant unit cost of abatement is lower than CAC.EI instruments are advantageous over time because they have a provision for continuous incentives upon reduction of pollution giving room for technological advancement and allowing maximum flexibility in reducing emission. CAC policies achieve their objective with a lot of certainties and less time. Regulated firms show a likelihood of disagreeing to EI despite it being efficient. Their fear is that they will face a higher cost.
Home | Resources for the Future. (n.d.). Retrieved March 16, 2017, from http://www.rff.org/files/sharepoint/WorkImages/Download/RFF_Resources_152_ecoincentives.pdfWorld Health Organization. (n.d.). Retrieved March 16, 2017, from http://www.who.int/quantifying_ehimpacts/publications/en/wsh00-10.pdfHarris, R., & Olewiler, N. (1979). The Welfare Economics of Ex Post Optimality. Economica, 46(182), 137. doi:10.2307/2553186
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