Transcript Document

Various Economic Means for
Environmental Improvement
Kosuda Keigo
Monroig Evan
R.A.Nilantha P.K.
Samarappuli Nirosha
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Global trend of environmental degradation

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increase of the amount
of CO2 in the
atmosphere
acceleration of global
warming
destruction of the ozone
Mln ton
layer ・・・
25,000
emissions of CO2
20,000
15,000
10,000
We need to preserve the environment!
5,000
We need a certain regulation.
0
1980 1985 1990 1995 1996 1997 1998 1999
year
OECD
non - OECD
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Main characteristic of environmental issue
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External diseconomy
Action of a certain economic unit that induces
a loss to other economic units, without
performing payment or compensating the
expense.
PPP (polluter-pays principle)
The idea that whoever causes pollution is
responsible for the cost of repairing any
damage.
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Two kinds of regulations
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Direct regulation (command and control)
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This has been achieved by applying direct
regulatory controls on industry, for instance by
specifying allowable levels of pollution.
The basis of the regulatory system is that the
polluter has little choice - they comply with the
standard imposed or face penalties.
This system may be the most appropriate for
controlling particularly dangerous pollutants.
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Two kinds of regulations (2)
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Economic means (economic instruments)
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This regulation promises to transform the pattern
of pollution control.
This aim to control pollution by harnessing the
power of market incentives, offer a more costeffective, flexible and dynamic form of regulation
than conventional measures.
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Direct regulation
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Merits
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Immediate effect
Demerits
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Administration cost is very huge
Administration cannot identify discharge
curtailment of expense between companies
Causal relationship is complicated
Extent of the impact is too wide
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Economic means
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Merits
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PPP is reflected
Use of price mechanism is effective
Efficient distribution of resources is possible
Applicable from prevention measures to penal
regulations
Demerits
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A setup of the optimal tax rates is difficult
The rate of a low income earner's expense burden
is large
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Kind of Economics Means
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Transferable (tradable) Permit System
Fiscal measures
Measures for older vehicles
Emission charges
Quota system on car ownership
Road pricing (licence)
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Transferable Permits (TP) System
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What is the TP system?
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TP is not a new concept (it has been
used in fisheries, in the fields of
construction and water pollution).
Variety of instruments: introduction of
flexibility into traditional regulation,
organization of competitive markets for
permits…
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What is the TP system? (2)
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These various means have in common:
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Quantified physical constraints (obligations,
permits, credits, rights)
Permission granted to the agents to
transfer these quotas between
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Activities
Products
Places (offsetting)
Periods of time (banking)
Other agents (trading)
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Features of TP appropriate for the
transport sector
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More likely to achieve a quantitative objective
than taxation.
If the price-elasticity of demand is low in the
short term or medium term, a TP system is
more appropriate.
It allows flexible implementation of control of
policy and can be used to target local and
regional problems arising from the
transportation activities.
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Features of TP appropriate for the
transport sector (2)
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In political terms, systems where permits are
allocated free of charge may be seen as a
means of avoiding an additional tax, e.g..
High fuel duties in Europe, this can enhance
the acceptability of the new environment.
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Important points for effective TP
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The heterogeneity of the agents involved in
the system.
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Marginal costs of pollution abatement must be
sufficiently different for agents allowing profits to
be made by the exchange of permits and thus
letting the market function effectively.
Clarity: the physical basis is clearly defined
Simplicity: for transactions
Pragmatism: the program should be able to
evolve
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Main arguments against the use of TP
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Cost of administration over a large number of
mobile sources
Transaction cost of transferability.
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Potential for Implementation
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Unitary vehicle emissions
Fuel standard
Car ownership
Car use
Land-use
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Case study: Ecopoint program in Austria
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Background
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NS route Italy – Germany
Major link between Eastern
Europe and Western Europe
Ecologically fragile Alpine
valleys
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Germany
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West
East
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Exhaust emissions cannot
readily escape
Highway noise is intensified
NOX are 3 times higher than
on a plain with similar traffic
volumes
Italy
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Objectives of the Ecopoint Program
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Austria negotiated an agreement with the
European Union concerning trucks passing
through Austria.
The objectives were to reduce atmospheric
pollution (NOX) to 60% of its level in 1991
after 12 years, and to reduce the noise.
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The Ecopoint Program
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Concerns the heavy goods vehicles (HGV)
that pass through Austria, originating from all
EU Member States and some other countries.
Each vehicle has a Conformity of Production
document (COP) which states its level of NOX
emissions, and the number of Ecopoints
required to travel through Austria (October 1,
1990).
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1 Ecopoint = 1g of NOX/kWh
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The Ecopoint Program (continued)
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Ecopoints are distributed annually by the
European Commission among the Member
States, which in turn redistribute them among
their hauliers.
The unused Ecopoints are transferred
through an administrative process.
The Ecopoints are deducted using an
electronic system (Ecotags, overhead
electronic readers).
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Results: costs
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Interoperable electronic road charging
systems targeting trucks exist already, or are
being set up in several European countries.
 the costs will be minimal once these
systems are already working
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Results: benefits
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The number of Ecopoints used by trucks has
declined more swiftly than the target value
laid down in the agreement. The program
may have accelerated the technology shift.
Ecopoints
1993
1999
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51%
2%
7 or less
0.1%
78%
Percentage of trucks paying a certain number of Ecopoints
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Results: shortcomings
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Insufficient coverage of pollution sources
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Lack of incentive to use even cleaner trucks
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Trucks going to Austria or coming from Austria
Light-duty vehicles and buses
Because the number of through trips cannot exceed 108%
of the number in 1991 (the “108% clause”)
Too comprehensive measure for addressing the
preservation of Alpine valleys
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The system targets entire Austria, so the traffic may increase
in the Alpine valleys as long as it decreases in plains
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Conclusions
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It is technically possible to apply a quotabased system of permits to mobile sources
within a defined area, at an acceptable
financial cost.
The points of entry and exit should be few
and easily controllable (trade-off with the size
of the area).
The transfer of quotas between hauliers could
have been introduced, to reduce the total
cost of the scheme.
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