Environmental Problems, Their Causes, and Sustainability 1

• Decreases depletion and degradation ofnatural resources• Improves environmental quality by full-cost pricing• Encourages pollution prevention and waste reduction• Stimulates creativity in solving environmentalproblems to avoid paying pollution taxes and therebyincreases profits• Rewards recycling and reuse• Relies more on marketplace rather than regulation forenvironmental protection• Provides jobs• Can stimulate sustainable economic development• Allows cuts in income, payroll, and sales taxesFigure 26-10 Solutions: Advantages of taxing wages andprofits less and pollution and waste more. Pick the two advantagesthat you think are the most important.shift. It would have to be phased in over 15 to 20 yearsto allow businesses to plan for the future and depreciateexisting capital investments over their useful lives.And because consumption taxes place a larger burdenon the poor and lower middle-class than do incometaxes, governments would need to provide safety netsin the form of lifeline payments or credits for essentialssuch as food, fuel, and housing.Nine western European countries have begun trialversions of such tax shifting, known as environmentaltax reform. So far only a small amount of revenue hasbeen shifted by taxes on emissions of CO 2 and toxicmetals, garbage production, and vehicles entering congestedcities. But such experience shows that this ideaworks.xHOW WOULD YOU VOTE? Do you favor shifting taxes onwages and profits to pollution and waste? Cast your voteonline at http://biology.brookscole.com/miller14.How Can Environmental Laws andRegulations Improve EnvironmentalQuality and Reduce Resource Waste?Encouraging InnovationEnvironmental laws and regulations work bestif they motivate companies to find innovative ways tocontrol and prevent pollution and reduce resourcewaste.Most economists agree that government interventionin the marketplace is needed to control or prevent pol-lution, reduce resource waste, and encourage full-costpricing.Regulation is a widely used form of government intervention.It involves enacting and enforcing lawsthat set pollution standards, regulate harmful activitiessuch as releasing toxic chemicals into the environment,and require that certain irreplaceable or slowly replenishedresources be protected from unsustainable use.Many environmentalists and business leadersagree that innovation-friendly regulations can motivatecompanies to develop eco-friendly products and processesthat can increase profits and competitiveness innational and international markets. But they also agreethat some overly costly pollution control regulationsdiscourage innovation. Some regulations are too prescriptive,for example, mandating specific technologies.Some set compliance deadlines that are too shortto allow companies to find innovative solutions, andthey discourage risk taking and experimentation.Consider the difference between the United Statesand Sweden concerning their regulation of the pulpand paper industries. In the 1970s, strict U.S. regulationswith short compliance deadlines forced companiesto adopt the best available end-of-pipe waterpollution treatment systems, which were costly.By contrast, in Sweden the government startedwith slightly less strict standards and longer compliancedeadlines but clearly indicated that tougherstandards would follow. This more flexible and innovation-friendlyapproach gave companies time to focuson redesigning their production processes instead ofrelying mostly on waste treatment. It also spurred themto look for innovative ways to prevent pollution andimprove resource productivity to meet stricter futurestandards. They developed processes for pulping andchlorine-free bleaching processes that met the emissionstandards, lowered operating costs, and gave them acompetitive advantage in international markets.Experience shows that an innovation-friendly regulatoryprocess emphasizes pollution prevention andwaste reduction and requires industry and environmentalinterests to work together in developing realisticstandards and timetables. It sets goals, but freesindustries to meet them in any way that works, and establishesstandards strict enough to promote real innovation,allowing enough time for it. It also uses marketincentives such as emissions and resource-use chargesand tradable pollution and resource-use permits to encouragecompliance and innovation.Finally, pollution control regulations have to bedesigned to improve environmental quality while notbeing too costly. Recall that the marginal cost for removinga specific pollutant from gases or wastewaterbeing discharged rises with each additional unit ofthat pollutant that is removed (Figure 26-7).http://biology.brookscole.com/miller14595