Category: Essentials of Economics: Ch 07

Did you buy red roses for Valentine’s Day? If so – where did they come from? Africa or Europe? You may have taken a conscious environmental decision to buy from European sources as the flowers do not have to travel so far and therefore involve fewer air miles, but according to International Development Secretary, Hilary Benn, this may be mistaken and it may be ‘greener’ to buy red from Africa.

Buy African flowers – UK Minister BBC News Online (13/2/07)
Buy African flowers for Valentine’s Day, minister says Guardian (13/2/07)

Questions

1. Compare and contrast the social costs and social benefits (including both private and external costs) of buying red roses produced in Europe and those produced in Africa.
2. Assess which are the most environmentally beneficial presents to give on Valentine’s Day. Give reasons to justify your answer.
3. Evaluate two policy options available to the government to reduce the environmental impact of Valentine’s Day.

The world of ‘carbon offsetting’ has suddenly become trendy. With bands like Coldplay and the Rolling Stones making their tours ‘carbon neutral’ and government ministers offsetting all the environmental cost of their overseas travel, the industry has hit the limelight. Even Tony Blair, under pressure over his personal holidays has relented and agreed that he will offset all his personal travel. However, up to now the industry has been unregulated and standards have been uncertain. Defra has now set new standards for the industry to comply with and the articles below consider the impact of this regulation.

Questions

1. Using diagrams as appropriate, explain how carbon offsetting is intended to reduce the environmental impact of plane travel.
2. Discuss the effectiveness of carbon offsetting as an approach to reducing the impact of increasing plane travel.
3. Suggest one demand-side and one supply-side policy to reduce the carbon emissions resulting from air travel and assess their relative effectiveness.

The issue of road pricing has been simmering in the background of the environmental debate for many years and has, this month, gained greater prominence with the publication of a draft version of the Road Transport Bill that will allow local authorities to run pay-as-you-drive trials in their local areas. A number of local authorities will be interested, though all will be wary of the policy given the recent petition on the Downing Street website against road pricing that got nearly two million signatures! London Mayor, Ken Livingstone, has meanwhile extended the reach of the London congestion charge with his plans to create a low emission zone (LEZ) in the capital and charge more for older, and therefore dirtier, vehicles to enter the zone.

Draft bill starts Britain down the road to pay as you drive Guardian (21/5/06)
Livingstone to charge older, dirtier lorries £200 per day Guardian (8/5/06)


Questions
1. What are the external costs and benefits resulting from increased use of the roads?
2. Discuss the extent to which the policy of charging more for older, dirtier vehicles is likely to reduce the external costs of driving.
3. Using diagrams as appropriate, show the likely impact of pay-as-you-drive schemes on the social equilibrium in the transport market.

Ever keen to boost his environmental record, Ken Livingstone, the Mayor of London, has decided to extend the London congestion charge westwards into areas like Kensington and Chelsea. Residents are up in arms, but will the larger congestion zone help further with the management of traffic and carbon emissions in London?

Congestion zone could fuel voter revolt against Livingstone Guardian (19/2/06)
London congestion zone (interactive map) Guardian
London congestion zone (podcast) Guardian
London C-charge zone spreads westwards Times Online (19/2/06)
Livingstone praises congestion zone extension Guardian (19/2/06)
Bigger new congestion zone launched Guardian (19/2/06)
London’s Lefty Mayor Fights Traffic Guardian (18/2/06)
Leafy Kensington shows its anger BBC News Online (17/2/06)

Questions

1. Using diagrams as appropriate, show the impact of the extended congestion zone on traffic levels in London.
2. Discuss whether the implementation of a larger congestion zone will help move closer to a socially optimal position in this market.
3. Assess other measures that the Mayor of London could introduce to meet emissions targets for the city..