Category: Economics for Business: Ch 22
March 2007 has seen a lot of activity in government circles relating to the environment and environmental legislation. The EU has agreed a renewable energy target for all members while the UK government has released its own climate change bill. The Carbon Trust has then released a one-year pilot of a carbon labelling scheme, with Walkers Crisps being the first brand to bear the carbon labels. The aim is to increase consumers’ awareness of the carbon footprint of the goods they are buying. The articles linked below look at all these issues.
EU agrees renewable energy target BBC News Online (9/3/07)
EU seeks converts to eco-stoicism BBC News Online (9/3/07)
Navarra embraces green energy BBC News Online (9/3/07)
How Europe can save the world Guardian (11/3/07)
Carbon labelling scheme launched BBC News Online (15/3/07)
Labels reveal goods’ carbon cost BBC News Online (16/3/07)
New law in the climate jungle BBC News Online (13/3/07)
Questions
| 1. |
Explain the difference between private costs and external costs. Identify five external costs that arise from the generation of electricity by conventional means. |
| 2. |
Using diagrams as appropriate, show the impact on the market for energy of increased use of energy generated from renewable sources. |
| 3. |
Evaluate the likely effectiveness of the carbon labelling scheme introduced by the Carbon Trust. |
In a surprise move, the Tories have announced plans to tax air travel as part of their environmental policy. It was no surprise to hear the airlines criticise this, but disquiet about this policy has been expressed in traditional Tory circles and it amounts to a significant departure from the past for the party. Are they just flying a kite, or is this a serious policy initiative?
Tories reveal plans for green tax hike on air travel Guardian (11/3/07)
Tory plan for sky-high flight taxes Scotsman (11/3/07)
Airlines shoot down Tory ‘tax on fun’ Telegraph (12/3/07)
Green tax won’t help the planet or the Tories Telegraph (11/3/07)
Tories plan green tax on flights BBC News Online (11/3/07)
Questions
| 1. |
Why might a free market in air travel not result in an optimal number of flights. |
| 2. |
Discuss the likely effectiveness of the tax on flying for reducing the demand for air travel. (You should consider the likely value of the price elasticity of demand in your answer.) |
| 3. |
With the use of appropriate diagrams, assess the likely impact of the tax on flying on the equilibrium level of price and output in the market for air travel. |
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. |