“The economic crisis is petty by comparison to the nature crunch. But they have the same cause.” This is how George Monbiot starts his article below. The comparison between the financial crisis may seem an unlikely one, but global warming and the resultant economic costs could also have a significant effect on the world economy.
This is what denial does Monbiot.com (14/10/08)
Green shoots of recovery Guardian (8/10/08)
Independence from the street up Guardian (23/9/08)
Questions
| 1. |
Define the terms (i) external cost (ii) private cost (iii) social costs. |
| 2. |
Using diagrams as appropriate show the reasons why the market economy may fail to allocate scarce resources appropriately. |
| 3. |
“If the global economy keeps growing at 3% a year (or 1700% a century) it too will hit the wall.”. Discuss possible policies that may help prevent this situation arising. |
A significant illegal trade in ‘e-waste’ has developed with thousands of discarded computers arriving every day in the ports of West Africa. Once there, children are often used to dismantle them and extract metals . However, this has resulted in huge toxic dumps and serious health problems for resident in the surrounding area.
Breeding toxins from dead PCs Guardian (6/5/08)
Questions
| 1. |
Identify the principal external costs resulting from this illegal trade in e-waste. |
| 2. |
Using diagrams as appropriate, show the impact of this market failure on the market for new computers. |
| 3. |
Evaluate two policies that the international community could adopt to reduce this illegal trade in e-waste. |
One of the key Budget measures was a change in the car tax regime. The Chancellor, Alistair Darling, introduced a new banded system annual vehicle excise duty (VED) based on the level of emissions of the vehicle. The cars with the lowest levels of emissions will be exempt from VED, but at the other end of the spectrum, the highest polluting vehicles will face an annual VED of around £440. However, this will be substantially higher in the year of purchase of the vehicle and this so-called ‘showroom tax’ will raise the tax level to £950 in the first year of purchase.
Gas guzzlers hit with higher taxes Guardian (12/03/08)
New taxes on gas-guzzlers will raise an extra £1.2bn Guardian (13/03/08)
Spared at the pumps – but hit in the showroom Guardian (16/03/08)
Q&A: Showroom tax BBC News Online (12/03/08)
Gas guzzlers set to face £950 tax BBC News Online (12/03/08)
Questions
| 1. |
Explain how the highest polluting vehicles affect the socially optimal equilibrium in the market for car travel. |
| 2. |
Using supply and demand diagrams as appropriate, illustrate the likely impact of the new car tax regime in 2009-10 on the equilibrium in the market for car travel. What is the significance of the concepts of price elasticity of demand and consumer surplus in your analysis? |
| 3. |
Discuss the likely effectiveness of the new banded car tax regime at reducing the average level of emissions from cars. Would raising the tax on petrol and diesel be a more efficient method of achieving the same goal? |
The Civil Aviation Authority (CAA) – the regulatory body for Britain’s airports – has allowed the main airport operator BAA to increase substantially the landing charges it levies on airlines. The airlines have reacted angrily and argued that the higher charges will simply be passed on to passengers in the form of higher fares.
Q&A: Airport landing fees BBC News Online (11/3/08)
BAA to raise airport landing fees BBC News Online (11/3/08)
Fares will rise as fees cap is lifted Guardian (cartoon) (12/3/08)
Fares will rise as fees cap is lifted, airlines warn Guardian (12/3/08)
Video
BAA to raise landing fees BBC News Online
Questions
| 1. |
Explain the regulatory system in operation for the control of landing fees at UK airports . |
| 2. |
Explain why the CAA has increased the landing fees that BAA can charge for planes landing at UK airports. |
| 3. |
Is raising landing fees an efficient method of internalising the externalities associated with air travel? |
| 4. |
Evaluate the extent to which the higher landing fees will be passed on to airline passengers. Use diagrams as appropriate. You may also like to consider the relevance of the price elasticity of demand for air travel in determining the extent to which the higher landing fees can be passed on by the airlines. |
2008 may yet come to be seen as the year that marks the death of the single-use plastic bag. Many countries around the world, including China, have banned their use and February 2008 has seen Marks and Spencer announcing a 5p charge per plastic bag in an attempt to reduce their usage. Even government departments have faced criticism over their use as promotional tools. For more details on plastic bag bans and policies relating to limiting their usage, see our 2007/8 podcast on The economics of plastic bags elsewhere on the site.
M&S hopes to cut plastic bag use with 5p levy Guardian (28/2/08)
Brown may legislate against free plastic bags Guardian (29/2/08)
Q&A: Plastic bags Guardian (28/2/08)
M&S to charge 5p for carrier bags BBC News Online (28/2/08)
Brown threatens supermarkets over plastic bag reduction Times Online (29/2/08)
Government accused over plastic bag waste Guardian (29/2/08)
Agency scraps use of plastic bags for Whitehall promotions Guardian (1/3/08)
Plastic bag bans around the world BBC News Online (28/2/08)
Videos
M&S to charge for carrier bags BBC News Online (February 2008)
M&S boss on plastic bags BBC News Online (February 2008)
M&S to start charging for plastic bags BBC News Online (February 2008)
Questions
| 1. |
What are the social costs and benefits resulting from the use of single-use plastic
bags? |
| 2. |
Using diagrams as appropriate, show how the equilibrium price and quantity of plastic bags differs from the social optimum. |
| 3. |
Evaluate two possible policies that the government could use to reduce the use of plastic bags. |