The Economy and Environment - How Bad is Pollution?

To pollute or not to pollute... This is the question. Since the industrial periods, we have been altogether stuck with the same problem- climate change and respiratory health problems among others.

Is pollution really bad? The answer is yes and no. In order to produce, we all need to pollute. Factories that process the food that we eat, clothes that we wear, cars that we drive, needs to pollute. Everything that we consume, from the shampoos and soaps, to the socks and shoes, all of these could not be made without polluting. Hence, if we will say that pollution is bad and we do not want ANY pollution it's synonymous to signing our death warrant or better or worse, going back to how the neanderthals lived before.

So, since we need to produce in order to survive, then we need to pollute.

The environment has the ability to assimilate or absorb all of our wastes or the pollution. Hence, we could say that pollution is not always bad. But the assimilation capacity of the environment has its limit. It has a specific rate or speed at which it could only absorb specific amounts of pollution for a certain period of time. In other words, if pollution rate is so fast or higher than what the environment could only absorb, then that's the time that pollution is bad.

This is the reason why the government uses policy regulations such as tax emissions, flat rate carbon tax, ban on production of energy extensive vehicles, incentives for alternative energy research and a lot more. If pollution rate became so high, then health of people is at risk. In effect, the productivity level of the sick people is low and the economy suffers.

The economy suffers not just because of the lost productivity of the people, but also because the government must pay for the damages it has done to its people. Public hospitals would abound with patients with respiratory diseases.

Among a long list of policy instruments the lawmakers could use, taxation has always been their favorite. So what does taxation do? How efficient or effective is it in the goal for abatement of our pollution rate?

Imposing a tax on firms that pollutes can be considered a good strategy, as long as the tax would cover all the external cost or the cost of the damage the firm created during production. Taxation, if enforced really well, could make firms create a technology that may lessen pollution, if they will find out that it will be cheaper than continuously paying the tax. In this way, pollution is reduced without compensating the quantity of the firm's production. The downside of this policy however, lies on the possibility that some big firms would find the tax cheap (because it did not cover the true costs of damage), hence, they will just produce more and pollute more. They will produce more, if the case will be, other small firms may find the tax expensive, thus closing down, so that they're production quantity will be eaten up by those firms who could afford the tax. If this happens, another set of problems arises. The worst scenario would be oligopoly or monopoly could happen, thus raising prices, to the demise of the consumers. On the other hand, if the tax is so high, small firms could close down, or firms could just pass the tax to its consumers, hence raising prices.

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Hence, it is crucial that lawmakers in each country, when decides to impose tax on pollution emissions, must first review and analyze very carefully the true cost of the damage. It must not be too high so as to protect the consumers from price hikes, or not too low so as not to have any effect on pollution rate of firms.