Economic Analysis Of Public Hazards Control And Pollution Prevention

Since the beginning of industrialization in human society, the pursuit of economic growth has led to unprecedented development and utilization of natural environment. Such efforts created abundant material wealth to satisfy the needs of human beings in a relatively short period of time. However, the huge consumption not only exacerbated natural resources such as land, forests, fresh water, and minerals, but also triggers severe environmental disaster that brought great harm to human society. Under this background, economists have started to apply modern economic theory and methods to investigate environmental issues, including the relationship between environment and economy, the economical causes of environmental problems and the economic means to solve these problems.Based on the theory of externalities of pollution prevention and public hazards control, this paper reviews the basis of economic theory, analyzes the different effects and mechanisms of pigovian tax and emissions trading as two main economic incentive means, and take emissions trading system as an example to explain the superiority of property rights theory in solving environmental problems. Through analyzing and summarizing experiences from western countries especially emission trading system in the United States, the problems of China's environmental protection policies, as well as defects of property rights system that cause these problems, we arrive at the conclusion that efforts should be made to deepen the reform of property rights system of environmental capacity resources, clear the boundary and authority of government supervision, establish and improve emission trading markets as well as a perfect legal system and so on.The paper consists of four parts.The first part mainly focuses on externality theory and particularly the economical incentive methods used in environment protection and public hazard. According to the neo-classical economists'point of view, the economic source of environmental problems is caused by externalities and market failure. Externalities refer to the inconsistencies of private cost and social cost of economic activities, and usually fall into two sides: positive externality and negative externality. Environmental problems are mainly caused by negative externality. The concept of externalities originated from Marshall, who firstly analyzed factors affecting the cost of business from both internal and external aspects, and formed a foundation of the concept. Pigou assumed that pollution caused by external diseconomies were not directly linked to producers and consumers of products, and pollution could not affect transactions between the producers and consumers, as a result, it can not be eliminated automatically in the market. However, in the form of taxes, governments would be able to increase the costs of products that caused pollution. Pigou set up a basic framework of economic analysis to internalize externalities through taxation in environmental protection theories. Coase Theorem and property rights theory provided a new economic analysis tool to environmental issues. School of property rights held that unclear property rights were the roots of environmental problems. Hardin's study of"The Tragedy of Commons" enabled economists to realize that if property rights were not mutually exclusive arranged, it would inevitably lead to excessive use of environmental resources. Therefore, school of property rights advocated setting up a definite property rights system of environmental resources, and letting the market decide the allocation of resources. On the basis of externality theory, property rights theory further enrich the economical explanations to the problem of pollution.The second part is a comparative analysis of the main economic incentive instrument. Pigou advocated imposing taxation on polluters to reduce the damage to environment, and the traditional way of pigovian tax collected by government in controlling pollution is the practical application of this theory. The practice of polluter-paying principle based on pigovian tax has achieved remarkable results in environmental control and gained approval from many international environment protection groups, governments and economists. However, application of pigovian tax still has its limitations in practice. For example, the optimal tax rate is greatly affected by information asymmetry, government failure also has effect on the implementation process, and both decision-making and implementation involve high administrative costs. By comparison, emissions trading system is more efficient. The main idea is to establish emission permits that allow legal emission of polluting substances first. This kind of legal rights can be traded like commodities in the market in order to control the emission of pollutants. As long as the property rights of environment legal capacity are well-defined, both victims and polluters have incentives to control pollution through emissions trading. Through market mechanisms and equilibrium price, the marginal costs of the private sector become in line with social marginal cost. Therefore, the capacity of the environment is optimized and environmental damages caused by pollution can be reduced.The third part summed up the successful experience of emissions trading system in developed countries, especially in the United States. Emissions trading system has been developed as America's most important economic environmental policy. The Federal Environmental Protection Agency of United States has adopted various forms of emissions trading policies. Currently, the United States has established policies including Offset, Banking, Bubble and Netting as a set of emission trading system, and has gained significant environmental and economic benefits. We can draw lessons from these successful experiences, such as a large number of theoretical studies that lay a strong foundation for the practice, a highly developed market mechanism that provides a platform for market system and private sectors, a perfect legal system that guarantees the effective implementation of emissions trading system, and so on.The forth part involves analysis of the current situation of China's economic environmental policies and suggestions to solve the problems in it. The use of economic incentive instruments in environmental policies has developed rapidly in recent years. Among economic means that has begun to work, traditional economic means represented by pollutant discharge are facing many problems. The establishment of emissions trading system based on the theory of property rights has just begun and yet need to be improved. To solve the problem of pollutant discharge such as low tax standard, lack of effective incentive for environmental management funds, and inefficient use of finance, polluter-paying principle should be reformed from the perspective of property rights theory to design diverse environment tax programs. To deal with the problems of emission trading system, such as contradictions between total volume control and extensive economy growth pattern, difficulties and high costs in information searching, imperfectness of emissions trading market that fails to encourage active transaction, and lack of effective legal protection, we should deepen the reform of property rights system of environmental resources, establish a mature market economy system, transform the mode of extensive economic growth, develop and establish circular economy and improve the legal system to protect emission trading.