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1.                  Arthur Isaac Moses (65484)

2.                  Carine anak Dunstun (65589)

3.                  Husna bt Mazi (66146)

4.                  Ania anak Wilfred (65448)

Solution to externalities

1.      Coase Theorem

-          When there are well-defined property rights and costless bargaining, then negotiations between the party creating the externality and the party affected by the externality can bring about the socially optimal market quantity. The efficient solution to an externality does not depend on which party is assigned the property rights, as long as someone is assigned those rights.

Public response

2.      Taxes and subsidies

-          Taxes as solution negative externalities in the street market as with the coasion payment, tax internalizes the externality and remove inefficiency of negative externality. While, subsidies is to ensure higher level of consumption and production than would arise through the completely the interaction of market force.

3.      Emission fee

-          Emission fee is the social cost of external damage imposed to firms for per unit of pollution produced. this creates a disadvantages to the firm in production because of negative externalities they release often increase with the increase in production quantity.

4.      Command and control

-          Command-and-control regulation sets specific limits for pollution emissions and/or mandates that specific pollution-control technologies that must be used.

-          policy that require a given amount of pollution reduction with limited sources

5.      Cap and Trade

-          Cap and trade is market based approach to controlling pollution by providing economic incentives for achieving reductions in the emulsion of pollutions.

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EBE2053 G01 Monday Class 0800-1100 1) Nur Soleha BInti Budiman 62080 2) Amidnuddin Bin Zinal Abidine 65407 3) Rosmarina Anak Dulah 67591 4) Jurima Binti Juhaini 61082

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Doren Oliva Gilbert 65818
Ania anak Wilfred 65448

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1. Mohammad Badrul Amin Bin Abu Kassim 66800   2. Pengiran Mohd Azizi Bin Pg Che Adnin 67478  3. Nur Nadirah Binti Mohd Zaina Amirul 67189   4. Dayang Munirah Binti  Abang Adenan 68502

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CANCEL

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1. Khor Wei Cyan 66384

2. Cheah Joe Seng 65631

3. Yow Kok Xiang 68141

4. Chai Ming Xi 68489

5. Raymond Wong Tiiung Ing 67549

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Kelly Ting Shi Rong 68554 Ting Kah Kwong 67945 Kong Mei Ling 66396 Evelyn Chong Mei Chee 65924

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1. Alice Mary Savarimuthu (65374)

2. Husna bt Mazi (66146)

3. Aziah Aziana binti Roslee (65518)

Coase theorem

1. Argues that under the right conditions parties to a dispute over property rights will be able to negotiate an economically optimal solution, regardless of the initial distribution of the property rights.

2. Offers a potentially useful way to think about how to best resolve conflicts between competing business or other economic uses of limited resources.

Public responses

1. Taxes and subsidies: to tackle the problem of externalities is a market-based method of control as it works through the price system.

a) If negative externalities exist, and there is allocative inefficiency at the free market price then the appropriate solution would be to tax the good.

b) If the market is under-producing, it would be appropriate for the government to grant a subsidy.

1. Emissions fee: like the Pigouvian tax, but the tax is per unit of pollution.

a) The advantage of an emissions fee is that it makes pollution more expensive and creates incentive for firms to use cleaner technology. Firms will decrease pollution as long as the fee is above MC of reducing emissions.

2. Command-and-control regulations:

a) Technology standard: requires firms to install a certain level of technology to reduce their pollution. It is not cost effective.

b) Performance standard: sets emissions goals for each polluter, it is more flexible than the technology standard as firms are allowed to cut back emissions in any way they want. For this reason, it is more cost effective and creates incentive for firms to innovate.

3. Cap-and-trade: the government gives or sells permits to pollute to firms, but no more than the effective amount. The same problem occurs as it is expensive to measure pollution. The difference between cap-and-trade and emission fee:

a) Responsiveness to inflation: Higher inflation decreases the real emissions fee, leads to less pollution reduction.

b) Responsiveness to cost changes. Comparable to changes inflation, increases in the marginal costs of reducing pollution.

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1. Alice Mary Savarimuthu (65374)

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Coase theorem

1. Argues that under the right conditions parties to a dispute over property rights will be able to negotiate an economically optimal solution, regardless of the initial distribution of the property rights.

2. Offers a potentially useful way to think about how to best resolve conflicts between competing business or other economic uses of limited resources.

Public responses

1. Taxes and subsidies: to tackle the problem of externalities is a market-based method of control as it works through the price system.

a) If negative externalities exist, and there is allocative inefficiency at the free market price then the appropriate solution would be to tax the good.

b) If the market is under-producing, it would be appropriate for the government to grant a subsidy.

1. Emissions fee: like the Pigouvian tax, but the tax is per unit of pollution.

a) The advantage of an emissions fee is that it makes pollution more expensive and creates incentive for firms to use cleaner technology. Firms will decrease pollution as long as the fee is above MC of reducing emissions.

2. Command-and-control regulations:

a) Technology standard: requires firms to install a certain level of technology to reduce their pollution. It is not cost effective.

b) Performance standard: sets emissions goals for each polluter, it is more flexible than the technology standard as firms are allowed to cut back emissions in any way they want. For this reason, it is more cost effective and creates incentive for firms to innovate.

3. Cap-and-trade: the government gives or sells permits to pollute to firms, but no more than the effective amount. The same problem occurs as it is expensive to measure pollution. The difference between cap-and-trade and emission fee:

a) Responsiveness to inflation: Higher inflation decreases the real emissions fee, leads to less pollution reduction.

b) Responsiveness to cost changes. Comparable to changes inflation, increases in the marginal costs of reducing pollution.

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Coase theorem

1. Argues that under the right conditions parties to a dispute over property rights will be able to negotiate an economically optimal solution, regardless of the initial distribution of the property rights.

2. Offers a potentially useful way to think about how to best resolve conflicts between competing business or other economic uses of limited resources.

Public responses

1. Taxes and subsidies: to tackle the problem of externalities is a market-based method of control as it works through the price system.

a) If negative externalities exist, and there is allocative inefficiency at the free market price then the appropriate solution would be to tax the good.

b) If the market is under-producing, it would be appropriate for the government to grant a subsidy.

1. Emissions fee: like the Pigouvian tax, but the tax is per unit of pollution.

a) The advantage of an emissions fee is that it makes pollution more expensive and creates incentive for firms to use cleaner technology. Firms will decrease pollution as long as the fee is above MC of reducing emissions.

2. Command-and-control regulations:

a) Technology standard: requires firms to install a certain level of technology to reduce their pollution. It is not cost effective.

b) Performance standard: sets emissions goals for each polluter, it is more flexible than the technology standard as firms are allowed to cut back emissions in any way they want. For this reason, it is more cost effective and creates incentive for firms to innovate.

3. Cap-and-trade: the government gives or sells permits to pollute to firms, but no more than the effective amount. The same problem occurs as it is expensive to measure pollution. The difference between cap-and-trade and emission fee:

a) Responsiveness to inflation: Higher inflation decreases the real emissions fee, leads to less pollution reduction.

b) Responsiveness to cost changes. Comparable to changes inflation, increases in the marginal costs of reducing pollution.

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1.Wong Kai Wen (68075)
2.Shirly Tho Siew Siew (67708)
3.Tiong Sheau Leen (67950)

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1. Irene Liew Siew Wen (66170)
2. Chiong Ding Jing (65653)
3. Yek Ai Ping (68116)
4. Valera Umbau Anak Speedy Bena (68760)

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1)Nur Amira Aina Bt.Zulkarnain (67075)
2) Santika Ariana Bt Mohamad (67636)
3) Voon Li juan (68024)
4) Sheika shermilla bt jaraiee (67696)

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1. Ong Xue En (68826)
2. Gwendoline Tay Ker Ping (66063)
3. Genevieve anak Lawrence (66027)

(A) Coasian approach
Cap-and-trade by means of exercising strongly defined property rights with the presence of minimal transaction cost. Inefficiency is minimised when property rights is granted to the party with most highly valued use regardless of the initial ownership to achieve socially efficient output.

(B) Command and control
Regulations by means of technology standard and performance standard. Pollution can be reduced by regulating a strictly standardised technology while performance standard, on the other hand, regulates the amount of pollutants by setting a standard level of emission allowed. However, this approach is not cost effective and it is difficult to determine the standard for different firms.

(C) Tax and subsidies
Implementation of Pigovian tax through the use of price system to tax the firms based on the quantity of output produced. Emission fee imposed causes the social cost to be incorporated into the firm’s private cost, hence, firms will make optimal choices of producing at the efficient amount.

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G11
Lorita anak Ngindah 66517
Maxwell Dagit anak Anthonia 66603
Michelle anak Thomas Malis 66630
Vellerina Stephen 67993

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G15 :-
Yandie Komborod 68099
Nancy Anyi 66902
Eisya Binti Akeng 65836
Lidia Chundie 66468

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G17 :
1. Azilah Bt Ramzi (68199)
2. Umi Natasha Bt Abang (67968)
3. Voo Li Yun (68022)
4. Mohd Azizul Nazmi ( 66658)

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MONDAY CLASS 8-11AM. Please share your group's discussion outcome on public policies associated to externalities here.