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Government and the Market

Government and the Market. Environmental Policy. The environment and production environmental failures of the market nature of an environmental policy Problems with policy intervention valuing the environment financial costs to other users revealed preference contingency valuation

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Government and the Market

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  1. Government and the Market

  2. Environmental Policy • The environment and production • environmental failures of the market • nature of an environmental policy • Problems with policy intervention • valuing the environment • financial costs to other users • revealed preference • contingency valuation • other problems • spatial issues • temporal issues • irreversibility issues

  3. Environmental Policy • Environmental policy options • market-based policy: taxation and subsidies • conflicts with revenue objectives • redistributive effects • problems with international trade • effects on employment • uses of green taxes in various countries

  4. Types of environmental taxes and charges

  5. Green tax revenues as a % of GDP

  6. Green tax revenues as a % of GDP

  7. Environmental Policy • Environmental policy options (cont.) • non-market-based policy: command-and-control systems • approaches to devising CAC systems • technology-based standards • ambient-based standards • social-impact standards • assessing CAC systems

  8. Environmental Policy • Environmental policy options (cont.) • tradable permits • how tradable permits work • deciding on permitted levels of pollution • 'grandfathering' • their possible use internationally • advantages • problems • Environmental policy in the UK and EU

  9. Transport Policy • Congestion problems and the impact on society and business

  10. Passenger transport in Great Britain (percentage of passenger kilometres by road)

  11. Passenger transport in Great Britain (percentage of passenger kilometres by road)

  12. Passenger transport in Great Britain (percentage of passenger kilometres by road)

  13. Passenger transport in Great Britain (percentage of passenger kilometres by road)

  14. Passenger transport in Great Britain (percentage of passenger kilometres by road)

  15. Increase in car ownership Cars per thousand population Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm

  16. Increase in car ownership Cars per thousand population UK Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm

  17. Increase in car ownership USA Cars per thousand population UK Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm

  18. Increase in car ownership USA Germany W Germany Cars per thousand population UK Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm

  19. Increase in car ownership USA Germany W Germany Belgium Sweden Cars per thousand population UK Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm

  20. Increase in car ownership USA Germany W Germany Belgium Sweden Cars per thousand population UK Spain Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm

  21. Transport Policy • The allocation of road space • demand for road space • a derived demand • determinants of demand • the price and income elasticities of demand • supply of road space • short run • long run

  22. Transport Policy • Social optimum level of road usage • marginal social benefit • marginal social cost • congestion costs: time • congestion costs: monetary • environmental costs • socially efficient level of road usage

  23. Actual and optimum road usage Costs and benefits (£) MSB O Cars per minute

  24. Actual and optimum road usage MC (private) Costs and benefits (£) a MSB O Cars per minute

  25. Actual and optimum road usage MC (private) Costs and benefits (£) e a MSB O Q1 Cars per minute

  26. Actual and optimum road usage MSC MC (private) Costs and benefits (£) b e a MSB O Q1 Cars per minute

  27. Actual and optimum road usage Optimum charge c MSC MC (private) Costs and benefits (£) d b e a MSB O Q2 Q1 Cars per minute

  28. Transport Policy • Social optimum level of road usage • marginal social benefit • marginal social cost • congestion costs: time • congestion costs: monetary • environmental costs • socially efficient level of road usage • Identifying a socially optimum level of road building

  29. Transport Policy • Social optimum level of road usage • marginal social benefit • marginal social cost • congestion costs: time • congestion costs: monetary • environmental costs • socially efficient level of road usage • Identifying a socially optimum level of road building • use of cost–benefit analysis

  30. Transport Policy • Policy 1: direct provision • the road solution • public transport • Policy 2: regulation and legislation • restricting car access • bus and cycle lanes • no entry to side streets • pedestrian-only areas • parking restrictions

  31. Transport Policy • Policy 3: changing market signals • extending existing taxes • road pricing • variable tolls • supplementary licences • electronic road pricing • subsidising alternative means of transport

  32. Privatisation • History of privatisation

  33. Nationalisation and privatisation in the UK

  34. Nationalisation and privatisation in the UK

  35. Nationalisation and privatisation in the UK

  36. Privatisation • History of privatisation (cont.) • forms of privatisation • Arguments for privatisation • market forces • greater competition in the goods market • greater competition for finance • accountability to shareholders • reduced government interference • reducing the PSNCR • increased share ownership

  37. Privatisation • Arguments against privatisation • natural monopolies • the public interest • externalities • fairness and social justice • problems with the PSNCR • problems in the valuation of shares

  38. Regulating the Privatised Industries • Identifying optimum price and output • Regulation in practice: • the RPI–X formula • Advantages of UK regulation • discretionary • flexible • incentives • Disadvantages of UK regulation • disincentives of changes to X • excessive power of regulator? • alternatively, regulatory capture • complexity of regulation

  39. Making Privatised Industries more Competitive • Increasing competition in the privatised industries • allowing competition where there is no natural monopoly • limited extent of true natural monopoly • allowing access to grids by competitors • forbidding suppliers from being grid owners • capping market share of established firms • competitive franchising to make monopolies contestable

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