Questions/Answers

Q1a. What is “economic incentive” in environmental management?

Ans:

For the management of the environment, the government can adopt either a regulatory approach, economic incentive approach or a management approach.

The economic incentive approach is the one in which a government considers the market dynamics and utilizes financial means directly or indirectly so that the business entities are encouraged to shift from a solely profit-making entity towards an environment-friendly entity. In this approach, if a business complies with the environment-friendly norms, then they are rewarded with monetary gains directly or indirectly, and if they fail to become “green”, they are imposed monetary fine or levies or other means that gives them monetary loss.
The economic incentive approach includes a variety of measures such as price rationing in the form of fees, levy, and taxes or subsidies for pollution control, quantity rationing in the form of marketable permits, liability rules as well as deposit-refund system, performance bonds, and information disclosure, etc.

Q1b. Outline the benefits and limitations of using economic incentive as an environmental management tool?

Ans:

There are many benefits of using economic incentives as an environmental management tool. These are as follows:

a. The earlier command and control system can target only the big industries and visible pollution generation units. However, the economic incentive approach effectively targets small businesses as well as individual households.

b. The modeling theory and the economic theory suggest that the economic incentive approach is more cost-effective as compared to the earlier command and control strategies. Moreover, this is a more “flexible” system as compared to the command-and-control approach as it gives many options to both the polluter and the environment department..

c. The economic incentive approach becomes the 'driver of innovation" because the industry or big businesses are motivated to develop newer technologies that comply with the environmental standards.

d. Targeting individual households becomes an instrument of enhanced awareness and education regarding environmental issues, and citizens become more responsible for environmental conservation.

e. The business entities do not likely evade the environmental laws as they do in the command-and-control approach because there is no apprehension of being labeled a "criminal". Hence, they are more willing to comply with environmental standards.

1. Harmful microalgae is the causative agent of red tide. Eutrophic...