Other examples (note how the problem changes depending on the initial distribution of property rights. The capacity of the stream) for an appropriate fee. The view is taken that the public's right to enjoy the stream in its original state is the prior one, then theįarmer would be prohibited from discharging slurry, or might be permitted to do so (up to a level compatible with Him to adopt an alternative, and presumably more costly, way of disposing of his slurry. Right to use the stream in this way, then the public must bear the cost of compensating the farmer for requiring If the law takes the view that a farmer has the Of property rights in the environment in any society.įor example, take the issue of discharging slurry into a stream. Should be compensated is a social construct which depends entirely on the distribution Whose avoidance costs should be borne by producers and how to define 'environnmental benefits' for which producers However, the question of what is 'pollution' Pays Principle (PPP) which has been adopted by all OECD countries. In the case of negative environmental impacts, there is now general endorsement of the Polluter What are the income distribution consequences of alternative courses of action (equity)? The polluter pays principle Is what is the least-cost mechanism of bringing production down to the socially optimal level (efficiency), and Qo which takes into account the additional social costs of agricultural production. Q1 where his marginal private cost equals marginal revenue, although the socially efficient level of output is Of farm output which causes environmental damage is shown in the following diagram. The marginal social cost of production (which determines the socially optimal level of production). There is thus divergence between the marginal private cost of production (to which the producer responds) and These environmental costs are externalised, and To price the damage being done and require the producer to pay. Problem with many environmental impacts is that the costs are not borne by the producer because there is no mechanism soil erosion, as this may impact on the revenue-generating potential of the farm in the future. Some adverse environmental impacts may be internalised into a farmer's decision-making process,Į.g. Short introduction to the issues Adverse environmental impacts as negative externalities case studies of the EU Nitrates Directive and greenhouse gas emissions from agriculture.relative advantages and disadvantages of alternative policies to address negative externalities.ambiguity of the 'polluter pays' principle.treatment of adverse environmental impacts as negative externalities.Or to stimulate the supply of public goods. ![]() Intensive agricultural production, further direct government intervention may be justified to limit negative externalities While agricultural policy reform will alleviate some of the environmental stress due to
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