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Posted on August 29th, 2012, by

The development of modern economy is accompanied by the ongoing deterioration of the environmental situation. To put it more precisely, human socioeconomic activities contribute to the pollution of the environment that undermines the natural balance on the planet and leads to the extinction of numerous species, decrease of biodiversity and puts under a threat the survival of the mankind. It proves beyond a doubt that the situation cannot remain unchanged since the current way of the development of the world’s economy and culture leads to a dead end, where the mankind is likely to perish. The efforts of the world community are insufficient at the moment to stop or decrease the pollution substantially because the world’s economy is grounded on the extensive use of natural resources that naturally deteriorates the environmental situation. In such a context, it is possible to solve the problem of the ongoing pollution only by means of introduction of economic stimuli which can encourage the introduction of environmentally friendly technologies and limitations which can force companies to introduce more efficient technologies. In this respect, it is possible to focus on the change of the fiscal policy, development of international economic and environmental cooperation, including carbon trade, and introduction of stimulant policies to reduce pollution.

On analyzing the current environmental situation, it should be said that the interference of humans in the natural processes have reached an unparalleled level. Today, the impact of human activities on the environment is disastrous and leads to a gradual destruction of the environment and nature. One of the major negative effects of human activities on the environment is the global warming which is accompanied by the global climate change. The global warming and climate change lead to irrevocable changes in the environment and change the natural conditions of living of many species as well as humans. As a result, many species are on the edge of the total extinction, while biodiversity decreases steadily.

At this point, it is worth mentioning that one of the major reasons of the pollution of the environment is the emission of greenhouse gases which pollute air, decrease the share of oxygen and increase the level of CO2 in the atmosphere of the Earth. In addition, the ozone layer is destroyed by greenhouse gases emissions that increase the negative impact of the solar radiation on the surface of the Earth. In such a situation, the problem of environmental pollution threatens to the entire world and needs mutual efforts of the world community to be solved. In this respect, it is important to understand that roots of the problem of environmental pollution can be found in the economic activities of people which increase the pollution constantly. Hence, the solution of the problem can be found in the economic domain too.

To put it more precisely, the world community should develop the common strategy, which have been already developed partially in terms of the Kyoto protocol that need to be extended and modified to involve all the country. In addition, it is necessary to encourage carbon trade through introduction of efficient mechanisms of the trade, including international agreements between countries. Finally, it is necessary to introduce the Pigovian tax which should be equal to negative externalities of the market, which contribute to the pollution of atmosphere and environment at large. In such a way, it will be possible to discourage market activities which can deteriorate the environmental situation.

In fact, the suggested measures can be efficient on the condition that they are supported by all the states. In this respect, it should be said that one of the major failures of the Kyoto protocol was the non-participation of some states, such as the USA, which are the major contributors to the pollution of the environment. Hence, it is necessary to sign a new, international agreement which obliges all countries to reduce the pollution. Naturally, it is not possible to reduce the pollution immediately, but countries can have a transition period to reduce steadily the pollution. At this point, it is possible to use the carbon trade to allow the most developed countries to buy quotas on greenhouse gas emissions at developing countries. In such a way, developed countries will get time to transit to more efficient and environment friendly technologies, while developing countries can get money for modernization their technologies to make them environment friendly too. Such cooperation will reduce the emission of greenhouse gases worldwide.

The introduction of Pigovian tax will discourage the development of market activities which increase the pollution. In fact, Pigovian tax should be equal to negative externalities to discourage pollution. At the same time, this tax can be used to stimulate environment friendly technologies, such as technologies using alternative source of energy. Hence, the Pigovian tax will subsidize such market activities, which decrease the pollution of the environment.

Thus, on implementing the aforementioned measures, it is possible to regulate the economic development of countries and markets stimulating positive trends and decreasing the pollution of the environment.

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