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Posted on April 3rd, 2012, by

Microeconomic behavior of a firm depends not only on internal factors but is also highly dependable on external variables, usually studied by macroeconomics (Colander 2003). Qualitative changes in macroeconomic balance or the forthcoming of new factors may significantly change microeconomic behavior of an economical subject (Snowdon & Vane 2002). The aim of this essay is to study the changes in microeconomic behavior on the example of a power plant which is implementing the method of reducing gases and particulates emission. The analysis is done by suggesting two policies, analyzing their costs and benefits, and discussing how to measure emission reduction properly as well as considering the effect on economic development of the power plant.

There have been invented a number of methods used to reduce the amount of emissions or to eliminate negative effects of emission reduction. The two main directions of development concerning gas and particulate emission reduction are the following ones:

1)                  implement control devices such as electrostatic precipitators, fabric filters, wet scrubbers or cyclones for particulates, and using air pollution control system to control gas pollutants before they reach the atmosphere (or using devices for destroying pollutants by thermal or catalytic combustion) (Pfafflin & Ziegler 2006)

2)                  reorganize the engineering procedure so that gas and particle emission could be reduced, or captured in the process and reused for various purposes; this strategy might also include changing pollutants to less harmful forms through chemical reactions.

Each of these policies has its own benefits and disadvantages. Both policies will have effect: the first one will help to reduced emission be means of control devices (and will definitely give effect assuming appropriate selection of control devices); the second policy will be efficient if appropriate research is done and changes in the technology are implemented. The second policy might require more time and the effect might be not as predictable as the first policy offers; however, changes in the engineering procedure can give additional revenue in the long term perspective and optimization of technology, while the first policy directly increases costs (initial costs for control devices are accompanied by annual renewing and depreciation costs). Meanwhile, the second policy might require significant initial investment, but will be compensated with the flow of time.

Thus, both policies have their costs: the first one has lower initial costs but will be more expensive in the long-term perspective; the second policy can be expensive from the very beginning and can require a lot of time, but is more efficient in the long run. Moreover, research related to the second policy can also add to overall efficiency of the plant. This is why the second policy should be considered as priority one if budget of the plant and time requirements allow this.

The method of measuring the reduction of emission and choosing optimal rate of emission reduction can also impact the implementation of both policies. In general, the level of emission is controlled by sector-specific emission regulations and by performance-based standards in the chosen area. The allowed emission levels are also regulated by state laws in many cases. After analysis of allowed emission level, the number of emitting entities within each sector and cost curves for potential emissions reductions from that sector will help determine emissions reduction potential (Pfafflin & Ziegler 2006). Historical rates of emission of the plant and its sub-units have to be studied.

Basing on this data, the excess reduction rate has to be determined, and the costs needed to reach the allowed level of emission have to be calculated. In case these costs do not raise the costs of the output to critical values, the level of emission should be reduced to a value lower than critical value determined by the laws. It is also necessary to take into account that second policy can aid in reducing overall costs this is one more reason for choosing it.

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