The greenhouse effect

Case 1.2
Green Economics
Taking account of environmental costs

People have become concerned by a number of environmental problems in recent years. These include:
The greenhouse effect. This is caused by carbon dioxide and other gases emitted again by power stations, various industries and cars. The fear is that these gases will cause a heating of the Earth's atmosphere. This will lead to climatic changes which will affect food production. It will also lead to a raising of sea levels and flooding as part of the polar ice caps melts.
Acid rain. This is caused by sulphur and nitrogen emissions from power stations, industry and cars. It has been blamed for 'Walsterben' (forest death) in Central Europe and the contamination of many lakes and streams, with the death of fish and plant life.
Depletion of the ozone layer. This is caused by the use of CFC gases in aerosols, refrigerators and the manufacture of polystyrene foam. The ozone layer protects us from harmful ultra-violet radiation from the sun. A depletion of this layer could lead to increased skin cancer.
Nuclear radiation. The fear is that accidents or sabotage at nuclear power stations could cause dangerous releases of radiation. The disposal of nuclear waste is another environmental problem.
Land and river pollution. The tipping of toxic waste into the ground or into rivers can cause long-term environmental damage. Soils can be poisoned; rivers and seas can become polluted. It is not just industry that is to blame here. Sewage pollutes rivers and seas. Nitrogen run-off and slurry from farming are also major pollutants. It was not until the late 1960s and early 1970s that the 'environment' became more firmly part of the political agenda in most European countries. It was largely a response to the spectacular growth of not only the Western economies, but also the continued and extensive industrialisation of the Eastern bloc countries such as Poland and the USSR. 'Green groups' sprang up round the world. These groups realised that if economic growth was to be sustained then environmental damage could grow at an alarming rate. The problems such groups have encountered in attempting to change attitudes and economic strategies have been immense. Certain governments have been reluctant to enter international environmental agreements perceiving them to be against their national interest. The cut in sulphur dioxide emissions from power stations is one such example. The costs of pollution abatement are high, especially in the short run. As long as these short-run costs are greater than the perceived costs of continuing pollution, then industry and government will continue to incur them. The consequences of this, however, could be devastating and far more costly in the long run, in both a financial and an environmental sense. What can economists (see also, and also) say about the causes of these environmental problems? There are three common features of these problems:
Ignorance. It is often not for many years that the nature and causes of environmental damage are realised. Take the case of aerosols. It was not until the 1980s that scientists connected their use to ozone depletion.
The polluters do not pay. The costs of pollution are rarely paid by the polluters. Economists call such costs external costs. Because polluters rarely pay to clean up their pollution or compensate those who suffer, they frequently ignore the problem.
Present gains for future costs. The environmental costs of industrialisation often build up slowly and do not become critical for many years. The benefits of industrialisation, however, are more immediate. Thus both governments, consumers and industry are frequently prepared to continue with various practices and leave future generations to worry about their environmental consequences. The problem then is a reflection of the importance people attach to the present relative to the future. Environmentalists recognise these problems and try through the political process and various pressure groups, such as Friends of the Earth and Greenpeace, to reduce people's ignorance and to change their attitudes. They stress the need for clean technologies, for environmentally sound growth and for greater responsibility by industry, consumers and government alike. Policies, they argue, should prevent problems occurring and not merely be a reaction to them once they are nearing crisis point. If growth is to be sustainable into the long term, with a real increase in the quality of life, then current growth must not be at the expense of the environment.

Question
Should all polluting activities be banned? Could pollution ever be justified? Explain your answer.