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    Optimal Pollution: The Welfare Economic Approach to Correct Market Failures2011

    BACHMANN T.M.Journaux et Revues (scientifiques)

    analyse coût-bénéfice / coût-efficacité, biens communs, externalités, market based instruments, santé, valeur économique totale

    Encyclopedia of Environmental Health
    2011, Pages 264–274

    Climate change has been called the greatest example of market failure the world has ever seen. Generally speaking, has one to eliminate market failures altogether? Market failures misguide a society in deciding how to best use its resources. Excessive use of the environment is one such market failure, also having an impact on human health. Without policy measures, environmental pollution is largely not reflected in market prices, constituting externalities. Getting the prices right is therefore the motivation of related government interventions.

    Political internalization measures aim at correcting market prices, however, only up to an optimal point. Social cost–benefit analysis (CBA), a welfare economic concept, is the only concept aiming at finding this optimal scale of policy intervention. This point is found where marginal avoidance costs equal avoided marginal damage costs. The main approach of CBA is outlined, focusing on the benefits in terms of avoided environmental pollution.

    Despite its merits, conducting CBAs involves value judgments and raises issues such as monetization of environmental impacts in general and across time in particular. Finally, availability of information is crucial, also regarding policy acceptance.

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