Home > China, Environment, Journalism and Economics, Tax Policy > An Inefficient Way to Deal With Pollution

An Inefficient Way to Deal With Pollution

Photo: EPA

Photo: EPA

Air pollution is a negative externality. As China moves closer to a free market economy, it over-produces  negative things for which buyers and sellers don’t pay the full cost.

This week officials in Beijing have proposed some solutions. Some (fining polluters) make more sense than others (shutting down factories, banning new cement production).

The most extreme solutions, like closing factories, won’t solve the problem, only move it somewhere else. Those factories will likely be located more out of the spotlight of the international media (note the lack of stories in the Western media about air pollution in Lanzhou, for example). In these areas, people will be even less equipped to deal with the health effects.

It would be far more beneficial for the government to try to internalize the externality. If the price of cement reflects not only its value but also the cost of the pollution it emits, there will be less pollution, but there will still be resources to enjoy (more housing) and resources for improving air quality (extra tax collected from polluters).

Just shutting down cement production in Beijing isn’t likely to do anything other than move the same amount of pollution to a place less in the spotlight.

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