The concept of a Property Right Essay Example | Topics and Well Written Essays - 500 words

The concept of a Property Right - Essay Example Under this system, it is expected that market forces will drive down the release of pollutants into the environment, insofar as the cost of releasing pollutants costs more than cleaning up and disposing the pollutant [LIVERMAN 2008]. In the short-term, carbon trading is meant as an incentive. That is, firms are punished by being forced to buy more permits to pollute if they need to; firms are rewarded when they can sell these permits because they have reduced emissions. In the long-term, it is hoped that carbon trading will reduce emissions enough to make a significant contribution to reducing climate change. However, carbon trading schemes largely appeal to those people whose ideologies bias them toward the market-based solution in every case. In fact, there is no economic evidence that price effects through caps and limits is more effective or more desirable than direct regulation or command and control [PARKER 2007]. There is a theoretical problem and a practical problem with trading schemes. The theoretical problem is that trading schemes must rely on the market to form a price mechanism to limit the supply of pollutants—the same market that failed in the first place to provide the socially acceptable outcome. This dissonance poses a difficulty with respect to whom society must trust with achieving reductions in climate change. The practical problem is how carbon derivatives would be traded. Hybrid securities and exotic derivatives were at the root of the most recent recession. It might be difficult to trust these same institutions. b) A property right is the exclusive authority to determine how a resource is used, whether that resource is owned by government or by individuals [ALCHIAN 2008]. The problem of externalities extends to the negative effects of action has on others, and the disconnect between the negative effects and the benefits the actor receives from performing that action. In