MGMG506 Thai Economy in Global Context: Externalities PDF

MGMG506 Thai Economy in Global Context Slide: 6-1 Externalities  Book Chapter 10: Externalities PowerPoint Slides...

MGMG506 Thai Economy in Global Context Slide: 6-1 Externalities  Book Chapter 10: Externalities PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain 2 product or service or otherwise on a password-protected website for classroom use. 3  ประเด็นเรื่องทางเขา-ออกโครงการที่เปนปญหาสําคัญที่ตอ งแกไข เนื่องจาก โครงการแอชตัน อโศกมีพื้นที่ใชสอยอาคารประมาณ 55,000 ตารางเมตร ซึ่ง ตามกฎกระทรวง ฉบับที่ 33 พ.ศ. 2535 ออกตามความใน พ.ร.บ.ควบคุมอาคาร พ.ศ. 2522 ระบุวา สําหรับที่ดินที่ใชเปนที่ตั้งของอาคารสูงหรืออาคารขนาดใหญ พิเศษที่มีพื้นที่อาคารรวมกันทุกชั้นมากกวา 30,000 ตารางเมตร ตองมีดานหนึ่ง ดานใดของที่ดินนั้นยาวไมนอยกวา 12 เมตร ติดถนนสาธารณะที่มเี ขตทางกวาง ไมนอยกวา 18 เมตร ยาวตอเนื่องกัน และที่ดินนั้นตองวางเพื่อสามารถใชเปน ทางเขา-ออกของรถดับเพลิงไดโดยสะดวกดวย ในกรณีของแอชตัน อโศก แมมีถนนเขา-ออกกวาง 13 เมตร ขนาดถูกตองตาม กฎหมาย แตเปนถนนที่เชามาจาก รฟม. แลวขอใชประโยชนรวมกันเปนทั้ง ทางเขาแอชตัน อโศกและทางเขาที่จอดรถของสถานี MRT สุขุมวิท ซึ่งขัดตอ วัตถุประสงคของการเวนคืนที่ดิน ทําใหไมสามารถนับวาเปนทางเขา-ออกทาง กฎหมายได https://plus.thairath.co.th/topic/politics&society/103554 4 In 1989, Tim Berners Lee invented WWW. It went online for the first time on 6 August 1991 at CERN. https://www.youtube.com/watch?v=GUrDI6OkJfU 5  Application protocols specific to applications such as WWW, e-mail, FTP, etc. Transmission control protocol (TCP) directs packets to a specific application on a computer using a port number. Internet protocol (IP) directs packets to a specific computer using an IP address. Hardware converts binary packet data to network signals and back. (e.g. ethernet network card, modem for phone lines, etc.) 6  Externalities Externality – The uncompensated impact of one person’s actions on the well-being of a bystander – Market failure Negative externality – Impact on the bystander is adverse (ไมพึงประสงค) Positive externality – Impact on the bystander is beneficial (เกิดประโยชน) © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain 7 product or service or otherwise on a password-protected website for classroom use.  Externalities Market equilibrium (ตลาดเกิดดุลยภาพ แตไมทําใหเกิดประโยชนกับสังคมโดยรวม) – Inefficient allocation of resources – Buyers and sellers neglect the external effects of their actions when deciding how much to demand or supply – Fails to maximize the total benefit to society as a whole Government – Protects the interests of bystanders (ภาครัฐปกปองผูที่ไดรับผลกระทบจากสิง่ ที่ ผูผลิตกอขึ้นมา) © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain 8 product or service or otherwise on a password-protected website for classroom use.  Externalities & Market Inefficiency Welfare economics: a recap – Demand curve – value to consumers Prices they are willing to pay – Supply curve – cost to suppliers – Equilibrium quantity and price Efficient Maximizes sum of producer and consumer surplus © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain 9 product or service or otherwise on a password-protected website for classroom use. Figure 1 The Market for Aluminum Price of Aluminum Supply (private cost) Equilibrium Demand (private value) 0 QMARKET Quantity of Aluminum The demand curve reflects the value to buyers, and the supply curve reflects the costs of sellers. The equilibrium quantity, QMARKET, maximizes the total value to buyers minus the total costs of sellers. In the absence of externalities, therefore, the market equilibrium is efficient. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain 10 product or service or otherwise on a password-protected website for classroom use.  Externalities & Market Inefficiency Negative externalities – Cost to society (of producing a good) Larger than the cost to the good producers – Social cost (ตนทุนของสังคม ประกอบดวยตนทุนในสวนผูผลิต รวมกับตนทุนที่ ผูเห็นเหตุการณไดรับผลกระทบไมพึงประสงคจาก negative externality) Private costs of the producers (supply) Plus the costs to those bystanders affected adversely by the negative externality – Social cost curve – above the supply curve © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain 11 product or service or otherwise on a password-protected website for classroom use. โรงงานไฟฟา และเหมืองถานหินลิกไนต อ.แมเมาะ จ.ลําปาง 12 13 Figure 2 Pollution and the Social Optimum Price of Social cost (private cost Aluminum External Cost and external cost) Supply (private cost) Optimum Equilibrium Demand (private value) 0 QOPTIMUM QMARKET Quantity of Aluminum In the presence of a negative externality, such as pollution, the social cost of the good exceeds the private cost. The optimal quantity, QOPTIMUM, is therefore smaller than the equilibrium quantity, QMARKET. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain 14 product or service or otherwise on a password-protected website for classroom use.  Externalities & Market Inefficiency Negative externalities – Optimum quantity produced (ปริมาณการผลิตที่เหมาะสมที่สุด) Maximize total welfare Smaller than market equilibrium quantity (ผลิตต่ํากวาปริมาณดุลยภาพ) Government – correct market failure – Internalizing the externality Altering incentives so that people take account of the external effects of their actions © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain 15 product or service or otherwise on a password-protected website for classroom use.  Externalities & Market Inefficiency Positive externalities – Education Benefit of education – private Externalities: better government, lower crime rate, higher productivity and wages – Social value – demand Higher than private value – Social value curve Above demand curve © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain 16 product or service or otherwise on a password-protected website for classroom use. Figure 3 Education and the Social Optimum Price of Education External Benefit Supply (private cost) Optimum Equilibrium Social value (private value and external benefit) Demand (private value) 0 QMARKET QOPTIMUM Quantity of Education In the presence of a positive externality, the social value of the good exceeds the private value. The optimal quantity, QOPTIMUM, is therefore larger than the equilibrium quantity, QMARKET. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain 17 product or service or otherwise on a password-protected website for classroom use.  Externalities & Market Inefficiency Positive externalities – Socially optimal quantity (ปริมาณการผลิตที่เหมาะสมที่สดุ สําหรับสังคม) Greater than market equilibrium quantity (สูงกวาปริมาณดุลยภาพของตลาด) – Government – correct market failure Internalize the externality (การใชมาตรการกระตุนใหเกิดกิจกรรมในองคกรธุรกิจ) Subsidy (การใหเงินอุดหนุนเพื่อสรางผลกระทบเชิงบวกมากขึ้น) © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain 18 product or service or otherwise on a password-protected website for classroom use.  Externalities & Market Inefficiency Negative externalities – Markets - produce a larger quantity than is socially desirable – Government: tax (ภาครัฐใชการเก็บภาษี เพื่อใหผูผลิตลดการผลิตลง) Positive externalities – Markets - produce a smaller quantity than is socially desirable – Government: subsidy (ภาครัฐใชเงินอุดหนุน เพือ่ ใหผผู ลิตเพิ่มการผลิตมากขึ้น) © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain 19 product or service or otherwise on a password-protected website for classroom use.  Technology spillovers, industrial policy, and patent protection Technology spillover (การแพรกระจายของเทคโนโลยี) = Positive externality – Impact of one firm’s research and production efforts on other firms’ access to technological advance – Government: internalize the externality Subsidy = value of the technology spillover © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain 20 product or service or otherwise on a password-protected website for classroom use.  Technology spillovers, industrial policy, and patent protection Industrial policy – Government intervention in the economy that aims to promote technology-enhancing industries Patent law – Protect the rights of inventors by giving them exclusive use of their inventions for a period of time © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain 21 product or service or otherwise on a password-protected website for classroom use.  Public Policies Toward Externalities Regulation – Regulate behavior directly Making certain behaviors either required or forbidden – Cannot eradicate pollution – Environmental Protection Agency (EPA) Develop and enforce regulations Dictates maximum level of pollution Requires that firms adopt a particular technology to reduce emissions © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain 22 product or service or otherwise on a password-protected website for classroom use. การติดตั้ง catalytic converter ในระบบทอไอเสียรถยนตเบนซิน 23  Public Policies Toward Externalities Corrective taxes and subsidies – Corrective tax Induce private decision makers to take account of the social costs that arise from a negative externality Places a price on the right to pollute Reduce pollution at a lower cost to society Raise revenue for the government Enhance economic efficiency © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain 24 product or service or otherwise on a password-protected website for classroom use. 25  Public Policies Toward Externalities Tradable pollution permits – Voluntary transfer of the right to pollute from one firm to another – New scarce resource: pollution permits – Market to trade permits – Firm’s willingness to pay Depend on its cost of reducing pollution © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain 26 product or service or otherwise on a password-protected website for classroom use.  Public Policies Toward Externalities Tradable pollution permits – Advantage of free market for pollution permits Initial allocation of pollution permits doesn't matter If firms can reduce pollution at a low cost (คนที่สามารถลดมลพิษได ดวยตนทุนที่ต่ํา จะขายสิทธิที่ไดรับออกมาในตลาด) – Sell whatever permits they get If firms can reduce pollution only at a high cost (คนที่สามารถลด มลพิษไดแตมีตนทุนสูง จะซื้อสิทธิในการปลอยมลพิษจากคนขายสิทธิ) – Buy whatever permits they need Efficient final allocation © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain 27 product or service or otherwise on a password-protected website for classroom use. 28  Private Solutions to Externalities The Coase theorem – If private parties can bargain without cost over the allocation of resources They can solve the problem of externalities on their own ปริมาณมลพิษและการผลิตที่เหมาะสมกับสังคม (Social Optimum) อาจหาไดจากการเจรจาระหวาง ผูกอมลพิษและผูไดรับผลกระทบจากมลพิษ ตอรองกันเพื่อประนอมผลประโยชนรวมกัน แตมีเงื่อนไข อยูวาตองมีการกําหนดสิทธิในทรัพยสินอยางชัดเจน ไมเชนนั้นจะใชไมไดผล Whatever the initial distribution of rights – Interested parties can reach a bargain in which Everyone is better off Outcome is efficient © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain 29 product or service or otherwise on a password-protected website for classroom use.  Private Solutions to Externalities Why private solutions do not always work – High transaction costs Costs that parties incur in the process of agreeing to and following through on a bargain – Bargaining simply breaks down – Large number of interested parties Coordinating everyone is costly © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain 30 product or service or otherwise on a password-protected website for classroom use. Source: https://climate.nasa.gov/what-is-climate-change/ 31  Thailand’s commitments to Paris agreement Carbon reduction of at least 30% compared to the business-as-usual case by 2030 (B.E. 2573) Carbon Neutrality in 2050 (B.E. 2593) Net Zero in 2065 (B.E. 2608) Note: What the differences between carbon neutrality and net zero?  Mitigation attends to the cause of climate change. Adaptation addresses its impacts. Mitigation (ใชมาตรการแกไขสิ่งที่เกิดขึ้น): Actions to reduce and curb greenhouse gas emissions Such as: energy efficiency, renewable energy, electrification of industrial processes, efficient transport, carbon tax and emission markets Adaptation (ปรับตัว ใชมาตรการปองกัน) : Actions to reduce vulnerability to climate change Such as: more secure facility locations and infrastructures, reforestation, diverse cultivation, preventive and precautionary measures  How to mitigate climate change? These are some of the mitigation measures that can be taken to avoid the increase of pollutant emissions: Practice Energy efficiency Greater use of renewable energy Electrification of industrial processes Efficient means of transport implementation: electric public transport, bicycle, shared cars... Carbon tax and emissions markets  Adaptation to climate change: In terms of adaptation measures, there are several actions that help reducing vulnerability to the consequences of climate change: More secure facility locations and infrastructures Landscape restoration (natural landscape) and reforestation Flexible and diverse cultivation to be prepared for natural catastrophes Research and development on possible catastrophes, temperature behavior, etc. Preventive and precautionary measures (evacuation plans, health issues, etc.)  Thailand’s Nationally Determined Contribution (NDC): Adaptation component Thailand has developed the National Adaptation Plan (NAP) with the aim to build adaptive capacity and enhance climate resilience in 6 priority sectors including water resources management, agriculture and food security, tourism, public health, natural resources management, and human settlements and security.  Source: https://ourworldindata.org/co 2/country/thailand  Source: https://ourworldindata.org/co 2/country/thailand  Source: https://ourworldindata.org/co 2/country/thailand  Source: https://ourworldindata.org/co 2/country/thailand  Source: https://ourworldindata.org/co 2/country/thailand Source: Greenpeace (Thailand), Climate Action Tracker Source: Germanwatch, Global Climate Risk Index 2021 Source: Global Climate Risk Index 2021 Thailand: Low Emission but Severely Affected Priority? Mitigation or Adaptation??? การบรรเทาปัญหา หรื อการปรับเปลี่ยนเพื่อ ป้องกันปัญหา Too many focus on just mitigation. The right approach??? Given that climate change is the global negative externality problem.  Strategy to achieve for Sustainability Adaptation should be much more emphasized. – Disaster prevention – Water management – food Mitigation must be sustainable and commercially viable. – Response to business needs – For our own health e.g. Smog (partially caused by agricultural practices)  Mitigation? Sustainable and Commercially Viable CBAM (Carbon Border Adjustment Mechanism) by EU Carbon credit (สิทธิที่เกิดจากการลดการปลอยกาซเรือนกระจก รวมถึงการเก็บกัก และดูดกลับ ดวยกิจกรรม/โครงการ มีการรับรองโดยหนวยงานรับรอง ตามระเบียบหรือวิธีการทีเ่ ปนที่ยอมรับ หรือเทียบไดกับระดับสากล) Supply Chain (หวงโซอุปทานที่ใชในการผลิต ตั้งแตตนน้ําถึงปลายน้ํา)  Source: student’s report in economics class at CMMU Source: Bank of Thailand (https://www.bot.or.th/th/research-and-publications/articles-and- publications/articles/Article_13Sep2022.html) Source: Bank of Thailand (https://www.bot.or.th/th/research-and-publications/articles-and- publications/articles/Article_13Sep2022.html) Source: Bank of Thailand (https://www.bot.or.th/th/research-and-publications/articles-and- publications/articles/Article_13Sep2022.html) Source: Bank of Thailand (https://www.bot.or.th/th/research-and-publications/articles-and- publications/articles/Article_13Sep2022.html) Source: student’s report in economics class at CMMU Source: student’s report in economics class at CMMU  COP21 Paris 2015 (B.E. 2558) established article 6. Source: student’s report in economics class at CMMU COP26 Glasgow 2021 (B.E. 2564) approved article 6. Source: student’s report in economics class at CMMU  First carbon credits traded under Article 6 of the Paris Agreement Thailand and Switzerland are set to become the first two countries in the world to seal a deal under Article 6.2 of the Paris Agreement, which creates a basis for trading in global greenhouse gas (GHG) emission reductions or mitigation outcomes between nations … The MoU follows a Thai-Swiss joint statement signed virtually in May on climate protection, enabling Switzerland to offset carbon emissions with climate projects in Thailand. … Source: Bangkok Post 23 June 2022 Link: https://www.bangkokpost.com/thailand/general/2331983/ministry-to-ink-climate-pact-with-swiss-under-paris- agreement  “Bangkok E-Bus Program” authorized by Switzerland and Thailand under Article 6 of the Paris Agreement Thailand and Switzerland have authorized a climate protection programme that will reduce greenhouse gas emissions and air pollution in the greater Bangkok Metropolitan Area through the introduction of electric vehicles in privately-operated public transport. The Bangkok E-Bus Program is the first authorized climate protection activity in the context of the bilateral cooperation agreement between Switzerland and Thailand, in accordance with Article 6 of the Paris Agreement, which is supported by the KliK Foundation. The program owner Energy Absolute Public Company Limited has contracted South Pole to develop the Bangkok E-Bus Program, enabling the private operator of e-buses to convert its fleet in the Bangkok Metropolitan Area from diesel to electric vehicles. In parallel, it will lay the foundation for a city-wide network of charging infrastructure. To secure the financing, the purchase agreement between Energy Absolute Public Company Limited and the KliK Foundation on greenhouse gas emission reductions (International Transferred Mitigation Outcomes, ITMOs) from this program was signed on 24 June 2022. The climate protection measure will contribute significantly to improving the air in the capital and, as a flagship programme, is expected to pioneer the electrification of Thailand’s mobility sector. Source: https://carbonsink.it/en/bangkok-e-bus-programme-authorised-by-switzerland-and-thailand/ 28 Feb 2023