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"Airlines Hit by E.U's Co2 Emissions Plan"

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Introduction

"International Airlines Hit by European Unions's CO2 Emissions Plan" Bearing in mind that this article is comprehensive, coherent and fluent, the written account is inclusive and demonstrates an apparent connection with Section 2.4 Market Failure and sets up a close relation with the two sections in particular; negative externalities1 and the possible governmental responses concerning the quandary given, which in this case proposes a European Commission draft proposal requiring all flights arriving at or departing from the European Union airports to buy permits for their carbon dioxide emissions. This article is effective for the internal assessment because it does not dive into the economic theory, but introduces many notions that can easily be absorbed into economic presumptions and then be analysed. The extract portrays about how the advantages and disadvantages of using pollution permits, how effective they are and how several European companies are learning to deal with the more stringent regulations of the EU on pollution as a result of global warming. ...read more.

Middle

The problem undoubtedly being that the market was experiencing failure, as the global airline firms did not have to pay the cost they were causing the society by their carbon gas emissions. In Figure 1.2, the Private Marginal Cost (PMC) has shifted into the same position as the Social Marginal Cost (SMC) 3 was in Figure 1.1, as now the Airliners have to pay for the negative externalities they are causing, consequently leaving the society left without having to pay for the pollution the aircraft caused, and the negative externality being pollution, abolished. Also, the Private Marginal Cost has become sharper, as the company must now compensations in case it exceeds a certain amount of carbon gas emissions. This is an incentive for the company to either produce less or produce more eco-friendly. As a result, Figure 1.3 will arise, as the respective Airline Firm is now producing eco-friendly, and will not exceed the limits on its carbon gas emissions, furthermore will even be able to sell some of its excess pollution permits, to other firms who need surplus to cover their pollution. ...read more.

Conclusion

However, it does not work as smoothly as was initially planned. For one, international airline firms are able to evade paying for the pollution permits, by moving production to developing economies outside the E.U., who don't have any regulations on the carbon gas emissions. The effects of this are that they pollute excessively in the new production environment, which has exactly the opposite effect to the desired one. This of course, shows that many alterations need to be undertaken for the European Commission draft proposal's requirement of all flights arriving at or departing from EU airports to buy permits for their carbon dioxide emissions to work effectively. The E.U. will have to alter their plan slightly, which should be made more rigorous and binding to produce the desired plan, which is the slowing down of global warming, but also to combat the endless possibilities of negative externalities. 1 Externalities are costs (negative externalities) which are not reflected in free market prices. 2 http://textbooks.triplealearning.co.uk/file.php/75/mod2_notes/page_104.htm 3 Full opportunity cost to society of an extra unit produced 4 http://www.businessweek.com/globalbiz/content/nov2006/gb20061116_295888.htm?chan=search ?? ?? ?? ?? ...read more.

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