1. Government and the Market Government and the Market

2. Environmental Policy The environment and production –environmental failures of the market –nature of an environmental policy Problems with policy intervention –valuing the environment financial costs to other users revealed preference contingency valuation –other problems spatial issues temporal issues irreversibility issues The environment and production –environmental failures of the market –nature of an environmental policy Problems with policy intervention –valuing the environment financial costs to other users revealed preference contingency valuation –other problems spatial issues temporal issues irreversibility issues

3. Environmental Policy Environmental policy options –market-based policy: taxation and subsidies conflicts with revenue objectives redistributive effects problems with international trade effects on employment uses of green taxes in various countries Environmental policy options –market-based policy: taxation and subsidies conflicts with revenue objectives redistributive effects problems with international trade effects on employment uses of green taxes in various countries

4. Types of environmental taxes and charges

5. Green tax revenues as a % of GDP

7. Environmental Policy Environmental policy options (cont.) –non-market-based policy: command-and- control systems approaches to devising CAC systems –technology-based standards –ambient-based standards –social-impact standards assessing CAC systems Environmental policy options (cont.) –non-market-based policy: command-and- control systems approaches to devising CAC systems –technology-based standards –ambient-based standards –social-impact standards assessing CAC systems

8. Environmental Policy Environmental policy options (cont.) –tradable permits how tradable permits work –deciding on permitted levels of pollution –'grandfathering' their possible use internationally advantages problems Environmental policy in the UK and EU Environmental policy options (cont.) –tradable permits how tradable permits work –deciding on permitted levels of pollution –'grandfathering' their possible use internationally advantages problems Environmental policy in the UK and EU

9. Transport Policy Congestion problems and the impact on society and business

10. Passenger transport in Great Britain (percentage of passenger kilometres by road) Passenger transport in Great Britain (percentage of passenger kilometres by road)

11. Passenger transport in Great Britain (percentage of passenger kilometres by road) Passenger transport in Great Britain (percentage of passenger kilometres by road)

12. Passenger transport in Great Britain (percentage of passenger kilometres by road) Passenger transport in Great Britain (percentage of passenger kilometres by road)

13. Passenger transport in Great Britain (percentage of passenger kilometres by road) Passenger transport in Great Britain (percentage of passenger kilometres by road)

14. Passenger transport in Great Britain (percentage of passenger kilometres by road) Passenger transport in Great Britain (percentage of passenger kilometres by road)

15. Cars per thousand population Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm Increase in car ownership

16. UK Cars per thousand population Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm Increase in car ownership

17. USA UK Cars per thousand population Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm Increase in car ownership

18. USA Germany UK Cars per thousand population W Germany Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm Increase in car ownership

19. USA Germany Belgium Sweden UK Cars per thousand population W Germany Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm Increase in car ownership

20. USA Germany Belgium Sweden UK Spain Cars per thousand population W Germany Energy and Transport in Figures (EC, 2003); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm Increase in car ownership

21. Transport Policy The allocation of road space –demand for road space a derived demand determinants of demand the price and income elasticities of demand –supply of road space short run long run The allocation of road space –demand for road space a derived demand determinants of demand the price and income elasticities of demand –supply of road space short run long run

22. Transport Policy Social optimum level of road usage –marginal social benefit –marginal social cost congestion costs: time congestion costs: monetary environmental costs –socially efficient level of road usage Social optimum level of road usage –marginal social benefit –marginal social cost congestion costs: time congestion costs: monetary environmental costs –socially efficient level of road usage

23. Actual and optimum road usage O Costs and benefits (£) MSB Cars per minute

24. O Costs and benefits (£) MSB Cars per minute MC (private) Actual and optimum road usage a

25. O Costs and benefits (£) MSB Cars per minute Q1Q1 e Actual and optimum road usage MC (private) a

26. b O Costs and benefits (£) MSB Cars per minute Q1Q1 e MSC Actual and optimum road usage MC (private) a

27. a b d O Costs and benefits (£) MSB Cars per minute Q1Q1 e Q2Q2 c Optimum charge MSC Actual and optimum road usage MC (private)

28. Transport Policy Social optimum level of road usage –marginal social benefit –marginal social cost congestion costs: time congestion costs: monetary environmental costs –socially efficient level of road usage Identifying a socially optimum level of road building Social optimum level of road usage –marginal social benefit –marginal social cost congestion costs: time congestion costs: monetary environmental costs –socially efficient level of road usage Identifying a socially optimum level of road building

29. Transport Policy Social optimum level of road usage –marginal social benefit –marginal social cost congestion costs: time congestion costs: monetary environmental costs –socially efficient level of road usage Identifying a socially optimum level of road building –use of cost–benefit analysis Social optimum level of road usage –marginal social benefit –marginal social cost congestion costs: time congestion costs: monetary environmental costs –socially efficient level of road usage Identifying a socially optimum level of road building –use of cost–benefit analysis

30. Transport Policy Policy 1: direct provision –the road solution –public transport Policy 2: regulation and legislation –restricting car access bus and cycle lanes no entry to side streets pedestrian-only areas –parking restrictions Policy 1: direct provision –the road solution –public transport Policy 2: regulation and legislation –restricting car access bus and cycle lanes no entry to side streets pedestrian-only areas –parking restrictions

31. Transport Policy Policy 3: changing market signals –extending existing taxes –road pricing variable tolls supplementary licences electronic road pricing –subsidising alternative means of transport Policy 3: changing market signals –extending existing taxes –road pricing variable tolls supplementary licences electronic road pricing –subsidising alternative means of transport

32. Privatisation History of privatisation

33. Nationalisation and privatisation in the UK

36. Privatisation History of privatisation (cont.) –forms of privatisation Arguments for privatisation –market forces greater competition in the goods market greater competition for finance accountability to shareholders –reduced government interference –reducing the PSNCR –increased share ownership History of privatisation (cont.) –forms of privatisation Arguments for privatisation –market forces greater competition in the goods market greater competition for finance accountability to shareholders –reduced government interference –reducing the PSNCR –increased share ownership

37. Privatisation Arguments against privatisation –natural monopolies –the public interest externalities fairness and social justice –problems with the PSNCR –problems in the valuation of shares Arguments against privatisation –natural monopolies –the public interest externalities fairness and social justice –problems with the PSNCR –problems in the valuation of shares

38. Regulating the Privatised Industries Identifying optimum price and output Regulation in practice: –the RPI–X formula Advantages of UK regulation –discretionary –flexible –incentives Disadvantages of UK regulation –disincentives of changes to X –excessive power of regulator? –alternatively, regulatory capture –complexity of regulation Identifying optimum price and output Regulation in practice: –the RPI–X formula Advantages of UK regulation –discretionary –flexible –incentives Disadvantages of UK regulation –disincentives of changes to X –excessive power of regulator? –alternatively, regulatory capture –complexity of regulation

39. Making Privatised Industries more Competitive Increasing competition in the privatised industries –allowing competition where there is no natural monopoly limited extent of true natural monopoly –allowing access to grids by competitors –forbidding suppliers from being grid owners –capping market share of established firms –competitive franchising to make monopolies contestable Increasing competition in the privatised industries –allowing competition where there is no natural monopoly limited extent of true natural monopoly –allowing access to grids by competitors –forbidding suppliers from being grid owners –capping market share of established firms –competitive franchising to make monopolies contestable