• River Pollution and Externalities

Water/Wastewater

River Pollution and Externalities

Feb 27 2023

As public awareness of and concern for the state of British waterways continues to grow, it’s perhaps worth asking some broader questions about the causes of river pollution – and therefore, the mechanisms that might be used to curtail it. Absent effective means of fining and financially reprimanding sewerage firms for illegal discharges, one concept that is useful in understanding this issue come from mainstream economics: externality.  

Externalities are costs or benefits that are not reflected in the market price of a good or service. When a firm or individual engages in an activity that generates costs or benefits for others who are not directly involved in the transaction, that is an externality.  

River pollution is a serious environmental issue in the UK. Polluted rivers can harm aquatic ecosystems, including fish, plants, and other wildlife. Polluted water can also be a health hazard for humans, as it can carry bacteria and other pathogens. In addition to the direct health and environmental impacts of river pollution, there are also economic externalities associated with the pollution. 

One of the main economic externalities of river pollution is that it is often considered a negative externality, as it does not cost water companies to produce the pollution. Instead, the costs of the pollution are often borne by society as a whole, through the loss of recreational opportunities, property values, and the health impacts of pollution. The impact of river pollution on the fishing industry is another example of an economic externality. The fishing industry relies on clean water to support healthy fish populations. When a river is polluted, fish populations can be negatively impacted, which can result in lower catch rates and reduced revenue for fishermen. This, in turn, can have a ripple effect on the wider economy, as the fishing industry supports other businesses such as processing plants, wholesalers, and retailers. 

The economic externalities of river pollution can be addressed through the implementation of policies and regulations that hold polluters accountable for the costs of their pollution. By making polluters pay for the externalities associated with their pollution, it is possible to reduce the incidence of river pollution and promote a cleaner and more sustainable environment. 

In addition to the economic externalities, there are also social externalities associated with river pollution. Social externalities are the costs or benefits that are not reflected in the market price of a good or service, but instead impact society as a whole. In the case of river pollution, the social externalities can include the impact on the environment, the health of the local population, and the quality of life in the area. 

To address the issue of river pollution and its economic and social externalities, the UK government has implemented a number of policies and regulations. These include the Water Framework Directive, which sets out a framework for the protection and management of surface water, such as rivers and lakes, and the Environmental Permitting Regulations, which require businesses to obtain a permit before discharging pollutants into waterways. 

The UK government has also established a number of agencies to monitor and regulate river pollution. The Environment Agency, for example, is responsible for regulating water quality and issuing permits for the discharge of pollutants. The agency also monitors water quality and conducts investigations into pollution incidents. 

Despite these efforts, however, river pollution remains a significant problem in the UK. Many rivers in the UK are still polluted, and the economic and social externalities associated with this pollution continue to impact local communities and the wider economy. To address this issue, it will be necessary to continue to develop and implement policies and regulations that can effectively address river pollution and its associated externalities. 

River pollution in the UK is a type of externality, which can have significant impacts on local communities and the wider economy. By making polluters pay for the externalities associated with their pollution, and by continuing to develop and implement policies and regulations that can effectively address river pollution, it is possible to reduce the impact of pollution on society and promote a cleaner and more sustainable environment. 


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