COMMON ACCESS RESOURCES AND SUSTAINABILITY

COMMON ACCESS RESOURCES AND SUSTAINABILITY-

Common access resources are those goods which are non-excludable and rivalrous. Non- excludable means you cannot prevent people from using the goods. People can use the good without having to pay for it. Rivalrous means that the quantity consumed by one person reduces the quantity available for consumption by others. Common access resources consist of all natural resources such as water, air, forests, oil, coal and grazing lands.

Market failure occurs due to overexploitation of these common access resources beyond their sustainable limit. Overconsumption leads to a negative externality of consumption. Overproduction leads to a negative externality of production.

There are two types of resources, renewable and non-renewable resources. Renewable resources are those which can be produced in a short period of time such as fish and trees. Non-renewable resources take upto millions of years to reproduce such as oil and coal.

In the strict sense, the concept of sustainability applies only to renewable resources. Using these resources by the present generation in a manner that does not reduce the quantity and quality of these resources for the future generation is known as sustainability. However in the broader sense, the concept of sustainability applies to non-renewable resources as well. It means avoiding wastage so that these resources last for as long as possible.

There are a few solutions for market failure due to common acccess resources. One solution is legislation. For example, restriction on emissions from cars, restrictions on emissions from factories and industrial production, banning the use of harmful substances and restrictions regarding hunting seasons and hunting areas. Another solution is to impose a tax. A tax can be imposed on output which means imposing a tax on the finished product. A tax can be imposed on input as well which means imposing a tax on raw materials used depending on the extent to which this raw material pollutes for example, tradeable permits and carbon tax. A tax on pollution caused by inputs used to produce the goods is intended to ensure that the firms switch to environmentally friendly fuels for production. Carbon tax is a tax per unit of carbon emissions of fossil fuels. The more the carbon emitted, the higher the tax. Following the imposition of the tax, firms must pay the higher price to buy the fossil fuel. Tradeable permits are also known as cap and trade schemes involving permits to pollute issued to firms by a government or international body.

Citations-

Tragakes, Ella. Economics for the IB Diploma. Cambridge University Press.