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Citation:
Muñoz, Lucio, 2024. Sustainability thought 178: Environmental pollution management
markets versus environmental pollution reduction markets: Which one is
environmentally clean economy transition friendly? Why?, In: CEBEM-REDESMA
Boletin, Año 18, Nº 7, La Paz, Bolivia.
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Sustainability thought 178: Environmental pollution management markets versus
environmental pollution reduction markets: Which one is environmentally clean
economy transition friendly? Why?
By
Lucio Muñoz*
* Independent Qualitative Comparative Researcher / Consultant, Vancouver, BC, Canada Email: munoz@interchange.ubc.ca
Abstract
There are two ways of dealing with the environmental pollution problem separating
environmentally dirty markets from environmentally clean markets, using environmental
pollution management markets and using environmental pollution reduction markets. If the
goal is to transition from environmentally dirty economies to environmentally clean
economies, then understanding which one is friendly and which one is not friendly with such
a transition is important for science-based policy making and for understanding the rationale
behind non-science-based policy making. And this makes the following topic and question
relevant: Environmental pollution management markets versus environmental pollution
reduction markets: Which one is environmentally clean economy transition friendly? Why?
Among the goals of this paper is to provide answers to these questions.
Key concepts
Dirty market, environmentally dirty market, environmental pollution management
market, environmental pollution reduction market, environmentally clean market, pollution
production markets, pollution-less markets, environmental pollution problem.
Introduction
a) The two ways to deal with the environmental pollution problem separating the
environmentally dirty economy from the environmentally clean economy
Ideas such as environmental pollution management markets and environmental
pollution reduction markets can be useful to understand ways to address the environmental
problem found between environmentally dirty economies and environmentally clean
economies (Muñoz 2022) as well as to highlight the usefulness of these approaches in
supporting an orderly transition in the future towards an environmentally clean world. These
clean market transition ideas were introduced recently both in terms of dwarf green markets
(Muñoz 2023a) and in terms of green markets (Muñoz 2023b), which summarized in Figure 1
below:
Figure 1 above tells us that there are two ways of dealing with the environmental
pollution problem (EPO) separating the environmentally dirty market (EDM) from the
environmentally clean market (ECLM), namely environmental pollution management markets
(EPOMM) and environmental pollution reduction markets (EPORM), the first one being a
partial fix and the second one a full fix.
b) Linking environmental pollution correction markets to environmental clean market
transition friendliness
As indicated above, there are two ways of dealing with the environmental pollution
problem separating environmentally dirty markets from environmentally clean markets, using
environmental pollution management markets and using environmental pollution reduction
markets. This pollution production problem linked to the working of traditional market
thinking (Smith 1776) was addressed by the Brundtland Commission in 1987(WCED 1987)
through sustainable development thinking; and later this same pollution production problem
was the central focus of the 2012 Rio +20 conference(UNCSD 2012a; UNCSD 2012b), who
was initially advocating for a full environmental fix a la pollution problem internalization, but
in the end, it took the route of a partial fix a la pollution management. If the goal is to
transition from environmentally dirty economies to environmentally clean economies, then
understanding which one is friendly and which one is not friendly with such a transition is
important for science-based policy making and for understanding the rationale behind non-
science-based policy making. And this makes the following topic and question relevant:
Environmental pollution management markets versus environmental pollution reduction
markets: Which one is environmentally clean economy transition friendly? Why? Among the
goals of this paper is to provide answers to these questions.
Objectives
1) To point out the nature of the environmental pollution management market solution,
its consequences once in place, and the type of environmental clean market transition
friendliness it possesses; 2)To point out the nature of the environmental pollution reduction
market solution, its consequences once in place, and the type of environmental clean market
transition friendliness it possesses; and 3) To contrast the nature of the two solutions to show
that one of the solutions moves away and away from the goal of environmentally clean
markets once in place.
Methodology
First, the terminology and operational concepts and tools is given. Second, the
structure of the environmental pollution management market solution to the environmental
pollution problem is stressed, its consequences highlighted, and the nature of its
environmentally clean market transition friendliness is discussed. Third, the structure of the
environmental pollution reduction market solution to the environmental pollution problem is
shared, its consequences pointed out, and the nature of its environmentally clean market
transition friendliness is explained. Fourth, the friendliness displayed by environmental
pollution management markets and by environmental pollution reduction markets is
contrasted in the same plane to show that one of them moves away from the goal of the
environmental clean market transition. And finally, some food for thoughts and conclusions
are underlined.
Terminology
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EDM = Environmentally dirty market
EPO = Environmental pollution
EPOMM = Environmental pollution management market
EPORM = Environmental pollution reduction market
EM = Environmental margin
REPO = Remaining environmental problem
REM = Remaining environmental margin
DEM = Dwarf environmental margin
ECLM = Environmentally clean market
EPOM = Environmental pollution under management
I[EPO] = Environmental problem internalization
RETG = Renewable energy technology gap
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Operational concepts and tools
i) Environmentally dirty market, one cleared by an environmentally distorted market price.
ii) Environmental pollution management market, one that addresses only a portion of the
environmental pollution problem.
iii) Environmental pollution reduction market, one that addresses fully the environmental
pollution problem.
iv) Environmental margin, one that reflects the environmental cost of production.
v) Dwarf environmental margin, one that reflects only a portion of the environmental cost
of production.
vi) Environmental clean market, one where the environmental margin is zero.
vii) Renewable energy technology gap, the technology gap that needs to be closed to leave
non-renewable energy markets behind, partially or fully.
viii) Environmental problem internalization, the tool that corrects environmentally
distorted markets.
ix) Environmental cost externalization, the tools behind environmentally distorted market
prices.
x) Remaining environmental margin, the difference between the environmental margin and
dwarf environmental margin driving the remaining environmental problem.
The environmental pollution management market way to address the environmental
pollution problem
i) The setting up of environmental pollution management markets
When environmental pollution management markets (EPOMM) are used to manage
some of the environmental pollution problem created by environmentally distorted market
prices, we create the situation described in Figure 2 below:
We can highlight based on Figure 2 above that managing a portion of the
environmental problem (EPOM) leaves a remaining environmental problem (REPO) out there
keeping environmental pollution management markets (EPOMM) delinked from
environmentally clean markets as indicated by the broken arrow from REPO to ECLM.
ii) The consequences of operating under a remaining environmental problem
The three market consequences associated with the creation of the remaining
environmental problem (REPO) under environmental pollution management markets are
indicated in Figure 3 below:
The information in Figure 3 above tells us the following things about the existence of
the remaining environmental problem(REPO): 1) it prevents the movement of environmental
pollution management markets(EPOMM) towards environmentally clean markets(ECLM) as
arrow "i" from REPO to ECLM shows; 2) it affects the stability of remaining environmentally
dirty markets(EDM) as arrow "iii" from REPO to EDM indicates; and 3) it affects the stability
of environmental pollution management markets(EPOMM) as the arrow “ii” from REPO to
EPOMM demonstrates. Notice that going environmental pollution management markets
(EPOMM) is a move away from environmentally dirty markets (EDM), where permanent
government intervention is needed for it to work.
iii) The type of environmental clean market transition friendliness displayed by
environmental pollution management markets
The existence of the remaining environmental problem (REPO) indicates that when
environmental pollution management markets are set up you are creating a permanent
environmental market failure that leads them away from the transition towards
environmentally clean markets (ECLM), a situation stated in Figure 4 below:
Figure 4 above shows in simple terms that environmental pollution management
markets (EPOMM) are no environmental clean economy transition friendly as they create a
remaining environmental pollution problem (REPO) as a result of a permanent environmental
market failure that keeps them away from environmentally clean markets (ECLM).
The environmental pollution reduction market way to address the environmental
pollution problem
i) The setting up of environmental pollution reduction markets
When environmental pollution reduction markets (EPORM) are used to address fully
the environmental pollution problem created by environmentally distorted market prices, we
create the situation highlighted in Figure 5 below:
We can indicate based on Figure 5 above that internalizing the environmental
pollution problem(I[EPO]) leaves no remaining environmental problem (REPO) out there
creating a transition path from environmental pollution reduction markets (EPORM) to
environmentally clean markets as indicated by the broken arrow from EPORM to ECLM as it
creates an environmental cost differential between those 2 types of markets, EM > 0 and EM
= 0 respectively. Notice that the environmental margin(EM) under which environmental
pollution reduction markets(EPORM) operates in Figure 5 above is positive(EM > 0) as they
run under pollution based non-renewable energy once in place; and environmentally clean
markets have no environmental margin(EM = 0), hence environmental pollution reduction
markets make pollution reduction a profit making opportunity as the lower the environmental
margin goes the lower the cost of production and consumption is and therefore, the lowest the
level of environmental pollution production created. Notice in Figure 5 above that the
internalization of the environmental problem(I[EPO]) shifts the environmentally dirty market
(EDM) towards the environmental pollution reduction market (EPORM), creating the green
margin differential needed to create the profit-making opportunity that will lead to the
transition of environmental pollution reduction market towards environmental pollution-less
markets or environmentally clean markets.
ii) The consequences of operating under no remaining environmental problem
The two market consequences associated with the elimination of the remaining
environmental pollution problem (REPO) under environmental pollution reduction markets
are shown in Figure 6 below:
The information in Figure 6 above indicates the following about the no existence of
the remaining environmental problem(REPO): 1) it creates a path of movement from
environmental pollution reduction markets(EPORM) towards environmentally clean
markets(ECLM) as arrow "ii" from EPORM to ECLM shows; and 2) it leaves the old
environmentally dirty market paradigm(EDM) behind as its knowledge base is irrelevant
under both environmental pollution reduction market thinking and under environmentally
clean market thinking, new ideas or corrected old ideas are now needed. Notice that going
environmental pollution reduction market (EPORM) is a move that leaves the knowledge base
of the environmentally dirty market (EDM) behind as it does not work in the new market.
iii) The type of environmental clean market transition friendliness displayed by
environmental pollution reduction markets
The absence of the remaining environmental problem (REPO) tells us that when
environmental pollution reduction markets are set up you are fully correcting distorted market
prices to eliminate the environmental market failure they create, which opens the path towards
a profitable transition towards environmentally clean markets (ECLM), a situation stated in
Figure 7 below:
Figure 7 above highlights in simple terms that environmental pollution reduction
markets (EPORM) are environmental clean economy transition friendly as they create a
profitable green margin reduction path that transitions environmental pollution reduction
markets (EPORM) towards environmentally clean markets (ECLM), partially or fully, step by
step.
The transition from environmental pollution reduction markets to environmentally
clean markets
i) The structure of the transition
As reducing the environmental margin reflected in market prices is now a profit-
making opportunity (GM -----> 0), then closing the renewable energy gap (RETG-----> ∞) to
leave the non-renewable energy economy behind is now too a good profit marking
opportunity, and this create the structure of the transition from the environmental pollution
reduction market (EPORM) to the environmentally clean market (ECLM) as described in
Figure 8 below:
Figure 8 above stresses that closing the renewable energy gap (RETG-----> ∞) allows
environmental pollution reduction markets (EPORM) to reduce their environmental margin
(EM---->0) so as to produce and consume at the lowest market price possible while producing
the less pollution possible, until the environmental margin becomes zero (EM = 0), when
arrived to the world of perfect environmentally clean markets.
ii) The partially dominant renewable energy-based market and fully dominant
renewable energy-based market transition points.
The environmentally clean economy transition friendliness found in environmental
pollution reduction markets (EPORM) can be seen as to be guided in steps first to a world
under partial dominant renewable energy based environmental pollution reduction markets,
and then to a world under full dominance renewable energy-based markets, a situation
depicted in Figure 9 below:
Figure 9 above shows the transition point where the environmental pollution reduction
market (EPORM) reaches the partially dominant renewable energy-based market status at
point "1"; and the transition point where the environmental pollution reduction market
(EPORM) becomes a fully renewable energy dominant based market status at point "2".
Notice that at point "2" the environmental pollution reduction market (EPORM) becomes an
environmentally clean market (ECLM) as at point "2" we have EM = 0. The idea that closing
the renewable energy technology gap (RETG) is needed to transition to clean economies and
that failure to do that may even lead to market blackouts has been recently pointed out
(Munoz 2014).
Contrasting the friendliness of environmental pollution management markets and of
environmental pollution reduction markets in the same plane
We can contrast the structure of transition friendliness and model structure displayed
by environmental pollution management markets (EPOMM) and by environmental pollution
reduction markets (EPORM) by placing their structures in the same plane as detailed in
Figure 10 below
The following key aspects can be pointed out based on Figure 10 above: i) at the top
we can see that environmental pollution management markets work under a permanent
environmental market failure that creates the remaining environmental problem and which
leads them away from the goal of environmental clean markets as indicated by the green
arrow going away from environmentally clean markets; ii) at the bottom we see a market
correction that shift the environmentally dirty market towards the environmental pollution
reduction market, which by means of closing the renewable energy gap to reduce the
environmental margin moves towards the environmentally clean markets until they become
one; iii) the further away the environmental pollution management markets are from
environmentally clean markets, the greater the remaining environmental margin(REM > 0);
and iv) When environmentally clean market come to exist, they will tend to expand at the
lowest clean market price possible as indicated by the green arrow going from left to right
from ECLM.
Food for thoughts
i) Is environmental pollution reduction a profitable opportunity under environmental
pollution management markets? I think No, what do you think?; ii) Is investing in
environmental pollution reduction technology a profitable opportunity under environmental
pollution reduction markets? I think Yes, what do you think?; and iii) Can cost externalization
theory be used to explain why environmental management markets will tend to move away
from the goal of environmentally clean markets once in place? I think Yes, what do you
think?
Conclusions
First, it was pointed out that environmental pollution management solutions are partial
solutions that lead to permanent environmental market failure, which prevents them from
being environmentally clean economy transition friendly and which moves them away from
the transition goal as environmental cost externalization is still taking place by means of the
remaining environmental margin. Second, it was stressed that environmental pollution
reduction solutions are full solutions that lead to a distorted market correction, which
transform them into being environmentally clean economy transition friendly as pollution
reduction now is a good profitable opportunity, which leads them towards environmentally
clean economies. Third, it was indicated that the transition from environmental pollution
reduction markets once in place can reach a point of partial renewable energy dominant
market, and fully renewable energy dominant market, and when fully renewable energy
dominant market, the environmental pollution reduction market becomes and behaves as an
environmentally clean market. And finally, fourth, it was shown, graphically and analytically,
that once in place we should expect environmental pollution management markets to move
away from the goal of environmental clean market transition as the permanent environmental
market failure prevents environmental pollution reduction from becoming a good business
opportunity for expanding production and consumption while expanding pollution reduction.
References
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Citation:
Muñoz, Lucio, 2024. Sustainability thought 178: Environmental pollution management
markets versus environmental pollution reduction markets: Which one is
environmentally clean economy transition friendly? Why?, In: CEBEM-REDESMA
Boletin, Año 18, Nº 7, La Paz, Bolivia.