Simulation Exercises on Water Pollution Abatement Policies

Abstract

It is widely known that command and control measures do not provide necessary incentives to polluters for the choice of least cost methods of pollution control. The Government of India has so far resorted only to such measures for controlling industrial pollution in India. On the other hand, fiscal instruments, such as pollution taxes or marketable pollution permits, provide incentives to factories for adopting least cost pollution abatement technologies. There have been no serious attempts in India to use such instruments for the abatement of industrial pollution. This chapter attempts several experiments based on alternative set of instruments developed by the authors. We have suggested two pollution abatement policies and evaluated the impact of these policies on output and prices. This study could estimate the abatement cost for selected industries. It is assumed that if the existing industries having CETP or ETP could maintain the standards, then the total abatement cost will increase. This additional cost to achieve the standards can be treated as pollution tax. These pollution tax rates will be different for different industries. This additional cost borne by the selected industries will have an impact on the whole economy. Another scenario, based on the total pollution tax for selected industries, which is 0.76 % of gross value added for India for the year 2006–2007, is imposed on all the sectors. Although the tax rate was the same, the volume of tax was different across sectors because of the differences in value added. We received a similar pattern of changes in both outputs and prices for both policies in some sectors, namely, inorganic and organic chemicals, electricity, mining, sugar, and cotton textile. We have also calculated the future load of water pollution in the context of India’s growth strategy which will be useful to the policy makers and academic community. Three different growth rates have been applied to calculate the future impact on the Indian economy at the end of current 12th Five-Year Plan. Analysis reveals that water pollution-generating sectors will grow rapidly, though the abatement activities will continue to increase the output of clean water sector. In this context, we have also computed the total volume of pollution across the ten identified water pollutants. It is observed from the study that the whole economy will be affected due to pollution control.