Answer to Question #202469 in Microeconomics for vtg

Question

Master Paint is a company that produces paint and discharges the waste into the Limpopo River. The Farmers who use the water for irrigation down-stream have been complaining about the contamination of the water. The quality of crops on these farms has deteriorated significantly over the past seasons resulting in financial loses. Is there a case for taxing Master Paint? Discuss and Illustrate your answer with diagrams

Answer 1

Master Paint is is a company that produces a lot of waste that has little or no effect to the company as they are the polluters. Thus, the impact of the ineffective waste disposal technique has a wide range of effects on the downstream of the river. The effects of this could include but not limited to the following

• Pollution of the river water.
• Killing of the aquatic life
• Rendering the river water not good for human and animal consumption.

These among many other environmental challenges have with time increased the pressure on governments to find ways to reduce environmental damage so that they can reduce the harm on the growth of the economy.

Governments have a range of techniques at their disposal such as;

• Enacting regulations,
• information programmes,
• innovation policies,
• environmental subsidies 
• environmental taxes.

Taxes in particular are a key measure in handling these kind of situations.

Having the above background, it will be of great importance that Master Paint be taxed so that they give attention to proper waste disposal.This tax should be directly proportionate to the scope of the environmental damage caused.

The above diagram shows the increasing rate of environmental taxes because environmental tax has proved to be an efficient way of enhancing environmental conservation.

With increase in industrialization and global warming environmental taxes have been spiraling high and high

Therefore to curb the environmental effect of the Master Paint taxing will be most efficient.