People participate in a campaign for protecting the quality and supply of water along Cheonggye Stream in downtown Seoul. The government and civic groups have been active in the protection of water supply in recent years. / Korea Times file

The following is an article that was compiled by Korea Times reporter Kim Bo-eun based on an interview with Park Chin-keun, chairman of the National Research Council for Economics, Humanities and Social Sciences (NRCS). – ED.

Identifying and assessing the costs incurred to save the environment carries enormous importance from an economic standpoint. Environmental problems such as climate change, depletion of natural resources and pollution of the environment are not only dangers that we face today, but are factors that deteriorate the quality of our lives.

In trying to overcome these problems we have no choice but to pay for them but the cost incurred is another factor that complicates the issue at hand.

It is important that we assess whether the nation can cope with the costs. Being able to determine whether the costs are at the optimal level is not an easy task, but fortunately, research is currently being done on this matter.

First, an indicator (either a composite or brand new) that shows how “green” a nation is, needs to be developed. Then, based on the indicator, one determines where a nation stands in terms of being committed to conserving the environment. Then the optimal level of costs the nation should bear is calculated. Finally, one examines whether those costs are adequate in relation to the nation’s economy.

Research is being conducted both within our institute as well as at other research institutes.

Paying the price

The dominant principle in a market economy is that when a certain activity incurs social costs, the subject of the activity must pay the price. This is according to the principle of external diseconomies, and a violation of this principle leads to market failure.

External diseconomies are factors that increase the long-run average costs of production, one of which is environmental pollution. When external diseconomies arise, whichever company that is responsible should bear the costs.

In the United States, certain areas in which pollution is concentrated, with levels of ozone and carbon monoxide that exceed permissible levels, the government has mandated that when individuals own more than a certain number of cars purchase a new one, that they purchase a certain percentage of vehicles that use cleaner fuel.

This can be an example of a government requiring the perpetrator to take responsibility for the damage they have caused.

However, it is problematic that in most cases other companies, which are victims of these negative factors, end up paying for them.

When this happens, production costs of those companies inevitably rise and this leads to distortions in the market. One reason for this is the inadequate distribution of human resources. But the problem also lies in the fact that the cost structure is distorted.

In China, the price of industrial products is extremely cheap. However, we have to ask ourselves, if China were to implement a proper cost structure, would the Chinese products still be competitive in the international market?

And when there is market failure, there needs to be government intervention. Economists believe that environmental problems occur because there are no prices paid for the societal losses that incur when pollutants are discharged.

So the solution that the field of economics presents regarding environmental issues is actually quite simple: It is to ensure that the perpetrator pays the price.

For example, if a shoe factory in the upper reaches of a river lets out industrial waste and causes significant damage for fisheries in the lower reaches of the river, it should be the shoe factory that is held responsible.

However, if strict environmental standards were immediately imposed on all corporations in Korea, a significant number would go bankrupt. Consequently, the nation’s economy would inevitably suffer.

Ultimately, finding the optimal standard is most important. Each nation is at a different level of economic development and citizens have differing levels of awareness regarding environmental issues. Therefore it is crucial that a balance between economic development and environmental pollution is found.

Ethical Consumerism

In the past, when purchasing goods, the main criteria for consumers were price or function. However, today, consumers have started to look into how environmentally friendly the product is, how environmentally friendly the production process is, and so on.

We refer to this as ethical consumerism.

Ethical consumerism is the practice of purchasing products and services that seek to minimize social and environmental damage, and the avoidance of products deemed to harm society or the environment. This is seen today mainly in developed nations, especially countries in Western Europe.

In essence, this is a practice that heightens consumer sovereignty. And in this case, consumers are willing to pay for the extra costs that occur.

But we have yet to see how long this will continue. This is because the market is essentially a system determined by price. However environmentally friendly a product may be, if it is too expensive, it will be difficult for the consumers to continue spend so much.

International cooperation

Fortunately, human society possesses great intellectual capabilities. We should tackle environmental problems of today with a willingness to address these issues and through effective international cooperation.

When doing so, it is vital that we understand that the environmental problems and methods for managing them differ for each and every country. Each country has varying goals, standards and degrees of regulation regarding the environment.

The reason for this is that countries have differing natural environments, and the value that citizens place on the environment are also different.

This is why some environmental policies may favor certain countries while for others they may be a disadvantage, and this can raise the possibility of causing conflict between nations.

In particular, the Kyoto Protocol implemented in 2005 mandated that developed nations, consisted mostly European nations, reduce the amount of greenhouse gases emitted.

At the Copenhagen climate change conference, developed nations demanded that the greatest emitters such as the United States and China should also be subject to a heavy cut on emissions.

The post-Kyoto era, the period after 2012, when the first commitment period comes to an end, will require more nations to decrease emissions of environmentally hazardous gases and also increase the amount to be reduced.

Cuting down on emissions

Developed nations in Europe, and Japan, which are mandated to cut down on emissions, especially for carbon dioxide, are stepping up environmental protection in an effort to make environmental industries the breakthrough for economic growth, as growth is increasingly becoming limited.

Accordingly, environmental issues have become the new key agenda in the international society today. Environmentalism can be seen in the form of environment-related standards, technology regulations and evaluation standards, and nations are expected to use their superior technologies to protect their own industries.

Another reason international cooperation is essential is because environmental problems are not a single nation’s concern. Pollutants effortlessly and inadvertently cross borders and spread to other countries.

Pollutants from China easily spread throughout the Korean Peninsula. Various pollutants from China’s industrial belts, as well as yellow sand, continue to flow into Korea’s atmosphere.

The principle of the perpetrator bearing the costs of pollution applies to international environmental problems as well. In other words, the country that causes environmental damage is the one that should be held accountable.

However, in an international society in which individual nations pursue their sole interests, the principle is close to impossible to adhere to.

As for international cooperation, we are currently in the stage in which acceptable norms are being set up. But just because we strive to cooperate, it doesn’t mean that all issues can immediately be resolved.

But there are positive developments, in that research on the environment is actively being pursued around the world.

In the past, institutions would conduct individual research projects. Today, these institutions are collaborating with a common goal. With the study of international cases, there is an active exchange of knowledge occurring, which is definitely a positive sign.

Keeping in mind the fact that environmental problems are directly linked to the survival of all of humanity and not just a single country, we should steadily pursue international cooperation.

Environment Info
Food waste composting

As many as one billion people, mostly women and children, are regularly exposed to levels of indoor air pollution exceeding WHO guidelines by up to 100 times.

This startling statistic was quoted at a WHO strategy meeting on Air Quality and Health held in Geneva this week.

Air pollution is a major environmental health problem affecting both developed and developing countries. This is a truly global concern involving ambient air quality in cities as well as indoor air quality including the workplace, in both rural and urban areas. The highest air pollution exposures occur in the indoor environment particularly in developing countries. Cooking and heating with solid fuels, that is wood, coal, dung, crop residues and charcoal, still occurs for over half the world's population. A deadly combination of solid fuels, inefficient stoves and poor ventilation triggers off a complex mix of health damaging pollutants in homes.

Park Chin-keun completed his doctorate in economics at the University of California, Los Angeles. He has been a professor at Yonsei Univerity in Seoul and advisor in numerous organizations, including the Federation of Korean Industries.