Caspian Journal of Environmental Sciences (May 2010)
A theoretical framework for determining environmental costs, benefits, and the net welfare effects associated with hazardous waste management
Abstract
This paper reviews and presents a theoretical model to determine the costs, benefits, and welfare effects of hazardous wastes management. According to the Iranian law, environmental costs are assigned to waste producing firms. However, in practice, due to weak enforcement programs, firms do not pay any environmental costs. Using the basic principles and logic of welfare economics, we present a micro-level model for analyzing an industry that generates waste as a by-product of its production process. Firms in the industry choose the least cost method of disposal (either legal or illegal disposal). By utilizing various figures of presented models in partial equilibrium structure we found R'1, R'2 and 3 R′ which are the net welfare effect of producing firms, the net welfare effect to firms supplying legal waste disposal services and the net welfare effect of the environmental damage, respectively. By analyzing the presented figures we concluded that government regulatory policy may ideally lower environmental costs via a subsidy program.
