Externalities: An impact or affect that is caused by an unconnected event or process. Externalities can be both positive or negative. For example a new factory being built may create extra business for a local shop when staff buy there lunch (positive externality), but it may also create congestion and pollution in the local area (negative externality).
Negative externalities usually affect poor people the most. Poor people tend to be people who are forced to live near polluting factories because they can’t afford to live anywhere else. It is also poor countries that polluting TNCs tend to locate in, because either environmental regulations do not exist or they are not enforced. The old/young and sick are also vulnerable to pollution caused by industry.
Depending on the type of externality, some can just have local impacts on the surrounding houses and communities or others can have much bigger impacts covering whole countries or even the globe. The Chernobyl Nuclear accident in the Ukraine has created long-tern negative externalities, but it also greater much wider temporary negative externalities across much of Europe.
The greenhouse effect is caused by greenhouse gases being released into the atmosphere (many of them come from industry). The greenhouse effect causes global warming which is a global negative externality. Although the greenhouse effect is a natural process, it is being enhanced by human activity i.e. the release of greenhouse gases from factories, cars, houses, power stations, etc.
Acid Rain is caused by pollutants (carbon monoxide, sulphur dioxide, nitrous oxide, etc.) being released into the atmosphere and then falling to ground either as dry or wet deposition. The pollution can blow anywhere so is known as tarns-frontier pollutant.
Dry deposition: Pollution falling directly to the surface.
Wet deposition: Pollution mixing with rain and falling to the earth.
Causes of Acid Rain
Problems Caused by Acid Rain
The closure of an industry can cause many externalities to the local area and the country. These problems may include:
- Unemployment amongst workers at the factory
- The government receiving less income and corporation tax and having to pay benefits instead
- Suppliers going bankrupt because they have lost their main customer. This causes unemployment amongst suppliers.
- Local shops and businesses may also see a decline in business and may suffer bankruptcy or redundancies (negative multiplier effect)
- Old factories may become derelict leaving polluted brownfield sites
- Locals may migrate out of the area to try and find work.
- There maybe inflation for the product produced because demand exceeds supply
- There maybe a reduction in the choice for customers if a certain product was only made in the one factory.
- Renewable Energy: If industries use renewable energy they will reduce the amount of greenhouse gases released into the atmosphere.
- International Agreements: International agreements like the Kyoto Protocol limit the amount of pollution that countries (and therefore companies) can make.
- Government Regulations: Governments creating laws to limit noise, air and water pollution and just as importantly enforcing the regulations and punish non-compliance.
- Corporate Responsibility: Companies can make their own steps to reduce pollution e.g. recycling, using energy saving light bulbs, using materials from sustainable sources and using low emission vehicles.
- Appropriate Technology and Industries: Industries only locating in areas where the technology and regulations are in place to minimse externalities e.g. it is no point a chemical factory locating in a country where there is not the technology to clean waste water. Also companies should use technology appropriate to the local area, if people is the abundant local resource, use people rather than polluting equipment.