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Summary: Hydraulic Fracking

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anomaly and stated to be caused by radiation. We discontinued selling calves for two years.” Due to Alvarado being largely an agricultural community, many resident’s livelihoods were impacts due to their inability to grow crops or raise cattle without the fear of contamination or radioactivity. Additionally, when David went to confront the oil companies about the cancerous side effects undoubtedly due to their fracking operations, he was told that, “The fracking ingredients/chemicals were proprietary and they could not be released. I also unfortunately fought cancer through the statute of limitations and could not sue them to make them stop drilling”. These enormous gas companies lie, deceive, and take advantage of residents all to increase …show more content…

Specifically, in the presence of negative externalities, a Pigovian Tax can be utilized to correct the externalities and produce an efficient outcome. In regards to hydraulic fracking, a Pigovian Tax can be applied to the quantity of gas pumped daily during the process of shale fracking. A Pigovian Tax would incentivize producers to reduce the quantity of gas pumped daily as well as generate revenue that can be used to offset the negative effects of hydraulic fracking in communities. Exemplified by Graph 4, the Marginal Private Cost endured by the firms would be shifted upwards by the amount of the tax to the point of Marginal Private Cost + Tax. Due to this increased cost, producers would have the incentive to diminish daily output of gas to the socially optimum level of QS, which considers the Marginal Social Cost as well. The level of the tax would equal the external damage at the quantity produced, which is represented by the difference between Marginal Social Cost and Marginal Private Cost at the point they both cross the Marginal Private Benefit. Therefore, the total tax revenue is represented by the light purple area. By utilizing a tax, it offers an economic incentive to hydraulic fracking firms to reduce production levels as well as compensate communities with the tax revenue. However, the Pigovian Tax would only apply to gas pumped from the process of shale fracking in order to address the specific negative externalities that arise during hydraulic fracking. Additionally, the tax revenue collected can be distributed back to the communities

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