Essays on Market Failure Evident in the Pollution Created by the Extraction of Oil from Tar Sands Coursework

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The paper "Market Failure Evident in the Pollution Created by the Extraction of Oil from Tar Sands" is a good example of marketing coursework.   Market failure is a situation in an economy where the free market fails to allocate resources efficiently. It normally occurs when the mechanism of the market does not attain an optimal resource allocation. There are several cases of market failure. Some of the cases include monopoly power, missing and incomplete markets, de-merit goods, externalities, information failure, inequality and unstable markets. It is believed that market failure can be corrected effectively through government intervention.

Therefore, this paper seeks to explain the market failure evident in the pollution created by the extraction of oil from tar sands. The paper also seeks to explain the regulatory powers that the government should use to mitigate and prevent disasters caused by pollution. Market Failure Evident In the Pollution Created By the Extraction of Oil from Tar Sands Economic examination of environmental policy is majorly based on the fact that the possible harmful effects of economic activities on the environment constitute an externality. It is believed that externalities are the major cause of market failure.

There are two different types of externalities, positive and negative externalities. A positive externality prevails when a person or an organization making a decision does not benefit fully from the decision made. The benefit is usually more on society than on the organization or a person making the decision. Negative externalities, on the other hand, prevail when producing or consuming an item or a commodity imposes a cost on the individuals who do not involve directly in consuming or producing the commodity.

It is therefore important to note that market failure occurs due to the existence of negative externalities. Market failure prevails when the market outcome is not efficient on an economic perspective. This is because; the gains the market provides the individuals or organizations undertaking certain activity diverge from the gains to the entire society. Therefore, negative externalities such as pollution are one of the major forms of market failure. Market failure is quite evident in the extraction of oil from tar sands due to the pollution caused. It is believed that the tar sands have emerged as one of the rapidly growing sources of greenhouse gas pollution that poisons water, air and destroys the land.

Pollution of air, water and land are evident in market failure. The pollution caused by oil extraction from tar sands is evidence of market failure since the benefits that the market provides the oil extraction companies diverge from what the entire society gains. The market allows oil extraction companies to benefit at the expense of harming society, through environmental degradation. It is believed that oil extraction companies are carelessly creating the tar sands with aims of enhancing production to a dangerous level of 6 million barrels daily by the year 2035 (Dirty Oil Sands, 2013). The extraction of oil from tar sands has a great impact on climate, land, water and air.

Its environmental costs are quite high. It is believed that pit mining and drilling of tar sands are the rapidly growing sources of global warming emissions. Producing one barrel of tar sands oil produces greenhouse gas that is three times that produced by a barrel of conventional oil.

This is quite disastrous, particularly on climate. The extraction of oil from tar sands is disastrous to climate since its emissions are more greenhouse gas-intensive as compared to emissions in conventional oil production. Emissions from tar sands have been growing rapidly for the last two decades. It is estimated that by the year 2020 the emissions would have doubled. Most oil extraction companies are continuously enhancing their production of oil from tar sands since there are no government regulations that limit the amount of greenhouse gas emitted from tar sands.


Dirty Oil Sands, 2013, Tar Sands.

International Boreal Conservation Campain (IBCC), 2009, Canada’s Tar Sands.

Martin J, 2011, Paying for Pollution: An Introduction to Taxes and Permits. <>

Natural Resources Defense Council (NRDC), 2012, Stop Dirty Fuels: Tar Sands.

Phaneuf, D, 2007, The Economics of Pollution Control.

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