The smoke

The volcanic smoke that has started out in Iceland a couple of weeks ago has left off many consequences behind. For example, airline companies such as the British Airways have been losing millions of dollars everyday because of the interruption of their flights. The Prime Minister in Iceland has announced that another volcano nearby the current one may be stirred to eruption due to its already active neighbor. If this happens, flights over Europe could stop for an entire month and economically wise, this would evidently be a disaster. However, there is a positive externality to all of this concerning the environment and that is the massive drop in CO2 emissions while no flights are operating. “Volcanoes pump lots of greenhouse gases into the atmosphere, including methane which is said to be 100 times more impactful than CO2. Volcanoes have always had a hugely significant role to play in changing the Earth’s climate” (http://spicycauldron.com/2010/04/19/economic-recovery-may-go-up-in-smoke-thanks-to-the-volcano/). Additionally, “[v]olcanic activity should not be seen as putting the brakes on global warming; instead, it can accelerate the increase in temperatures in ways impossible to model and predict.” This leaves us off with a natural disaster matter towards the economy. This next negative externality cost graph shows the externality that occurred with the volcanic smoke. The situation then becomes a Social Marginal Cost matter.