Vanguard Bio-Coal (VBC), a private-sector renewable energy firm, plans to construct a large-scale wood-pellet processing plant. While VBC highlights the carbon-neutral credentials of biomass, local environmental groups argue that the intensive logging of regional broadleaf forests will destroy critical habitats for nesting bird species, and that the plant's drying kilns will release high levels of fine particulate matter (PM2.5PM_{2.5}PM2.5) and loud noise, impacting a nearby retirement village.
Explain why, even if this wood-pellet plant is highly profitable for VBC, an economist could argue that it represents a case of market failure.
378 exam-style questions on AQA A Level Economics 1.8 The market mechanism, market failure and government intervention in markets, covering 1.8.1 How markets and prices allocate resources, 1.8.2 The meaning of market failure, 1.8.3 Public goods, private goods and quasi-public goods, 1.8.4 Positive and negative externalities in consumption and production, 1.8.5 Merit and demerit goods, 1.8.6 Market imperfections, 1.8.7 Competition policy (A-level only), 1.8.8 Public ownership, privatisation, regulation and deregulation of markets (A-level only), 1.8.9 Government intervention in markets, and 1.8.10 Government failure. Each one has a worked solution and a mark scheme showing where the marks go.