Module 3 The Economic Context

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Module 3The Economic Context

• BCN 1582
• International Sustainable Development

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Terminology-Module 2

• Terminology
• Substitutability
• Ethics
• Environmental Ethics
• Biocentrism
• Ecocentrism
• Anthropcentrism
• Environmental Justice
• PV, BIPV, Fuel Cell, Wind Energy

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Concepts-Module 2

• What is environmental ethics?
• Different ethical points of view
• Impacts of environmental degradation on the
  poor-environmental justice
• Redesign of the worlds energy systems

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Main Points

• Everything is connected
• The result is there are feedback loops between
  all
• GDP and GNP do not really represent welfare
  just economic throughput
• Maldistribution of wealth is prevalent but not
  sustainable
• The economy responds to signals it is sent
• Cheap waste disposal
• Low costs for emissions (air, water, land)
• Low cost for environmental impacts
• Cheap and subsidized resources
• Tax benefits for resource depletion
• How do you change the signals to the economy?

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Empty World View Herman Daly
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Full World View
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The Production System?
Life-Cycle Cost and Economic Analysis, W.Fabrycky
and B. Blanchard, Prentice-Hall, 1991
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Sustainable Economic System

• Accounts for true costs of waste and disposal
• Cradle-to
• Grave responsibility for products
• Penalizes waste, rewards efficiency

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Economics Terminology

• Economics the study of the allocation of scarce
  means among competing ends. (Daly)
• Capital wealth of property that is used or
  invested to produce more wealth the money with
  which an enterprise is started. Set of all
  physical things capable of satisfying human wants
  and subject to ownership. Fisher (1906)
• natural, human, manmade, critical natural
• Wealth Riches, possession of these.
• Riches a great quantity of money or property or
  valuable possessions.
• Money portable pieces that can be used as a
  medium of exchange. Banknotes or coins.

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More...

• Technology mechanical arts and applied
  sciences.
• Growth increasing in size by accretion or
  assimilation of material. A quantitative incease
  in physical dimensions or size.
• Economic Growth rising aggregate consumption
  (C) or output (Q).
• Development bring to a fuller, greater, or
  better state.

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Physical Limits to Economy

• Malthus absolute limits or scarcity
• Ricardo relative limits
• Marx limits due to social and political unrest

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Malthus Diagram
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Ecological Economics

• A new transdisciplinary field addressing the
  relationship between ecosystems and economic
  systems in the broadest sense.
• Uses the tools of conventional economics and
  ecology as appropriate.
• Need to establish institutions that take the long
  term view, a la biology
• Economics as an ecological system

R. Costanza, Ed. Ecological Economics, The
Science and Management of Sustainability,
Columbia University Press, 1991, 3-7.
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Hicksian Income
...income that can be consumed without reducing
future consumption possiblities
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The Ecological Economists

• Kenneth Boulding (1910-1992) The Economics of
  the Coming Spaceship Earth (1966)
• Nicholas Georgescu-Roegen (1906-1994) The
  Entropy Law and Economic Progress- the economy is
  not a reversible mechanical systems but subject
  to the 2nd Law
• Herman Daly student of N. G-R., steady state
  economy

Gowdy, J. and Sabine OHara, Economic Theory for
Environmentalists, St Lucie Press, 1995, 129-132.
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Economy like ecosystem?

• Eugene Odum
• young ecosystems production, growth, quantity
• mature ecosystems protection, stability, quality

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The metabolic analogy
Metabolism
Anabolism Catabolism
Degraded matter Degraded energy
Useful matter Useful Energy
Distribution
Economics
Anabolism Catabolism
Totally degraded matter Totally degraded energy
Useful matter Useful Energy
Distribution
Time
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Changing the Signals to the Economy

• Currently taxes are applied to positive aspects
  of behavior wages, productivity, profit
• It would be better to tax aspects that are
  negative waste, inefficiency, pollution
• Possible mechanisms
• Pollution taxes
• Tradable pollution permits
• Deposit fees

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Internalization

• Benefits of Internalization Processes
• Transparency
• Across All Sectors
• Flexibility
• Stimulates Innovation
• Polluter Pays
• Caveat must be transnational
• Cooperation between sectors
• Another example of interconnectedness

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Tax revenue, select countries, 1994
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Tax shifts from work investment to
environmental damage
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Pollution Taxes

• ASTM Standard

• Air Pollution 209/t
• Water 10,788/t
• Solid Waste 104/t
• Hazwaste 24/lb
• Leaking UST 3959/t
• Pesticides 1.35 lb active ingredient
• Toxic chemicals 0.165/lb

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Bionomics

• The economy behaves like a biological system
• Behavior of biological systems applied to
  economics
• Excellent forecasting tool (e.g. ATT demand for
  telephone service)

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Summary and Conclusions

• The current economic system is not sustainable
• Depends on the scale of material/energy
  throughput
• Subsidizes resource extraction and pollution
• Taxes productive activities
• Does not measure welfare
• A system based on Ecological Economics would
• Shift taxes to waste, inefficiency, and
  pollution, away from wages, profits,
  productivity, and investment
• Focus on dematerialization, deenergization,
  decarbonization, and detoxification
• Measure welfare instead of absolute monetary
  transactions
• Support an EcoIndustrial revolution

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Module 3- Sustainable Materials EconomySome
Background

• Average American Uses 37 tons of materials per
  year
• Total U.S. 10 billion tons
• 1900 20 elements Today 92 elements used
• 100,000 synthetic chemicals produced
• Copper extracted at 3 concentration in 1900,
  today at 0.5.22-fold growth
• Subsidies
• 1872 US law gives miners title to federal mining
  land for 5.00/acre
• U.S. government spends more on logging roads than
  it earns from timber sales

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Problems with Materials Flows

• Sustainable materials flows humans move as much
  material as natural systems and forces
• Current We are moving 2x as much materials as
  natural systems and forces (storms, hurricanes,
  tornadoes, tidal waves)
• Forestry threatens 70 of the worlds large
  intact virgin forests

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• Mining Canada produces 58x as much mining waste
  as municipal solid waste (MSW) toxic chemicals
  (cyanide, mercury, sulfuric acid) storage
  reservoirs
• Ecological Rucksack materials moved to produce a
  unit of a given end product (e.g. it takes 3 tons
  of earth movement to produce 1 gram of gold),
  producing a rucksack of 300,0001

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Growth in World Materials Production 1960-95
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Growth in U.S. Materials Consumption1900-95
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World Ore and Waste Production1995
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Hypothetical Increase in Global Materials Use,
1995, Based on U.S. Levels
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Possible Gains in Efficiency