Economics, Environment, and Sustainability

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Economics, Environment, and Sustainability

• Mr. Clark
• BHS

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Key Concepts

• Economic systems

• Economics and resource management

• Monitoring economic and environmental progress

• Full-cost pricing

• Effect and reduction of poverty

• Shifting to environmentally sustainable economies

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Economic Resources

• Capital

• Natural resources

• Human resources

• Physical resources

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Production of energy-efficient fuel-cell cars
Underground CO2 storage using abandoned oil wells
Forest conservation
High speed trains
No-till cultivation
Deep sea CO2 storage
Solar cell fields
Bicycling
Wind farms
Communities of passive solar homes
Cluster housing development
Landfill
Recycling plant
Water conservation
Recycling, reuse, and composing
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Economic Systems

• Pure free-market economic systems

• Demand, supply and price

• Market price equilibrium point

• Marginal costs and benefits

• Price inelasticity

• Government involvement in markets

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Supply curve
Demand curve
Quantity demanded
Quantity supplied
Surplus
If the price is too high, more oil is available
than buyers are willing to buy
Price (low to high)
At this market equilibrium price, the quantity of
oil that suppliers are willing to sell is the
same as the quantity buyers are willing to buy
If the price is too low buyers want to buy
more than suppliers are willing to sell
Quantity supplied
Quantity demanded
Shortage
Quantity
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Neoclassical vs. Ecological Economists

• Differing views of natural resources
• Differing views on economic growth
• Effective property rights
• Eco-economy

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Natural Resources
Manufactured Resources
Human Resources
Goods and Services
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Ecological Economics
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Economic Growth

• Economic growth

• Environmentally sustainable economic development

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High
Cost
Optimum level of resource use
Low
0
25
50
75
100
Coal removed ()
12
High
Cost
Optimum Pollution clean-up level
Low
0
25
50
75
100
Pollution removed ()
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35,000
30,000
25,000
20,000
1996 Dollars per person
15,000
Per capita gross domestic product (GDP)
10,000
5,000
Per capita genuine progress indicator (GPI)
0
1960
1970
1980
1990
2000
1950
Year
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Economics of Pollution Control

• Optimum level of pollution

• Cost-benefit analysis (CBA)

• Green taxes and fees

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Monitoring Environmental Progress

• Gross domestic product (GDP)

• Per capita GDP

• Limits of GDP and Per capita GDP

• Genuine progress indicator (GPI)

• Index of Sustainable Economic Welfare

• Materials balance measurements

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Harmful External Costs and Full-Cost Pricing

• Internal costs

• External costs

• External benefits

• Positive and negative externalities

• Full-cost pricing

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Improving Environmental Quality and Shifting to
Full-Cost Pricing

• Government subsidies and tax breaks

• Green taxes

• Environmental tax reform

• Innovation-friendly regulations

• Tradable pollution and resource-use rights

• Market forces

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Tradable Environmental Permits
Trade-Offs
Tradable Environmental Permits
Advantages
Disadvantages
Trade-Offs
Disadvantages
Advantages
Tradable Environmental Permits
Big polluters and resource wasters can buy their
way out May not reduce pollution at dirtiest
plants Can exclude small companies from buying
permits Caps can be too low Caps must be
gradually reduced to encourage innovation Determi
ning caps is difficult Must decide who gets
permits and why Administrative costs high with
many participants Emissions and resource wastes
must be monitored Self-monitoring can promote
cheating Sets bad example by selling legal
rights to pollute or waste resources
Flexible Easy to administer Encourages
pollution prevention and waste reduction Can
guarantee achievement of caps Permit prices
determined by market transactions Confronts
ethical problem of how much pollution or resource
waste is acceptable Confronts problem of how
permits should be fairly distributed
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Reducing Poverty

• Poverty

• Premature death and health problems

• Environmental impact of poverty

• Role of the World Bank

• Poor help themselves

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Expenditures per year (2003)
956 billion
World military
U.S. military
449 billion
29 billion
U.S. highways
12 billion
U.S. pet foods
8 billion
U.S. EPA
8 billion
U.S. foreign aid
8 billion
U.S. cosmetics
Expenditures per year needed to
eliminate hunger and malnutrition
19 billion
provide clean drinking water for all
12 billion
provide basic healthcare for all
11 billion
8 billion
protect tropical forests
eliminate illiteracy
5 billion
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Environmentally Sustainable Economies

• Mimic natural systems

• Sunset businesses

• Eco-friendly businesses

• Improve public awareness

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Resource Use and Pollution
Economics
Environmentally Sustainable Economy (Eco-Economy)
Reward (subsidize) earth- sustaining
behavior Penalize (tax and do not subsidize)
earth- degrading behavior Shift taxes from wages
and profits to pollution and waste Use
full-cost pricing Sell more services instead of
more things Do not deplete natural capital Live
off income from natural capital Reduce poverty
Use environmental indicators to
measure progress Certify sustainable practices
and products Use eco-labels on products
Reduce resource use and waste by
refusing, reducing, reusing, and recycling Improv
e energy efficiency Rely more on renewable solar
and geothermal energy Shift from a carbon based
(fossil fuel) economy to a solarhydrogen
based economy
Ecology and Population
Mimic nature Preserve biodiversity Repair
ecological damage Stabilize population by
reducing fertility
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Sunset Business
Eco-Friendly Business
Environmentally Sustainable Economy
(Eco-Economy)
Soil conservation Water conservation Pollution
prevention Ecoindustrial design Biodiversity man
agement and protection Ecological
restoration Disease prevention Environmental eng
ineering, design, and architecture Ecocity urban
design Environmental science Environmental educa
tion Ecological economics Environmental accounti
ng Teleconferencing
Coal mining Oil production Nuclear
power Energy-wasting motor vehicles Mining
Throwaway products Clear-cut logging Paper
production Conventional pesticide production Uns
ustainable farming Water well drilling Conventio
nal economics Conventional engineering, design,
and architecture Business travel
Solar cell production Hydrogen
production Fuel-cell production Wind turbine
production Wind farm construction Geothermal
energy production Production of
energy- efficient fuel-cell cars, trucks, and
buses Conventional and electric bicycle
production Light-rail construction Sustainable
agriculture Integrated pest management Aquacultu
re Recycling, reuse, and composting Sustainable
forestry