Economics, Environment, and Sustainability

1
Chapter 24

• Economics, Environment, and Sustainability

2
Economic Resources The Big Three

• Three types of resources are used to produce
  goods and services.

Figure 24-2
3
What is an ecological economist?

• One who studies the inter-dependence and
  coevolution between human economics and their
  natural ecosystems

4
Ecological economists base their models on the
following assumptions

• Resources are limited and should not be wasted.
• We should encourage environmentally beneficial
  and sustainable forms of economic development.
• The harmful environmental and health effects of
  producing goods and services should be included
  in their market price.

5

EARTH
Suns
capital
Economic Systems
Heat
Depletion of nonrenewable resources
Production
Natural Capital
Air, water, land, soil, biodiversity, minerals,
raw materials, energy resources dilution,
decomposition, recycling services
Degradation depletion of renewable resources
used faster than replenished
Consumption
Pollution, waste from overloading natures waste
disposal recycling systems
Recycling and reuse
Fig. 24-4, p. 573
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Characteristic
Unsustainable Economic Growth
Environmentally Sustainable Economic Development
Production emphasis
Quantity
Quality
Natural resources
Not very important
Very important
Resource productivity
Inefficient (high waste)
Efficient (low waste)
Resource throughput
High
Low
Resource type emphasized
Nonrenewable
Renewable
Resource fate
Matter recycled, reused, or composted
Matter discarded
Pollution control
Cleanup (output reduction)
Prevention (input reduction)
Guiding principles
Riskbenefit analysis
Prevention and precaution
Fig. 24-5, p. 573
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ESTIMATING THE VALUE OF ECOLOGICAL SERVICES AND
MONITORING ENVIRONMENTAL PROGRESS

• Economists have developed several ways to
  estimate nonmarket values of the earths
  ecological services based using
• Mitigation cost how much it takes to offset any
  environmental damage.
• Willingness to pay determine how much people are
  willing to pay to keep the environment in tact
  (e.g. protect an endangered species).

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Cost-Benefit Analysis a Useful but Crude Tool

• Comparing likely costs and benefits of an
  environmental action is useful but involves many
  uncertainties.
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Costbenefit analyses involves determining

• Who or what might be affected by a particular
  regulation or project.
• Projecting potential outcomes.
• Evaluating alternative actions.
• Establishing who benefits and who is harmed.

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• If costs exceed benefit, then the proposed action
  is rejected.
• If benefits exceed cost, the proposed action is
  accepted.
• If cost benefit, then a decision has to be made
  whether to start or stop the proposed action

11
What is GNP?

• The sum of all goods and services produced by a
  country in a given time frame.
• For example GNP includes Coca Cola bottled
  overseas but not Toyotas made in the United
  States (the profit is still going to the Japanese)

12
Environmental and Economic Indicators
Environmental Radar

• We need indicators that reflect changing levels
  of environmental quality and human health.
• Gross domestic product (GDP) measures the annual
  economic value of all goods and services produced
  in a country without taking harmful effects into
  consideration.
• Includes Toyotas made in the United States but
  not Coca Cola bottled overseas.

13
What is GPI?

• Genuine Progress Indicator
• The GPI subtracts from the GDP costs that lead to
  a lower quality of life or deplete/degrade
  natural resources.
• Kind of a way to see if the economic growth has
  benefited people overall

14
Environmental and Economic Indicators
Environmental Radar

• Comparison of the per capita GDP and the GPI in
  the U.S. between 1950 and 2002.

Figure 24-8
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What are external costs?

• External cost refers to something that a business
  does that is not included in its profit and loss
  (pollution for example).
• The business may be responsible for cleaning up
  its mess.
• Examples are Superfund sites, Shoreham nuclear
  power plant, Love Canal, PCBs in the Hudson
  River and General Electric.

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ECONOMIC TOOLS FOR IMPROVING ENVIRONMENTAL QUALITY

• Including external costs in market prices informs
  consumers about the harmful impact of their
  purchases the earths life-support systems and on
  human health.

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Eco-Labeling Informing Consumers So They can
Vote with Their Wallets

• Certifying and labeling environmentally
  beneficial goods and resources extracted by more
  sustainable methods can help consumers decide
  what goods and services to buy.

Figure 24-9
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How do we make the right choice for our wallet
and the environment?
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Trade-Offs
Environmental Taxes and Fees
Advantages
Disadvantages
Helps bring about full-cost pricing
Penalizes low income groups unless safety nets
are provided
Provides incentive for businesses to do better to
save money
Hard to determine optimal level for taxes and fees
Need to frequently readjust levels, which is
technically and politically difficult
Can change behavior of polluters and consumers if
taxes fees are set at a high enough level
Govts may see this as a way of increasing
general revenue instead of using funds to improve
environmental quality and reduce taxes on income,
payroll, profits
Easily administered by existing tax agencies
Fairly easy to detect cheaters
Fig. 24-10, p. 580
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What are Green Taxes?

• Taxing wages and profits less and pollution and
  waste more.

Figure 24-11
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Advantages of green taxes

• Decreases depletion and degradation of natural
  resources
• Encourages waste reduction and pollution
  prevention
• Rewards recycling and reuse
• Stimulates creativity in solving environmental
  problems to avoid paying extra

22
Jobs, Profits, and the Environment New
Industries and New Jobs

• Shifting to more environmentally sustainable
  economies will create immense profits and huge
  numbers of jobs.

Figure 24-16
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Examples of some environmentally sustainable
careers

• Aquaculture
• Biofuels
• Energy efficient product design
• Environmental Education
• Environmental Law
• Environmental Consulting
• Environmental Engineering
• Wind energy

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Pollution and Public Policy

• Steps in policy development in response to a
  human or environmental problem

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• Recognition admitting there is a problem
• Formulation coming up with a solution
• Implementation putting a plan into action
• Control making sure people adhere to the plan