Economics, Environment, and Sustainability Mr. Clark BHS

Key Concepts  Economic systems  Economics and resource management  Monitoring economic and environmental progress  Full-cost pricing  Shifting to environmentally sustainable economies  Effect and reduction of poverty

Economic Resources  Capital  Human resources  Natural resources  Physical resources

Production of energy-efficient fuel-cell cars Forest conservation No-till cultivation Solar cell fields Communities of passive solar homes Water conservation Recycling, reuse, and composing High speed trains Bicycling Wind farms Landfill Cluster housing development Recycling plant Underground CO 2 storage using abandoned oil wells Deep sea CO 2 storage

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

Quantity Price (low to high) Demand curve Supply curve Quantity demanded Quantity supplied Surplus If the price is too high, more oil is available than buyers are willing to buy Quantity supplied Quantity demanded 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 Shortage

Neoclassical vs. Ecological Economists  Differing views of natural resources  Differing views on economic growth  Effective property rights  “Eco-economy”  Differing views of natural resources  Differing views on economic growth  Effective property rights  “Eco-economy”

Natural ResourcesManufactured ResourcesHuman ResourcesGoods and Services ++=

Ecological Economics

Economic Growth  Environmentally sustainable economic development  Economic growth

High Low Cost Optimum level of resource use Coal removed (%)

High Low Cost Optimum Pollution clean-up level Pollution removed (%)

35, Dollars per person Per capita genuine progress indicator (GPI) Year Per capita gross domestic product (GDP) 5,000 10,000 15,000 20,000 25,000 30,000

Economics of Pollution Control  Optimum level of pollution  Cost-benefit analysis (CBA)  Green taxes and fees

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

Harmful External Costs and Full- Cost Pricing  Internal costs  External costs  External benefits  Positive and negative externalities  Full-cost pricing

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

Tradable Environmental Permits Trade-Offs Tradable Environmental Permits AdvantagesDisadvantages 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 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 Determining 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 Trade-Offs Tradable Environmental Permits Advantages Disadvantages

Reducing Poverty  Poverty  Premature death and health problems  Environmental impact of poverty  Poor help themselves  Role of the World Bank

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

Environmentally Sustainable Economies  Mimic natural systems  Sunset businesses  Eco-friendly businesses  Improve public awareness

EconomicsEnvironmentally Sustainable Economy (Eco-Economy) Resource Use and Pollution Ecology and Population 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 Improve energy efficiency Rely more on renewable solar and geothermal energy Shift from a carbon based (fossil fuel) economy to a solar–hydrogen based economy Mimic nature Preserve biodiversity Repair ecological damage Stabilize population by reducing fertility

Sunset Business Eco-Friendly Business Coal mining Oil production Nuclear power Energy-wasting motor vehicles Mining Throwaway products Clear-cut logging Paper production Conventional pesticide production Unsustainable farming Water well drilling Conventional 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 Aquaculture Recycling, reuse, and composting Sustainable forestry Soil conservation Water conservation Pollution prevention Ecoindustrial design Biodiversity management and protection Ecological restoration Disease prevention Environmental engineering, design, and architecture Ecocity urban design Environmental science Environmental education Ecological economics Environmental accounting Teleconferencing Environmentally Sustainable Economy (Eco-Economy)