Chapter 11 Slide 1 Copyright © 2003 Pearson Education, Inc.

Chapter 11 Slide 2 Copyright © 2003 Pearson Education, Inc. The Environment and Development Chapter 11

Chapter 11 Slide 3 Copyright © 2003 Pearson Education, Inc. Economics and the Environment n Environmental issues affect, and are affected by, economic development n Poverty and ignorance may lead to non- sustainable use of environmental resources

Chapter 11 Slide 4 Copyright © 2003 Pearson Education, Inc. Environment and Development: The Basic Issues n Sustainable development and environmental accounting

Chapter 11 Slide 5 Copyright © 2003 Pearson Education, Inc. Environment and Development: The Basic Issues Sustainable net national product is: Where GNP is Gross National Product D m is the depreciation of manufactured capital assets D n is the depreciation of environmental capital

Chapter 11 Slide 6 Copyright © 2003 Pearson Education, Inc. Environment and Development: The Basic Issues Alternatively, sustainable net national product is: Where GNP is Gross National Product D m is the depreciation of manufactured capital assets D n is the depreciation of environmental capital Ris expenditure needed to restore environmental capital Ais expenditure required to avert destruction of environmental capital

Chapter 11 Slide 7 Copyright © 2003 Pearson Education, Inc. Environment and Development: The Basic Issues n Sustainable development and environmental accounting n Population, resources, and the environment n Poverty and the environment n Growth versus the environment n Rural development and the environment

Chapter 11 Slide 8 Copyright © 2003 Pearson Education, Inc. Environment and Development: The Basic Issues, cont’d n Urban development and the environment n The global environment

Chapter 11 Slide 9 Copyright © 2003 Pearson Education, Inc. The Scope of Environmental Degradation: A Brief Statistical Review n Environmental problems have consequences both for health and productivity

Chapter 11 Slide 10 Copyright © 2003 Pearson Education, Inc.

Chapter 11 Slide 11 Copyright © 2003 Pearson Education, Inc.

Chapter 11 Slide 12 Copyright © 2003 Pearson Education, Inc. Rural Development and the Environment: A Tale of Two Villages n Representative African village n Representative South American village

Chapter 11 Slide 13 Copyright © 2003 Pearson Education, Inc. Traditional Economic Models of the Environment n Privately owned resources

Chapter 11 Slide 14 Copyright © 2003 Pearson Education, Inc. Figure 11.1 Static Efficiency in Resource Allocation

Chapter 11 Slide 15 Copyright © 2003 Pearson Education, Inc. Figure 11.2 Optimal Resource Allocation over Time

Chapter 11 Slide 16 Copyright © 2003 Pearson Education, Inc. Traditional Economic Models of the Environment n Privately owned resources n Common property resources

Chapter 11 Slide 17 Copyright © 2003 Pearson Education, Inc. Figure 11.3 Common Property Resources and Misallocation

Chapter 11 Slide 18 Copyright © 2003 Pearson Education, Inc. Traditional Economic Models of the Environment n Privately owned resources n Common property resources n Public goods and bads: regional environmental degradation and the free- rider problem n Limitations of the public goods framework

Chapter 11 Slide 19 Copyright © 2003 Pearson Education, Inc. Figure 11.4 Public Goods, Normal Goods, and Free-Rider Problem

Chapter 11 Slide 20 Copyright © 2003 Pearson Education, Inc. Urban Development and the Environment n The ecology of urban slums n Industrialization and urban air pollution

Chapter 11 Slide 21 Copyright © 2003 Pearson Education, Inc. Figure 11.5 Pollution Externalities: Private versus Social Costs and the Role of Taxation

Chapter 11 Slide 22 Copyright © 2003 Pearson Education, Inc. Figure 11.6 Increasing Pollution Externalities with Economic Growth

Chapter 11 Slide 23 Copyright © 2003 Pearson Education, Inc. Urban Development and the Environment n The ecology of urban slums n Industrialization and urban air pollution n Problems of congestion and the availability of clean water and sanitation

Chapter 11 Slide 24 Copyright © 2003 Pearson Education, Inc. The Need for Policy Reform n The recognition that action to reduce environmental hazards has been insufficient is now widespread n However, budgets are limited n Better pricing policies would improve matters n Inclusion of women in the design of environmental policy is important

Chapter 11 Slide 25 Copyright © 2003 Pearson Education, Inc. The Global Environment: Rain Forest Destruction and Greenhouse Gases n Many scientists are alarmed by recent evidence regarding ozone depletion and global warming n Economists also are concerned with the costs of global climate change n The solutions seem to involve both LDCs and industrialized countries

Chapter 11 Slide 26 Copyright © 2003 Pearson Education, Inc. Policy Options in Developing and Developed Countries n What LDCs can do –proper resource pricing –community involvement –clearer property rights and resource ownership –improved economic alternatives for the poor –improved economic status of women –industrial emissions abatement policies

Chapter 11 Slide 27 Copyright © 2003 Pearson Education, Inc. Policy Options in Developing and Developed Countries, cont’d n How developed countries can help LDCs –trade policies –debt relief –development assistance n What developed countries can do –emissions controls –R&D –import restrictions

Chapter 11 Slide 28 Copyright © 2003 Pearson Education, Inc. Concepts for Review n Absorptive capacity n Biomass fuels n Clean technologies n Common property resource n Consumer surplus n Debt-for-nature swap n Deforestation n Desertification n Environmental accounting n Environmental capital n Externality n Free-rider problem n Global warming n Greenhouse gases

Chapter 11 Slide 29 Copyright © 2003 Pearson Education, Inc. Concepts for Review, cont’d n Internalization n Marginal cost n Marginal net benefit n Ozone depletion n Pollution tax n Present value n Private costs n Producer surplus n Property rights n Public bad n Public good n Scarcity rent n Social costs n Soil erosion n Sustainable development n Sustainable national income n Total net benefit