1. Ocean/ENVIR 260 Autumn 2010Lecture 11© 2010 University of Washington Ocean/Envir 260 Lecture 11: Economic Causes of Environmental Degradation 1

2. Ocean/ENVIR 260 Autumn 2010Lecture 11© 2010 University of Washington Importance of economic theory The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. --John Maynard Keynes, British economist, journalist and financier (1883-1946) 2

3. Ocean/ENVIR 260 Autumn 2010Lecture 11© 2010 University of Washington Ecological Economics: Big Picture “Growth” definition –Increase in “throughput” Flow of natural resources from environment, through economy, back to environment as waste “Development” definition –Improved quality of life Need not depend on “growth” Cover, Daly and Farley (2004) 3

4. Ocean/ENVIR 260 Autumn 2010Lecture 11© 2010 University of Washington Ecological Economics: Big Picture Is the economy a subset of the ecosystem? Or vice versa? –Conventional economics? Concept of “sustainability” only makes sense in the first case 4

5. Ocean/ENVIR 260 Autumn 2010Lecture 11© 2010 University of Washington Ecological Economics: Big Picture If economy is subset of ecosystem, then must be an “optimal scale” –Beyond which “growth” is detrimental to human welfare –“Development” could continue Are we at that point, or even beyond? –“Empty” vs. “full” world 5

6. Ocean/ENVIR 260 Autumn 2010Lecture 11© 2010 University of Washington Ecological Economics: Big Picture If there is an optimal scale to the economy… Then distribution becomes an even greater matter of justice –Can’t rely on “growth” to raise everyone up From United Nations Study of Global Wealth Inequality 6

7. Ocean/ENVIR 260 Autumn 2010Lecture 11© 2010 University of Washington Ecological Economics: In Puget Sound Major issue: “Externalities” –Effect of an economic transaction on others not party (“external”) to that transaction –Can include ecosystem (society), future generations, etc. –May be positive or negative Classical economics recognizes as key to potential market failures –Yet rarely recommends addressing Pollution: the classic “externality” 7

8. Ocean/ENVIR 260 Autumn 2010Lecture 11© 2010 University of Washington Significance “Socialism collapsed because it did not allow the market to tell the economic truth. Capitalism may collapse because it does not allow the market to tell the ecological truth.” –Oystein Dahle, former Vice President of Esso for Norway and the North Sea 8

9. Ocean/ENVIR 260 Autumn 2010Lecture 11© 2010 University of Washington Externalities Negative externality –Too much of activity occurs –Tax or fee could address Positive externality –Too little of activity occurs –Incentive payment could address “Green wood” certified for forest management standards: example of a positive externality 9

10. Ocean/ENVIR 260 Autumn 2010Lecture 11© 2010 University of Washington Externalities No perfect answers –Government action must make assumptions, political choices –If “zero” is not an acceptable price, then some intervention is necessary 10

11. Ocean/ENVIR 260 Autumn 2010Lecture 11© 2010 University of Washington Example: Water Utility fees cover: –Storage –Filtration –Delivery Do not cover: –Ecological impacts Water withdrawals Changes to flow patterns Result: too much water is withdrawn –250B+ gallons/yr, region-wide Chester Morse Lake, reservoir for Seattle’s main water supply 11

12. Ocean/ENVIR 260 Autumn 2010Lecture 11© 2010 University of Washington Example: Water Tax or fee to address: –1/10¢/gal = $200-250M/yr –$5/mo for average household –Higher for summer, larger withdrawals? Practical challenge: small wells Private well, such as serve hundreds of thousands of homes across the region 12

13. Ocean/ENVIR 260 Autumn 2010Lecture 11© 2010 University of Washington Example: Transportation Externalities: –Water, air pollution Zinc, carbon from brakes Hydrocarbons from tires, leaks, exhaust –Hydrologic change More impervious surface for cars than people –Habitat fragmentation –Street lights –Etc. SR 520 interchange, Seattle Arboretum 13

14. Ocean/ENVIR 260 Autumn 2010Lecture 11© 2010 University of Washington Example: Transportation Roads currently subsidized by other revenues: –Gas and road taxes not cover cost to build and maintain –Existing sales tax exemption for gas: $500M+/yr Options: gas tax, tolls, charges on vehicles and parts, charge for exhaust pollutants… Emission test results could be used for charge based on pollution contributed to environment 14

15. Ocean/ENVIR 260 Autumn 2010Lecture 11© 2010 University of Washington Example: Green Wood Independently certified for good stewardship, e.g., –Longer rotations –Avoid clearcuts –Riparian protections –Logging roads Who benefits? Who pays? Forest Stewardship Council certification label 15

16. Ocean/ENVIR 260 Autumn 2010Lecture 11© 2010 University of Washington Example: Green Wood Regulate instead? –Global competition High relative standards already –Pressure to develop Based on relative economics –Key fact: in this region, forestry subsidizes us “Certify” for incentive payment, paid by all? Diagram of riparian forestry regulations in Washington State; Fig 9-5, Saving Puget Sound 16

17. Ocean/ENVIR 260 Autumn 2010Lecture 11© 2010 University of Washington Example: “Salmon Safe” Food Independently certified for good stewardship, e.g., –Riparian/wetland protections –Irrigation –Erosion control –Pesticide/fertilizer use –Habitat restoration Who benefits? Who pays? “Salmon Safe” certification label 17

18. Ocean/ENVIR 260 Autumn 2010Lecture 11© 2010 University of Washington Example: “Salmon Safe” Food Regulate instead? –Global competition High relative standards (?) –Pressure to develop Based on relative economics –In this region, farming subsidizes us “Certify” for incentive payment, paid by all? Skagit dairy farmer Alan Mesman, participant in The Nature Conservancy’s “Farming for Wildlife” program 18

19. Ocean/ENVIR 260 Autumn 2010Lecture 11© 2010 University of Washington Recap: Economic Causes of Degradation Ecological economics: a new paradigm? Externalities—key impacts to Puget Sound ecosystem, for good and bad Tax or fee could address negative externalities –Water, transportation (+ pollution, development…) Compensation could reward positive externalities –Independently “certify” good stewardship? 19