1. Lecture 12: Economy and Ecology
BIO410- Ecology and Environmental Engineering
FALL 2016
By Jasmin Šutković
26th Dec. 2016
Lecture 12: Economy and Ecology

2. Outline
Book 1: Chapter 8 – follow the subtitles in this presentations
while reading the book. Book Chapter Pages
Introduction
Classical Economics Perspectives On Ecological Engineering
Problems With Conventional Economics
Ecological Economics
Emergy Analysis

3. Introduction
Economics plays an important role in any engineering field, primarily as an aid in making design decisions!
There is always a need to find the least expensive way to solve a problem and, at the most basic level, economics provides a system for this accounting.
While making the final decisions an economic criteria is essential !
Some ideas and implementations may be too costly and are thus not realistic.
In practice engineers usually become involved in a project after a certain stage of decision making. Often, they are not asked whether the project should be done,
but rather. For example, the engineer is asked where to build a dam or what kind of dam to build, not whether
the dam should be built. Thus, engineers do not usually go beyond the typical uses of economic accounting.

4. The role of engineers
Engineers usually become involved in a project after a certain stage of decision making!
They are asked how best to implement the project, but not about the cost!
Ecological engineering designs are specifically intended to combine nature with human technology, which requires a complete accounting system

5. CLASSICAL ECONOMICS PERSPECTIVES ON ECOLOGICAL ENGINEERING
Goals of economy is to asses the cost and benefits of a system or project
The market values play a crucial roles!
The market controls production of goods and services to match the demand by consumers, so that there is no excess in terms of extra supply .
In this context, the price of a good or service is the measure of its value.
Financial analyses deal only with values of costs and benefits that are determined by markets.

6. Goal
To reduce the cost , through use of natural or constructed ecosystems!
To save money!
Perhaps the best demonstration of financial savings comes from the field of treatment wetlands which is the most advanced application of ecological engineering.
A wetland is a land area that is saturated with water, either permanently or seasonally, such that it takes on the characteristics of a distinct ecosystem
Wetlands are important for so many reasons:
Wetlands prevent flooding by holding water much like a sponge. By doing so, wetlands help keep river levels normal and filter and purify the surface water. 
Wetlands accept water during storms and whenever water levels are high. When water levels are low, wetlands slowly release water.

9. Benefits of using natural material
By-products created by natural (ecological) engineering methods, that have market values.
In other words, ecologically engineered systems often generate beneficial goods that have value as by-products of the normal operation of the system
Example: Wastewater treatment can result in additional income

10. Living machine
The direct purpose of these systems is to treat wastewater and produce clean water that can be discharged back into the environment. However, they also have the ability to generate by-products that can be sold to add value to the system. The Frederick, MD, living machine was a demonstration project that treated a small portion of the domestic sewage from the local urban area (Josephson et al., 1996a,b). In this system ornamental plants and aquarium fish were produced in the tanks near the end of the living machine and sold to local businesses

12. Cost benefit analysis
The most comprehensive form of financial assessment is cost–benefit analysis, in which all costs and benefits of a project are considered
Evaluation of all alternatives is done, in the same units (dollar, euro, KM or Lira) ..
After this calculation, the alternative with the highest ratio of benefits to costs is considered to be the best choice for implementing the project.

13. PROBLEMS WITH CONVENTIONAL ECONOMICS
Conventional economics deals with issues between humans and goods (products), market demand and supply and cost benefit
However, this is only a subset of human concerns because the environment enters into human affairs in many ways.
The environment, which consists of natural energy sources and ecosystems, provides to humans many goods and services that are not accounted for by classical economics

14. Example: Fish production and selling
An estuary is where a river meets the sea.
The estuarine ecosystem produces fish through interactions with an energy signature of tide and sun. Fishing is a process that removes fish from the estuary through interaction with purchased inputs from the fisherman. Money, shown with the dashed line, flows into the system in proportion to sales of fish, and it flows out in proportion to the inputs used by the fisherman. The problem here is that the process of fishing is based on inputs both from the estuary and from the fisherman, but money only goes to compensate the fisherman and not the estuary. Thus, the inputs from the estuary are considered to be free and are not accounted for in the economic transaction.

15. ECOLOGICAL ECONOMICS
A field that has developed to deal with the problems of accounting for the environment is ecological economics.
This is a somewhat radical departure from classical economics that attempts to address “the relationships between ecosystems and economic systems in the broadest sense” (Costanza, 1989).

16. Venn diagram
At a very basic level of comparison, ecology and economics have some commonalities or similarities that support the development of the new field. Both fields are named with the same prefix, eco from the Greek oikos, which refers to household.
Thus, they appear to deal with similar systems. Ecology deals with natural environments and with environments that include human use and impact. Economics deals with interactions between humans only. Thus, there is some overlap between the fields (Figure 8.4).

17. Value of ecosystem to economy
The discussion by ecological economists has evolved to focus on what bare termed ecosystem services which essentially constitute life-support functions (Table 8.6).
The approach is to identify individual services that ecosystems provide to society and to estimate their value

19. EMERGY ANALYSIS
One example of a new form of economics, related to ecological economics, is termed emergy analysis (H. T. Odum, 1996).
Emergy (short for “energy memory”) is a measure of embodied energy in a product or process which in turn is a measure of its value

20. Emergy analysis
Emergy analysis is an accounting system in which everything is accounted for with energy units rather than money.
In this way contributions from nature and environmental impacts can be assessed with the same units as traditional economic values.

21. One unit in Emergy analysis
The approach of emergy analysis is to convert everything to one unit which is then used in decision-making algorithms, such as cost–benefit analysis, and others, such as the investment ratio, that have been developed especially for this approach.

22. Steps Thus, two major steps are involved.
First, all flows and storages relevant to a problem are quantified and converted to emergy, using published conversion factors called transformities.
Then, the emergy values are used in algorithms to make assessments and to provide perspective for decision making.

23. Example

24. One more lecture to go…