1. Chapter 27: Dollars and the Environment

2. Economic Importance of the Environment
Mid 1990s the US spent $115 billion a year to deal with pollution. Present figures are closer to $170 billion annually. Though costly, it has many economic benefits.
particulate air pollution in US cities is a contributor to 60,000 deaths annually
Amendments to the Clean Air act passed in 1990 would prevent by ,000 premature deaths, 1.7 million asthma attacks
Benefits are estimated to be $110 billion in 2010 and costs only $27 billion from amendments alone
Environmental decision making often involves analyzing tangible and intangible factors. The aftermath of a mudslide is a tangible factor and the beauty of the slope before the slide and its ugliness after is intangible
Intangibles are obviously very difficult to deal with because of their uncertainty of economic value.
One part of environmental economics is to find methods of discovering the value of intangibles that are easy to understand, provide good guidelines and are credible.

3. Environment as a Commons
Economic analysis suggests that the profit motive, by itself, will not always lead a person to act in the best interests of the environment. These are two reasons why this is:
Tragedy of the Commons
Low Growth Rate, Low Productivity of a resource
Commons: land or another resource owned publicly with public access for private use.
The Tragedy of the Commons refers to an economic problem in which every individual tries to gain the greatest benefit from a given resource. As the demand for the resource overwhelms the supply, every individual who consumes an additional unit directly harms others who can no longer enjoy the benefits.
For example: Earth’s atmosphere is a resource that everyone on the planet uses as well as abuses. Air pollution and greenhouse gases from various industries and transportation increasingly damage this shared resource.
Questions we should be asking ourselves:
What is the appropriate public use of public lands?
Should all public lands be open to all public uses?
Should some public lands be protected from people?

4. Low Growth Rate and Profit is a factor in Exploitation
People exploit the Commons to gain maximum profit in the quickest amount of time; often these people have no regard for sustaining the area or animal.
Exploitation rates are high on animals or areas with low growth/reproductive rates
Time and man hours
Company Greed
Short-Term Thinking
Low growth rate is considered under 5% increase per year at most.
Many companies come and go from exploitation.
Greed for money often leads to the majority of these problems

5. Externalities aka Indirect Costs
“If external costs exist, such as pollution, the producer may choose to produce more of the product than would be produced if the producer were required to pay all associated environmental costs.”
2. Direct cost are considered to the products, cost, and waste externalities are the degradation of the environment and their world wide effect
3.Externalities are costly to the environment and can sometimes be put into dollar values this then becomes a problem with who will bears the burden of the costs.
Externalities aka
Indirect Costs
4. A general response to this is for the polluters to pay taxations or fees to fix the damage they caused

6. Natural Capital, Environmental Intangibles and Ecosystem Services
Public Service Functions of Nature:
Nature's ecosystem functions in such a way that it helps to clean the air and water naturally
Ex. forests absorb particulates, salt marshes convert toxic compounds to nontoxic forms, and wetlands and organic soils treat sewage
These benefits of public service functions of nature are typically recognized once they are lost. What was early passed off as an economic externality (indirect cost) then became a direct cost.
Natural Capital: estimates attempting to determine the dollar value of public service functions
Public service functions that benefit the environment have been estimated to provide between $3 trillion and $33 trillion per year
Landscape aesthetics: The beauty of nature, this is an important environment intangible since the species of humans has existed. Primary aesthetic qualities: Unity:refers to the quality or wholeness of the perceived landscape as a single harmonious unit Vividness-refers to the quality of landscape that makes a scene visually striking

7. Critical Thinking Issue
Read “U.S. Fisheries: How Can They Be Made Sustainable?”
Answer the questions on the bottom of the page
Class Discussion

8. How is the Future Valued
Can we place future value on the existence of anything?
As we get wealthier, the value we place on many environmental assets increases dramatically
How can we know the future usefulness of today’s sacrifices?
In terms of the future, there are two scenarios: 1) We are so much richer and better off than our ancestors that their sacrificing for us might have been inappropriate. 2) even if they had wanted to sacrifice, how would they have known what sacrifices would be important to us?
Do not throw away or destroy something that cannot be replaced if you are not sure of its value.

9. Risk-Benefit Analysis
Risk-benefit analysis is the riskiness of an action weighed against the value or benefit of the action
Risks that affect a small population (workers at a nuclear plant) are usually more acceptable than those involving all members of society
When determining whether a risk is worth it or not in an environment the common question is: Should we improve the quality of life for the living or extend the life expectancy for those in the future? (disregarding quality of life)
U.S. Toxic Substances Control Act- an act that states that no one may manufacture a new chemical substance or process a chemical substance for new use without obtaining clearance from the EPA
Allows the EPA to estimate the risk or potential hazard of a new chemical and if the chemical should be banned or restricted due to unreasonable risk
Social-economic-environmental trade-off- level of acceptable pollution or risk
Total cost of pollution- the sum of costs to control pollution and the loss from the pollution (opposite trends)

10. Risk-Benefit Analysis
Air Pollution Control Benefits: -reduced risk of asthma -reduced risk of bronchitis -reduced risk of bronchitis and chronic emphysema -aesthetic contentment: improvement in quality of life (mental/physical health) -overall health improvement
In terms of Dollars: -per family pollution control amounts to $30-$60 per year for families -per family indirect/direct stationary sources of pollution amounts to $250 a year for families

11. Global Issues: Who Bears the Costs?
Ralph D’Arge talks about how less developed countries during the Industrial Revolution didn’t receive economic benefits but have to deal with the pollution and the adverse effects of the use of fossil fuels.
2.Developing nations tend to think that those nations that enjoyed the benefits of the previous boom should accept the costs of clean the world.
3.At this moment this problem is unresolved in environmental economics

12. How do we Achieve a Goal Environmental Policy Instruments
A society achieves environmental goals by implementing policy instruments which are methods of persuading people by talk, publicity, and social pressure which include regulations that affect the price of goods and include various types of taxation.
How clean is clean? When do we stop and say that the environment is clean enough to not require any more attention to an issue? We introduce the concept of marginal costs which includes the cost of each addition step we take. As less pollutants exist the cost of removing the remaining percentage increase.
Main methods of direct control the pollution
setting maximum levels of pollution emission
requiring specific processes of reducing pollution
charging for pollution
Every environmental matter is a balance between maintaining individual freedom of choice and achieving a specific goal