1. Environmental Economics: Issues, Instruments and Institutions ECON*4930, Lecture 1 Prof. McKitrick

2. Issues: Air Pollution Ground Level Ozone (O 3 ) Nitrogen Oxides (NOx) Particulate Matter (PM, TSP) Sulphur Oxides (SOx) Volatile Organic Compounds (VOCs) Carbon Monoxide (CO)

3. Ozone: 11 AM, Bay&Wellesley

4. Ozone: Monthly Averages

5. NOx: 11 AM Bay&Wellesley

6. NO2: Monthly Averages

7. TSP: Bay&Wellesley

8. TSP: Monthly Averages

9. SO 2 : Bay&Wellesley

10. SO 2 : Monthly Averages

11. Air Pollution vs Income Is it like this?

12. Air Pollution vs Income

15. Air Pollution Since 1940: USA

16. Air Pollution vs Income: USA

18. Water Pollution (Kg/worker/day) vs Income

19. Water Pollution: Great Lakes

21. Global Issues: Ozone Layer

23. Instruments Standards Emission Standards Technology Standards Emission Charges (Taxes) Tradable Emission Permits Tort Law

24. Standards E.g. US motor vehicle emission standards

25. Tradable Emission Permits E.g. US EPA SO 2 Allowance Market

26. Tradable Emission Permits Number of trades

27. Institutions Canada Federal Government Inland waterways, CCME, International Treaties, Environmental Assessment, Motor vehicles, Endangered Species, Toxic Substances Provincial Government Air and water contaminant regulation, Energy, Municipal oversight (e.g. solid waste management) Courts Tort law, property rights

28. Models of Economic Growth and the Environment Substitution Effect: Growth uses up natural assets Income Effect: Expands resources for environmental protection

29. Models of Economic Growth and the Environment Output constraints

30. Models of Economic Growth and the Environment Preferences

31. Models of Economic Growth and the Environment Combining:

32. Environmental Kuznets Curve Low income: pollution rises as income rises High income: pollution falls as income rises

33. Beltratti Model Utility Function Production Function Environmental Quality Capital Stock

34. Beltratti Model Environment deteriorates according to

35. Beltratti Model Simple structure, yet: Has no steady state Can generate any relationship between pollution and income U, ∩, ~, etc. Bottom line: growth theory unlikely to make one single prediction about pollution v growth, but might help explain different histories