1. Environment & Ecology
005 Economics, Policy & Sustainable Development

2. What is Environmental Economics?
Economics is concerned with allocation of scarce resources—including environmental
Most environmental and economic problems are linked.

3. The environment and economy are linked
Economies receive inputs from the environment.
Process them for use
Discharge the wastes back into the environment
Traditional economists ignore the environment.
Environmental economists accept that human economies exist within, and depend on, the environment.

4. Natural Resources the Environment Provides
Renewable resources:
Perpetually available: sunlight, wind, wave energy
Renew themselves over short periods of time
These can be destroyed
Non-renewable resources: can be depleted

5. Natural Resources the Environment Provides
Renewable
Nonrenewable
Forest
Water
Fruit/Nuts
Fish
Minerals
Fossil Fuels

6. Natural Resources the Environment Provides
Waste are cleaned up
Protect against flooding and hurricane damage
Medicine
Providing space for recreation, scenery, wildlife and aesthetic enjoyment

7. Environmental systems interact
Natural systems are divided into categories
Lithosphere: rock and sediment
Atmosphere: the air surrounding the planet
Hydrosphere: all water on earth
Biosphere: the planet’s living organisms
Categorizing systems allows humans to understand earth’s complexity.
Most systems overlap
Hydrosphere

8. Environmental Segments
Lithosphere
Hydrosphere
Biosphere
Atmosphere
Atmosphere
Biosphere
Lithosphere
Hydrosphere

9. Scope of Environmental Economics
Economic growth and environmental Balance
Conservation recourses
Pollution control and environment

10. Atmospheric Pollution
Acid Rain
Ozone depletion
Global warming

11. Policy Questions -EE
What is the fundamental nature of the environmental problem?
Should the government “intervene” at all?
How clean should the environment be?
How can we achieve the desired environmental quality?

12. Economic Perspective on Environmental Management
“Free” markets will generate excessive pollution and overuse environmental services, hence, collective or public intervention is necessary
How clean the environment should be? Till MB=MC
Design of policy instruments to achieve environmental goals
Valuation of non-market goods

13. U.S. Environmental Policy
Early U.S. environmental policy addressed land management.(1st wave)
To promote settlement, and the extraction and use of the West’s abundant natural resources.
The Western lands were considered practically infinite, and inexhaustible in natural resources.
General Land Ordinances of 1785 and 1787 (Thomas Jefferson’s Township and Range System) provides mechanism and structure for taking of Native American lands.

14. Second wave of U.S. environmental policy addressed impacts of the first.
During this time the government created national parks, wildlife refuges, and the forest system.
Grand Canyon of the Yellowstone, 1872 by Thomas Moran
John Muir & Teddy Roosevelt in Yosemite

15. Earth Day April 22, 1970 20 million Americans participated!
The public demanded that the federal government do more to protect the environment. Why?
The publication of Rachel Carson’s Silent Spring, 1962
The burning of the Cuyahoga River on several occasions in the 1950s and 1960s.
The Santa Barbara, California oil spill in 1969.

16. The third wave responded largely to pollution.
NEPA (National Environmental Policy Act, 1970) was signed in 1970 and require EIS (Environmental Impact Statement) for federal actions and The Environmental Protection Agency (EPA) is created.
Other prominent laws followed: Two major laws were the Federal Water Pollution Control Acts (1965 and 1972) and Clean Water Act (1977).

17. Approaches to Environmental Policy
Command-and-control
An approach that sets strict legal limits, and punishments as opposed to financial incentives.
Ex. Regulate pollutants such as SO2 and NOx
Auto emissions
Coal plant

18. Approaches to Environmental Policy
The food that subsidies support
2. Subsidy
A government giveaway of cash or publicly owned resources used to promote a particular activity.
Fruits & vegetables <1%
Nuts & legumes 2%
Sugar, oil, starch, alcohol 15%
Meat & dairy 63%
Grains 20%

19. Approaches to Environmental Policy
3. Green taxes
Discourages undesirable activities by taxing activities and products that cause undesirable environmental impacts.
It’s a tool for policy as well as a way to fund government.
Electronic waste tax
Tire disposal tax

20. Approaches to Environmental Policy
Markets in permits
The government can issue permits to individual polluters.
They may buy, sell, and trade these marketable emissions permits
this provides financial incentives to reduce pollution.

21. Approaches to Environmental Policy
5. Ecolabeling
tells consumers which brands use environmentally benign processes.

22. Real Progress
In 1850 New Hampshire was 35% woods; today it is 80% woods. Much of Massachusetts, New Hampshire, and New York exhibit similar patterns.
Costa Rica now protects 25% of its entire country in national parks.

23. Real Progress Clean Air Act, 1970
EPA successfully improved ozone (smog), carbon monoxide, sulfur dioxide, nitrogen dioxide, lead, and particulate soot in U.S.
EPA announced in April of 2009 that CO2 is a pollutant and will be regulated.
Source: AQMD.gov, 2009

24. Real Progress
Denmark no longer imports oil because of widespread adoption of wind power.

25. Iceland no longer imports oil because of widespread construction of geothermal power plants.

26. Brazil no longer imports oil now that it uses sugar cane to make bio-fuels.

27. QUESTION: Review In a capitalist market economy:
a) People get their daily needs from nature
b) The government determines what is produced
c) People do not purchase or trade goods
d) Buyers and sellers determine production of goods
e) People believe that making a profit is bad
Answer: d

28. QUESTION: Review Which of the following is an ecosystem service?
a) Water purification in wetlands
b) Climate regulation in the atmosphere
c) Nutrient cycling in ecosystems
d) Waste treatment by bacteria
e) All of the above are ecosystem services.
Answer: e

29. QUESTION: Review
While valuable, neoclassical economics has led to environmental problems because:
a) Resources are treated as unlimited
b) Long-term effects are downplayed
Costs and benefits are experienced by people other than just the buyer and seller
All of the above assumptions have resulted in environmental problems.
Answer: d

30. QUESTION: Review
Which of the following is NOT considered an economic externality?
a) Human health
b) Property damage
c) Price a buyer pays for a product
d) Aesthetic damage
e) All of the above are externalities.
Answer: c

31. QUESTION: Review
Which of the following statements would be spoken by an ecological economist?
a) The current economic system is working fine.
b) The current economic system simply needs to be fine-tuned.
c) The current economic system is broken and a new one needs to be developed.
d) Economic systems never work.
Answer: c

32. QUESTION: Review
________ occur(s) when the market does not reflect the negative impact on the environment of a particular activity.
a) A subsidy
b) Green taxes
c) Market failure
d) Equity
Answer: c

33. QUESTION: Review
_______ is defined as “policy made by the government that consists of laws and regulations.”
a) Tort law
b) Public policy
c) Market failure
d) Tragedy of the commons
Answer: b

34. Which of the following is a goal of environmental policy?
QUESTION: Review
Which of the following is a goal of environmental policy?
a) Resource protection
b) Elimination of free riders
c) Addressing external costs
Promoting equity
All of these are goals of environmental policy.
Answer: e

35. QUESTION: Review
Policy is formulated to prevent ________, which tempts people to cheat.
a) Resource protection
b) External costs
The tragedy of the commons
Free riders
Overuse of a commonly held resource by the public
Answer: d

36. QUESTION: Review
What happened to the Cuyahoga River, which increased awareness of environmental problems?
a) It smelled bad.
b) People drowned in it.
c) It was drained.
It caught on fire.
It was drained because of its high pollution levels.
Answer: d

37. NEPA requires an Environmental Impact Statement when:
QUESTION: Review
NEPA requires an Environmental Impact Statement when:
a) An economically expensive project is proposed
b) Any state action may affect the environment
c) Any federal action may affect the environment
Politicians decide one is needed
The public demands one
Answer: c

38. QUESTION: Review
The _________ represent(s) multinational corporations to promote free trade and interpret(s) some environmental laws as unfair to trade.
a) World Trade Organization
b) The European Union
c) United Nations Environment Programme
Non-governmental Organizations
All of these represent multinational corporations.
Answer: a

39. QUESTION: Review
Which statement is FALSE when formulating environmental policy?
a) Identification of the problem is the first step.
b) Envisioning a solution to a problem involves both science and social action.
c) Individuals tend to be more effective than organizations.
Lobbyists try to influence politicians.
The final step of policy formulation ends up with a proposed bill or draft law.
Answer: c