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The Role of Economics in Environmental Management. Chapter 1. 2004 Thomson Learning/South-Western. 3. Economics and the Environment. Economic theory explains what we observe in realityMicroeconomic analysis can also be used to analyze environmental problems. 4. Economics and the Environment. Cir
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1. Environmental Economics and Management: Theory, Policy, and Applications 3e by Scott Callan and Janet Thomas
2. The Role of Economics in Environmental Management Chapter 1
3. 3 Economics and the Environment Economic theory explains what we observe in reality
Microeconomic analysis can also be used to analyze environmental problems
4. 4 Economics and the Environment Circular Flow Model – the basis for modeling the relationship between economic activity and the environment
Real Flow
Factor Market
Output Market
Money Flow
Does not explicitly show the linkage between economic activity and the environment
5. 5 Economics and the Environment Figure 1.1 Circular Flow Model of Economic Activity
6. 6 Economics and the Environment Figure 1.2 Materials Balance Model: The Interdependence of Economic Activity and Nature
7. 7 Economics and the Environment Materials Balance Model – illustrates the relationship between economic activity and the environment
Flow of Resources
Natural Resource Economics – concerned with flows of resources from nature to economic activity
Flow of Residuals
Residuals – by-products released back into the environment
Assimilative Capacity – environmental ability to absorb residuals
Recovery Recycling and Reuse – methods to delay the flow of residuals
8. 8 Economics and the Environment Materials Balance Model
Science and Materials Balance
First Law of Thermodynamics – matter and energy can neither be created nor destroyed
Second Law of Thermodynamics – nature’s capacity to convert matter and energy is not without bound
9. 9 Fundamental Concepts in Environmental Economics Causes of Environmental Damage: Types of Pollutants
Natural Pollutants – nonartificial
Anthropogenic Pollutants – human induced and include all residuals associated with consumption and production
Of greater concern to environmental economists
10. 10 Fundamental Concepts in Environmental Economics Sources of Pollution: Classifying Polluting Sources
Source Grouped by Mobility
Stationary Sources – fixed site
Mobile Source – any non-stationary source
Sources Grouped by Identifiability
Point source – single identifiable source
Nonpoint Source – a source that cannot be accurately identified
11. 11 Fundamental Concepts in Environmental Economics Identifying the Scope of Environmental Damage: Local, Regional, and Global Pollution
Global Pollution – widespread environmental effects with global implications
Examples:
Global warming
Ozone depletion
12. 12 Identifying Environmental Objectives Environmental Quality – reduction in anthropogenic contamination to socially acceptable levels
Sustainable Development – management of resources to ensure long-term quality and abundance
Biodiversity – the variety of distinct species, genetic variability, and variety of inhabitable ecosystems
13. 13 Environmental Policy Planning: An Overview Figure 1.4 Parties Involved in Environmental Policy Planning
14. 14 Environmental Policy Planning: An Overview National Environmental Policy Act
Risk Analysis
Risk Assessment – qualitative and quantitative evaluation of risk posed by an environmental hazard
Risk Management – decision process of choosing from alternative responses to environmental risk
15. 15 Environmental Policy Planning: An Overview Policy Evaluation Criteria
Allocative Efficiency – requires resources be appropriated such that benefits are equal to costs
Cost-effectiveness – requires the least amount of resources be used to achieve an objective
Environmental Quality – concerned with the fairness of the environmental risk burden across segments of society or geographic region
16. 16 Environmental Policy Planning: An Overview Government’s Overall Policy Approach
Command-and-control Approach – regulates polluters through the use of rules
Market Approach – incentive policy that encourages conservation or pollution reduction
“Polluter-pays Principle” – polluter pays for the damage caused
Setting the Time Horizon
Management Strategies – a short-term strategy intended to manage an existing problem
Pollution prevention – long-term strategy aimed at reducing the amount of toxicity of residuals released to nature