Environmental and Natural Resource Economics

1. Environmental and Natural Resource Economics Ms. Mangal Gogte

2. Visions of the Future • In what seems like nature’s brutal irony, the gases that make life on Earth possible now threaten our very existence.

3. Future is unknown • Constant change What is going to happen? to us? Old diseases – cure – new - H1N1 – Pandemic? Do societies sow the seeds of their destruction?

4. Are we destroying ourselves? Thomas Malthus: 1798: “An essay on the Principle of Population” examples: • Mayan Civilization • Easter Island • Mohenjodaro – Indus Valley civilization • Cliff palace – pueblo people

5. Easter Island 1992

6. Mohenjo Daro, or "Mound of the Dead" is an ancient Indus Valley Civilization city that flourished between 2600 and 1900 BCE. It was one of the first world and ancient Indian cities. The site was discovered in the 1920s and lies in Pakistan's Sindh province.

7. Cliff Palace: Mesa Verde National Park, Colorado, USA Ref: Span, March/April 2009 Contact: editorspan@state.gov

8. Mayan Civilization • Central America- Copàn: a major settlement • Population increasing in 5th century • One crop: maize • Extensive cultivation - Diminishing returns • Demand > production • To get more land – deforestation  erosion - low productivity - marginal land used - malnutrition – high mortality

9. Easter Island • 2000 miles off the coast of Chile • Volcanic rocks & little vegetation • Favourable climate, imposing statues, long roads ………What happened later? • Increasing population & heavy reliance on wood – housing, canoes, transport etc • Reducing forests  soil erosion  low productivity  less food  war or may be cannibalism

10. Future Environmental Challenges • Scarcity of resources – water accessibility and • Climate change – mainly Pollution

11. Climate Change • Atmospheric ‘greenhouse gases’ trap Sun’s energy that is good for earthlings or life is impossible • Too much good not good • Industrial revolution  Greenhouse Gases increased • Excessive heat – No white Christmas for long time, India: Diwali warmer than before • Committee on Science of Climate Change (2001): increase in temperature by 1 degree Fahrenheit in last century

12. The Greenhouse Effect • Greenhouse gases (like water vapour, carbon dioxide, methane, and nitrous oxide) heat up our planet. They are part of Earth's atmosphere and trap warmth emitted by the sun, thus heating Earth. It is this process – the greenhouse effect – that makes life on the planet possible.

13. Projected changes in the Arctic climate by 2090

14. Arctic Warming • Artic warming - occurred at nearly twice the global average rate • The artic - ice free in summersby the end of this century • Western Siberia - recently begun to melt

15. Mercury is Rising!! • 2005 the hottest –– 14.77 degrees C – Nasa scientists: 1934 • Six hottest years in the last 8 years • 1998 – 2nd warmest – 14.71 degrees C • past century temperatures rose to 0.8 degrees C

16. “ World energy outlook 2006” International Energy Agency (IEA)

17. Mercury is Rising!! • Northern hemisphere warmer now than any time in the past 1200 years • Atmospheric levels of CO2 and Methane are higher today than at any time in the last 650,000 years. • Rise in global temperature - rise in health risks from heat weaves, failing crops, infectious diseases,. . . . . .

18. Effects of climate change • Smog • Respiratory problems • Rising sea level • Storms • Flooding coastal areas - tsunami • Low agricultural Production

20. Protecting Ozone Layer • 1970s: evidence showing that CFCs were damaging the ozone layer • 1972: UN - first global conference - to address environmental issues. • 1987: Montreal Protocol on Substances that Deplete the Ozone Layer • 2005 Feb: Kyoto Protocol • 2005 July:Asia-Pacific Partnership on Clean Development • Bali Meet 2007

21. Right to Pollute! • Climate change has a moral dimension • Developing countries contribute the least - hardest to hit as adaptation is not quick • future climate change agreements - equal rights • size of the human population – a critical variable. • as population grows -each individual's right to pollute shrinks

22. CO2 per capita per year per country: April 2006

23. Each country’s share of CO2 emissions

24. CO2 levelsProjection

25. PerCapitaEmission – 2002 -2006 • global average - 3.9 metric tons • US - 19.7 metric tons – 20.4 • Germany - 10.2 metric tons - 9.79 • Japan - 9.5 metric tons – 9.84 • EU-15 - 8.4 metric tonnes - average • India - 1.0 metric ton – 1.2

26. Share of gas emissions countries with most rapidly growing population - very low p c greenhouse gas emissions China: 1980 to 2002 – • emission of carbon -1.5 to 2.6 m t p c • population - 984 m to 1.3 b • 2002: 13.5 % of the world's total emission

27. What are we going to do? temperature increase depends on what we do from now on to curb emissions shift to : • renewable energy sources and • moreenergy-efficient technologies.

28. What will happen? • By 2050, population -from 2.8 b to 8.9 b • rate of future increase - influence earth’s climate for centuries to come • people affected by climate change - increase • redistribution of disease-carrying insects-H1N1 • shifts in many species’ habitats - in search of cooler temperatures. • about half of all wild species in the UShave already been affected

29. Water accessibility Vital to life – increasing demand but finite supply World’s 40% population lives in the areas with moderate to high water stress Moderate stress: Where human consumption is of more than 20% of all accessible renewable freshwater resources Severe stress: consumption more than 40% of all accessible renewable freshwater resources

30. – stress not uniform everywhere US , China, India: consumption of water faster than it is replenished - groundwater levels ⇩ steadily Many rivers dry soon after monsoon in India Asian and African economies: lack of water supply and sanitation for 75% of Asians & 50% of Africa’s urban residents Contamination of water is common problem Ganges - no more ‘Holy’ – sewage pipes leakages, pipe bursting, waste without treatment

31. Meeting the Challenges • Our ancestors – no sustainable choice • We have fewer options • Use our creativity to find solutions • Economic activity increasing • Problems of lack of bio-diversity, poverty, climate change, ozone depletion • Need international action – being together • Problems affect different countriesin differentways

32. If one country becomes conscious of the environment – may run the risk of making their business vulnerable to competition from less conscious countries – US & Europe scared of ‘China price’ – lead in toys – banning US cars

33. India • SEZs in India – not following ILO standards – US & Europe’s declining market share – falling employment (recession) – Asia: a bigger and growing market • Not all want to follow stringent policies & want to maintain status quo – even if it means environment degradation e g. fishermen – trollers, farmers - pesticides

34. How will we respond? • We need to understand feedback loop Positive feedback loops: where secondary effects reinforce the basic trend • Growth process self-reinforcing • Climate change • environment problems intensified Negative feedback loops: self limiting • Theory by English scientist: James Lovelock - Gaia Hypothesis: Mother Earth – a living organism with complex feedback system – optimal environment – any deviation – nature restores the balance

35. Role of Economics • Scarcity is the main concern and how mankind behaves, individually & collectively, will decide society’s response. • We need to identify- • Circumstances that degrade the environment • How & why these circumstances support degradation • Ecological & Environmental Economics provides basis for identifying these.

36. Understanding of the circumstances will help us design new incentives that will harmonize the relationship between the economy & the environment. • Ignoring those will mean that we live with the consequences that may be are very expensive to correct or may be are irreversible.

37. Environmental economics Based on standard paradigm of neoclassical economics – emphasizes maximizing welfare & using incentives to modify destructive human behaviour Ecological economics More methodologically pluralist – uses a variety of methods including neoclassical economics depending on the purpose of investigation Competitive / complementary approaches

38. Models to be used to find / understand complex relationships between the economy & the environment – models may yield conclusions that are dead wrong. – useful abstractions that should be viewed with some skepticism as the details that are omitted may turn out to be crucial in understanding particular situation.

39. What is the future? • Bjorn Lomborg, Director Environmental assessment Institute, Denmark – “The Skeptical Environmentalist” : the mankind is intelligent ∴ can face any challenges – history supports  progress continues • Worldwatch Institute’s researchers: resources are shrinking – strain on environment – current development paths unsustainable – meaning of Development? Adam & Eve richer than us? alternatives available but are we using those?

40. Are societies on self destruction path? ↑ scarcity  behavioural response decides the pressure on environment - If it intensifies  pessimism and if it reduces  optimism Environmental & natural resource economics is helping us to understand human source of the problems & in crafting solutions to them. Market forces: extremely powerful in search of solutions – attempts to solve the problems shouldn’t ignore these forces. Or else possibility of failure. Instead use these forces to channel in right direction - protect the environment. Environmental & natural resource economics provides a specific set of directions as how that can be accomplished.

41. Basic Issues • Earth's carrying capacity • Our response to scarcities • Role of political system – Government’s intervention – other systems • Our response to uncertainty • Eradication of poverty – obligation to future generations