Lecture 2

1. Lecture 2 Environmental Economics and Environmental Policy

2. What will I learn today? • Understand a great example of International Pollution • Understand Economic theory • How economic decisions impact the environment. • The History of U.S. Environmental Policy and the institutions involved • How environmental policy is formulated. • How had President Bush done?

3. Mexico America THE BORDER

4. Case Study: Tijuana’s Sewage San Diego and Tijuana’s Sewage Pollution Problems and Policy Solutions • The beaches south of San Diego boast some of the world’s best waves for surfing. • These days, however, most surfers avoid the temptation. • The heavily polluted Tijuana River flows across the international border from Mexico and empties into the sea. • Discharging millions of gallons of untreated wastewater into the Pacific Ocean.

6. WaterShed for the Tijuana River

7. Movie: Watch this clip from a concerned citizen group

8. Cost: • Pollution has effected the economy of the region: • Medical costs from illness have increased due to the pathogens in the sewage • Raw sewage changes sea life by lowering water oxygen levels, this leads to less fish. • Tourism is reduced from bad press and beach closures • About $1.5 billion a year.

9. Short Sighted Solutions • The U.S. government built a sewage treatment plant to clean the water as soon as it comes over the border. • However, within two years that plant was regularly over used and now it pumps raw sewage into the ocean once more. • Population growth • Movement of U.S. companies to Mexico for cheap labor • Workers for these new companies • All add to the problem

10. Lesson to learn: • The environment and the economy are interlinked. • The new lesson that economists are learning now is that environmental protection is GOOD for the economy. • The short term view is still based on classic economics and considers just humans • The longer term view based on the new economics considers human action tied to the environment.

11. Understand Basic Economics • ECONOMICS is the study of how people decide to use scarce resources to provide goods and services, based on demand. • An ECONOMY is a social system that converts resources into goods and services.

12. Understand Basic Economics • Modern economics developed in the mid-1800s • Classical Economics assumes that free self-interest (with some rules) will regulate the market. • ? • Neoclassic economics assumes that you need to add human nature into the mix - better known as the supply and demand model. • Neither of these two consider the impact on the environment!

13. Understand Basic Economics WHAT TYPES OF ECONOMYS ARE THERE? • Subsistence Economy • rely on the environment to supply needs. • Capitalist Market Economy • U.S. where supply and demand work. Government intervention is minimized • Centrally Planned Economy • Socialist (Communist) governments dictate how the market is priced

14. ACTIVITY: • Discuss the free-market system. Do you like it? • Name at least one negative of it? • Name at least one positive of it? • Is it compatible with protecting the environment?

15. U.S. environmental policy • The United States provides a good focus for understanding environmental policy in constitutional democracies worldwide. • Why? • First, the United States historically pioneered innovative environmental policy. • Second, U.S. policies have served as models—both of success and failure—for many other nations and international government bodies. • Third, the United States exerts a great deal of influence on the affairs of other nations. • Finally, understanding U.S. environmental policy on the federal level enables us to better understand environmental policy at local, state, and international levels.

16. Environmental policy, like all U.S. policy, results from actions of the three branches of government

17. Legislative Branch • Statutory law, or legislation, is created by the legislative branch, or Congress, which consists of the Senate and the House of Representatives.

18. Executive branch • Legislation is approved or rejected by the president, who heads the executive branch. • The president may also issue executive orders - specific legal instructions for government agencies. • Once statutory laws are enacted, their implementation and enforcement is assigned to the appropriate administrative agency within the executive branch.

19. Judicial Branch • The judicial branchconsisting of the Supreme Court and various lower courts, is charged with interpreting law. • This is necessary because social norms, societal conditions, and technologies change over time, and because Congress must write laws broadly to ensure that they apply to varied circumstances throughout the nation

20. History of U.S. environmental policy • There are 3 periods of history over which the U.S. environmental policy has been formulated. • 1780s to late 1800s • Late 1800s to mid 20th century • Mid 20th century to present

21. The Western Frontier • Laws enacted during the first period dealt primarily with the management of public lands and accompanied the westward expansion of the nation. • Environmental laws favored • settlement and • mining

22. The Western Frontier U.S. environmental policy of this era reflected the public perception that Western lands were practically infinite and inexhaustible in natural resources. Typical Laws: • The Homestead Act of 1862 allowed any citizen to claim, for a $16 fee, 160 acres of public land by living there for 5 years and cultivating the land or building a home. • The Mineral Lands Act of 1866 provided land for $5 per acre to promote mining and settlement. • The Timber Culture Act of 1873 granted 160 acres to any citizen promising to cultivate trees on one-quarter of that area.

23. Preservation Orders • In the late 1800s public perception and government policy toward natural resources began to shift. • Laws of this period aimed to mitigate some of the environmental problems associated with westward expansion. • In 1872 Congress Yellowstone National Park. • Then a national park system • Then a national forest system, and • And a national wildlife refuge system These developments reflected a new understanding that resources were exhaustible, and required legal protection.

24. Pollution Awareness • Americans found themselves better off economically but living amid dirtier air, dirtier water, and more waste and toxic chemicals. • Today, largely because of environmental policies enacted since the 1960s, pesticides are more strictly regulated, and the nation’s air and water are considerably cleaner.

25. Roll backs @ BushMart • Some of the tougher regulations on clean air, and water, have been eroded mainly by the current Bush government • Pro business measures enacted. • The U.S. has now been surpassed by many countries which now have stricter and better environmental protection laws.

26. Earth Day • Earth Day is now celebrated in many nations • Earth Summit took place in 1992 • Many nations are shifting policies to support sustainable development!!!

27. Who shapes international law? • United Nations • World Bank • European Union • World Trade Organization • Nongovernmental organizations • The Nature Conservancy • Greenpeace • WWF…

28. United Nations • Of several agencies within it that influence environmental policy, most notable is the United Nations Environment Programme (UNEP), created in 1972 • It helps nations understand and solve environmental problems. • No real powers to enforce, except economic aid.

29. World Bank • Largest source of funding for economic development. • Funds dams, roads, infrastructure, etc. • Not always considered to have taken the best actions! • It has funded many unsustainable projects.

30. European Union • The EU also seeks to remove trade barriers among member nations. • It has classified some nations’ environmental regulations as barriers to trade. • Trade barriers take priority over environmental regulations between member countries.

31. World Trade Organization • Based in Geneva, Switzerland, the World Trade Organization (WTO) was established in 1995. • The WTO represents multinational corporations and promotes free trade • WTO has real authority to impose financial penalties on nations that do not comply with its directives. • These penalties can on occasion play major roles in shaping environmental policy.

32. World Trade Organization • Brazil vs U.S. • Brazil and Venezuela produce polluting gasoline. • EPA wanted clean burning gasoline and banned imports of polluting gasoline. • WTO ruled that the ban was illegal. • WTO can be anti-environmental

33. Consider: • If Nation A has stricter laws for environmental protection than Nation B, and if these laws restrict the ability of Nation B to export its goods to Nation A, then by the policy of the WTO and the EU, Nation A’s environmental protection laws could be overruled in the name of free trade. • Do you think this is right? • What if Nation A is a wealthy industrialized country and Nation B is a poor developing country that needs every economic boost it can get?

34. Science can be “politicized” • Unfortunately, sometimes policymakers choose to ignore science and instead allow political ideology alone to determine policy. • This complaint has been lodged against the George W. Bush administration by an unprecedented number of scientists. • In 2004, the Union of Concerned Scientists released a statement titled, “Restoring Scientific Integrity in Policy Making,” which faulted the Bush Administration for manipulating scientific information for political ends; censoring, suppressing, and editing reports from government scientists; placing people who are unqualified or who have clear conflicts of interest in positions of power; ignoring scientific advice; and misleading the public by misrepresenting scientific knowledge. By mid-2007, more than 12,000 scientists had signed on to this letter.

35. Science can be “politicized” • Bush appointee Philip Cooney, a lawyer with no scientific background and a former oil industry lobbyist, edited several key U.S. government reports on climate change to portray scientific findings as far more uncertain than they actually were and to downplay the threats most scientists see in climate change. • Cooney resigned when this was revealed, and the Exxon-Mobil corporation hired him just days later.

36. NASA ordered one of its employees, world-renowned climate scientist James Hansen, to refrain from speaking out after he publicly recommended that the United States reduce its greenhouse gas emissions to combat climate change. • He refused to back down, and after the matter garnered media attention, NASA changed its policies, allowing its scientists more freedom to speak out. • However, NASA also quietly deleted a portion of its own mission statement that Hansen had cited in his defense, which read that NASA sought • “to understand and protect our home planet.”

37. Interior Department deputy assistant secretary Julie MacDonald, a Bush appointee with no background in wildlife biology, edited scientific reports assessing species being considered for protection under the Endangered Species Act, ignoring her scientists’ conclusions without offering evidence of her own. • Following MacDonald’s edits, species that Fish and Wildlife Service scientists recommended for protection were not granted protection.

38. Such high-profile cases appear to be the tip of an iceberg. • In the past several years, scientists at government agencies - particularly those working on politically sensitive issues such as climate change or endangered species protection- say they have repeatedly found their work suppressed or discredited, and their jobs threatened. • Many have chosen self-censorship. • When taxpayer-funded science is suppressed or distorted for political ends, by either the right or the left, we all lose.

39. Command and Control • Much environmental policy has set rules or limits • and threatening punishment for violating these rules or limits, in what is often called a command-and-control approach. • The command-and-control approach has resulted in some major successes. • Without doubt, our environment would be in far worse shape today were it not for this type of government regulatory intervention. • Is this the only way?

40. Command and Control works..

41. Incentives and rewards • Subsidy - a government giveaway • Tend not to work as the may be used to support unsustainable activities rather than environmentally sustainable ones • Tax breaks - reducing the tax burden - wind power or buying a green car. • Green Taxes - adding taxes for those who wish to pursue undesirable activities. • The idea is to add to the costs of doing business. • Polluter Pays • Permits - tradable pollution permits • Coal powered power stations & sulfur dioxide

42. Consider: • Some environmental activists oppose emissions trading because they view it as giving polluters “a license to pollute.” • How do you feel about emissions trading as a means of reducing air pollution? Would you favor command-and-control regulation or market-based permit trading? What advantages and disadvantages do you see in each?

43. Ecolabeling • Government forces manufacturers to indicate on the label how the food was made and of what. • Consumers buy the ‘right’ foods • Non-genetically modified foods

44. Conclusions • Remember the fundamentals of environmental policy introduced here. • Economic success need not just be based on a growing market. • By understanding these fundamentals, you will be well equipped to develop your own creative solutions to many of the challenging problems we will encounter later in this class.

45. Understand Basic Economics • Most current economic models still do not acknowledge that there is interaction with the environment at all!! How silly is that! We learnt last time the humans are part of the environment and cannot be removed from it