GEOG 352: Day 26

1. GEOG 352: Day 26 Daly and Farley: Last Chapters

2. Reminder about the tax forum tonight. • Saturday from 8:30 to 9:30 p.m. is Earth Hour; reduce electricity use. • Will collect the final projects. • I think everyone who’s going to has presented, except for John. • Today we’ll do Chapter 21 of Daly and Farley and do as much of the other chapters as we have time for. • Next week we’ll pull together the course’s threads and review for the final, which will be on Thursday, April 19th from 1-4 in Building 355, Room 103. We’ll also do an evaluation of the course. Agenda for Today

3. At the end of Chapter 21, the authors discuss 3 types of property rights or entitlement rules on the assumption that property is a social institution, the rights of which must be granted by (and limited by) the state: • Property rule (defines the extent of freedom to interfere or to be free from interference) • Liability rule (can interfere, but must pay compensation) • Inalienability rule (the right to have or avoid certain things regardless of property rights). Tail End of Chapter 21

4. Four strategies for achieving sustainablescale: direct regulation, Pigouvian taxes, Pigouvian subsidies, and tradeable permits. The middle two are named after Arthur Cecil Pigou, an English economist. • Direct regulations (‘command and control’): examples would include banning CFCs, DDT, or lead gasoline and insisting on Best Available Control Technologies (BACT). • The mechanisms can include fines and penalties of various kinds. They are relatively effective, cheap and easy to enforce (or were before senior governments slashed their environmental ministries’ staff). • The downside is that they don’t necessarily meet goal of allocative efficiency. They can be too prescriptive (not good on preserving micro-freedom). Also: once targets are met, there’s no incentive for companies to keep going. Chapter 22

5. Pigouvian tax – impose a tax equal to the marginal external cost of pollution or resource depletion so that a cost-benefit equilibrium is created. This encourages an internalization of externalities, and creates a right to environment for the state on behalf of the public. A key concept is targeted revenue neutrality. • Since the abatement cost is hard to calculate and will vary for each company, one counts on some companies abating and some paying the tax. However, the overall effect is beneficial and it is cheaper to implement. They suggest starting with a low tax and then building up. • Pigouvian subsidy- instead of “polluter pays,” the polluter is paid to not pollute or to reforest riparian zones. It could involve encouraging switches to alternative technology. • Cap and trade – setting a quota on resource depletion or pollution and then allowing those having difficulty meeting their targets to buy ‘capacity’ from low polluters (see wrinkles on p. 433). Chapter 22

6. This approach has been used somewhat successful in the U.S. to reduce SO2 emissions, and in the EU to reduce CO2 emissions. It has also been used with success to reduce regulate fisheries. • The U.S. relied on shorter seasons for low population fisheries like halibut, but these had all kinds of perverse effects (see p. 436). • In 1990, Canada created individual quotas for ships and extended the season, and this worked much better. • In New Zealand, they determine a total allowable catch (TAC), deduct expected catch for sports fishery, and set aside 20% for the Maori. With the remaining Total Allowable Commercial Catch (TACC), they divide it into Individual Transferable Quotas (ITQs), which can be bought, sold and leased. It seems to work well. Initially the government bought and sold ITQs as fish populations fluctuated, but this is no longer necessary. Chapter 22

7. How to achieve a more just distribution of wealth in a society where inequality is at its highest levels since the Greatest Depression? And how to reduce the huge ecological footprint of the ultra-wealthy? When do the rights of the present generation (or a small fraction thereof) to the ‘good life’ trample on the rights of future generations to a world with adequate natural capital? • They review a number of possible mechanisms for achieving greater equality: • caps on income and wealth•minimum income (we already have to a limited degree through welfare, EI, OAP, minimum wages) • distributing the returns of production through ESOPs or worker ownership • distributing the returns to natural capital through ending public subsidies • “sky trusts” (where companies would pay for quotas to deplete or pollute and this would go to a fund to be redistributed to the public or pay for public infrastructure), and • land taxes. Chapter 23

8. Will only touch on a few highlights. • Discusses methods for giving a monetary value to ecosystems and their functions/ services: • Market price- estimate economic values for ecosystem products or services (e.g. storm protection of mangrove swamps) • Productivity- estimate economic values for same but as they contribute to the production of commercially marketed goods (e.g. timber for finely crafted furniture) • Hedonic pricing- estimate economic value of ecosystem property or services that directly affect the market price of other goods (e.g. how much more houses/ properties are worth that abut green space?) • Travel cost- how far are people willing to travel to visit or use a site? Chapter 24

9. Damage cost avoided, replacement cost, and substitute cost- what would the costs of damages be that are associated with ecosystem disruption, what is the replacement cost, or substitution cost? (e.g. Nicholas Stern’s calculations of impacts if we don’t stem climate change, or costs of losing fishery, etc.) • Contingent valuation- ‘willingness to pay’ based on hypothetical scenarios • Contingent choice- based on the hypothetical trade-offs people are willing to make • Benefit transfer- inferring from other situations and sites what something is worth? • A key issue is to what extent can or should all values (including non-ecological ones) have a price attached to them? Chapter 24

10. Another key issue is how to ensure adequate provision of non-market goods (infrastructure, parks, health care, police and fire services, libraries, etc.). There are a number of options: • Turn everything over the private sector and let them charge what the market will bear • Private sector but with utility commissions or other regulations (for instance, setting rates) • Direct government provision, including sometimes paying private contractors • Subsidies for positive externalities such as well-managed farmland (soil management, riparian management, and leaving habitat for birds) • Tax relief for same (e.g. tax breaks for covenants easements, etc.) • Low or no-interest loans or grants for desirable activities (e.g. energy-efficiency retrofits). Chapter 24

11. A huge issue is to find the right principles/ mechanisms for ameliorating climate change at a global scale. What is appropriate? • All countries limit emissions proportionally to some fixed baseline date? • Developed countries pay for past sins by reducing far more while giving developing countries a free hand? • Option 2, but with countries like China (world’s largest CO2 emitter) and India also having significant responsibilities? • Developed countries pay for past sins by paying developing nations to use alternative technologies? • Developed countries pay for past sins by paying developing nations to preserve carbon sinks, such as rainforests? • Other ideas? Chapter 24