Chapter 15 Environmental Economics , Equity, and Policy

1. Chapter 15Environmental Economics, Equity, and Policy

2. Where we’re going • Last Chapter  • We’ll learn, or review, some basic terms • We’ll learn, or review, some basic economics • A bit more about worldviews- • Anthropocentric, biocentric, ecocentric • Triple bottom line view of success, or profit

3. Sustainability is the ultimate goal of sound environmental science and policy. Are many places sustainable now???

4. Sustainability Something is sustainable when it meets the needs of the present generation without compromising the ability of future generations to meet their own needs.

5. Sustainability Sustainability weighs present resources and needs in terms of long-term and future resources and needs.

6. Economics studies how scarce resources are allocated.

7. Supply, Demand, and the Market • A market occurs whenever people engage in trade. • In a market economy, the cost of a good is determined by supply and demand. • And it’s opposite?

8. Supply (S) and Demand (D)- think about corn and turning it into ethanol The higher the price, the more suppliers are willing to produce But if they produce too much, then demand will drop!

9. Supply • The supply curve (S) shows how many units of a given product or service a supplier can make available. • If you are the only supplier of this product, and many people want it (a condition of scarcity), you are likely to be willing to produce many units of the product.

10. Supply • However, if there is competition for your product, you may be concerned how many units you can sell. • You will likely produce fewer units now that you share the market with other suppliers.

11. Demand • The demand curve (D) shows how many units of a good consumers want to buy. • Factors that determine demand include: • Income of the buyers • Price of the good • Tastes, expectations, and the number of people who want the good

12. Demand The demand curve slopes downward because as the price of the good rises, the demand declines: if P thenD

13. The Law of Demand When the price of a good rises, the quantity demanded falls. When the price falls, demand will rise. (Price and demand are inversely related.)

14. The Law of Supply When the price of a good rises, the quantity supplied of that good will rise. When the price of a good falls, the quantity of the good supplied will also fall. (Price and supply are directly related.)

15. Equilibrium When the price of a good comes to an equilibrium point (E), the two curves (S and D) intersect on the graph.

16. Equilibrium At this price (equilibrium), suppliers find it worthwhile to supply exactly as many of the product units as consumers are willing to buy.

17. Externalities • The costs or impact of a good or service on people and the environment not included in the economic price of that good or service • E.g., costs of using common resources such as water, air, land, or the oceans, and the costs of air and water pollution or solid waste products.

18. Externalities • With the costs of externalities included, the true cost of a good or service is realized: • The equilibrium point (E) moves upward • and to the left (E1), • reflecting the increase in the cost of each unit and the corresponding decrease in demand.

20. Wealth and Productivity • GDP(Gross Domestic Product): the value of all products and services produced in a year in a given country. • GDP does not reflect externalities such as pollution.

21. Wealth and Productivity GPI(Genuine Progress Indicator): attempts to address the shortcomings of the GDP by including externalities.

22. Wealth and Productivity • Unlike GDP, GPI includes: • Measures of personal consumption • Income distribution • Levels of higher education • Resource depletion, pollution, and the health of the population.

23. Some other measures • http://en.wikipedia.org/wiki/World_Happiness_Report • http://en.wikipedia.org/wiki/Happy_Planet_Index

25. The Kuznets Curve • The controversial Kuznets curve suggests that as per capita income in a country continues to increase over time, • Environmental degradation first increases, • then decreases. Why should this be??

27. Economic health depends on the availability of natural capital and basic human welfare. Natural capital Human capital Manufactured capital

28. Microlending The practice of loaning small amounts of money to people who intend to start a small business in less- developed countries.

29. Contrasting Economic Systems • Economic systems can be more or less sustainable, depending on how factors such as the waste stream are managed.

31. Sustainable Economic Systems • One promising approach is to use a cradle-to-grave system for material use and waste recycling.

33. Agencies, laws, and regulations are designed to protect our natural and human capital.

34. Environmental Worldviews • Anthropocentric:human-centered, considers that human beings have intrinsic value and nature should provide for our needs. • Biocentric:life-centered, says humans are just one of many species on Earth, all of which have equal value.

35. Environmental Worldviews • Ecocentric:Earth-centered, places equal value on all living organisms and the ecosystems in which they live, and it demands that we consider nature free of any associations with our own existence.

36. WorldAgencies • United Nations (UN) • United Nations Environment Program (UNEP) • The World Bank • The World Health Organization (WHO) • The United Nations Development Program (UNDP)

37. United States Agencies • Many Federal agencies are responsible for enforcing environmental laws and regulations. These include: • The Environmental Protection Agency (EPA) • The Occupational Safety and Health Administration (OSHA) • The Department of Energy (DOE)

39. There are several approaches to measuring and achieving sustainability.

40. The Triple Bottom Line • Sustainability is believed to be achievable at the intersection of three “circles” of mutual concern for all humans: • Social • Economic • Environmental

42. Two major challenges of our time are reducing poverty and stewarding the environment.

43. Environmental Justice • The observation is that poor people live in crappy places- and that’s not good. • It can be bad in all sorts of ways: Crime, drug use, but also environmentally • The individual solution can happen of there’s opportunity- but that will leave lots of people behind

44. Environmental Justice Where is the justice … In the inequitable distribution of pollution and of environmental degradation, with their adverse effects on humans and ecosystems?

45. Environmental Justice Where is the justice … When people that are of lower incomes and minorities have a disproportionate exposure to environmental hazards?

46. Environmental Justice Justice can be found … In sustainability, in the reduction and elimination of poverty, in personal action, and in an attitude of responsible stewardship toward the Earth and its inhabitants.

47. Review Questions What is sustainability? How does sustainability define the relationship between the present and the future? Basically, what does economics study? What is supply?

48. Review Questions What is demand? Explain the idea and effects of scarcity. What (who?) is the market? How are supply and demand related?

49. Review Questions What is the equilibrium point? Explain how the law of supply and the law of demand are interrelated. What are externalities? Distinguish between GDP and GPI (and explain what each abbreviation stands for).

50. Review Questions What does the Kuznets curve suggest may be true about income and environmental degradation? Define microlending. What are the three forms of capital?(natural, human, manufactured) Explain the “cradle-to-grave” concept.