Transcript APES Unit 01 - yayscienceclass

Dollars and Environmental
Sense: Economics of
Environmental Issues
Botkin & Keller chapter 28
Plan B 2.0, Hardin Article
The Economic Importance of
the Environment
• Environmental Economics
– The study of relationships of the
importance of the environment to the economy
– Includes:
• The impact of environment as a result of economic
activity
• Regulation of the economy and economic processes
• The objective of balancing environmental and economic
goals of society
• Development of economic policy to minimize
environmental degradation
• Finding solutions to environmental problems
• How environmental policy is often dictated by economics
Discussion Point
Your book states (page 605) that
environmental policy is often created
based on tangible and intangible factors.
1.Please give an example as to what this
means.
2.How do we handle policy in regard to
intangibles?
The Environment as a
Commons
• Commons:
– Land or another resources owned publicly
with public access for private uses
Discussion Point
In regard to the commons. Many people
do not behave in a way that leads to
sustainable use of a common area, which leads
to major problems in the future when the
resource is depleted or destroyed.
1.Why do people not act in their own best
interest by preserving the commons?
2.According to Garrett Hardin is this rational
behavior?
Solutions?
• How might one solve the tragedy of the
commons? (Garrett Harding gave
several suggestions)
Externalities
• Direct Costs
– Those borne by the producer and passed
directly on to the user or purchaser
• Externality (Indirect Cost)
– An effect not normally accounted for in the
cost-revenue analysis of producers and often
not recognized by them as part of their costs
and benefits
Discussion Point:
Public Service Functions
of Nature
Ecosystems can maintain themselves quite
well naturally and perform many public
services.
1.What are some examples of ecosystem
services?
2.How do you put a price on these services?
What if they are lost?
3.How do you put a price on the beauty of
nature?
Future Value??
• Is profit now worth more than profit in
the future?
Risk-Benefit Analysis
• Def: The riskiness of a present action in
terms of its possible outcomes
• The relation between risk and benefit
affects our willingness to pay for an
environmental good
• How much risk is acceptable? What if it
is long term risk?
Risk-Benefit Analysis
• Evaluation of environmental
intangibles is becoming more
common in environmental analysis
• When quantitative, such evaluation
balances the more traditional
economic evaluation and helps
separate facts from emotion in
complex environmental problems
How Do We Achieve an
Environmental Goal?
• Moral suasion
• Direct controls
• Market processes
• Government investment
What do these terms mean? (page 615)
• Many controls have been applied to the
use of desirable resources and the
control of pollution
Marginal Costs and the
Control of Pollutants
• Marginal Costs: the cost to reduce one
additional unit of pollutant
• 3 methods of direct control of pollution
– Setting maximum levels of emission
– Requiring processes and procedures
– Charging fees for emission