1. Full Cost Pricing Including External Costs

2. External and Internal Costs Internal cost: Included in the price. Raw materials, labor, shipping, profits External costs: hidden costs paid by other people such as poorer health, taxes for pollution control, land use.

3. Depletion of nonrenewable resources Degradation & depletion of renewable resources used faster than replenished Pollution, waste from overloading nature’s waste disposal & recycling systems Fig. 24-4, p. 573 Sun EARTH Heat Economic Systems Natural Capital Production Air, water, land, soil, biodiversity, minerals, raw materials, energy resources; dilution, decomposition, & recycling services Consumption Recycling and reuse

4. ESTIMATING THE VALUE OF ECOLOGICAL SERVICES AND MONITORING ENVIRONMENTAL PROGRESS Economists have developed several ways to estimate nonmarket values of the earth’s ecological services based using: –Mitigation cost: how much it takes to offset any environmental damage. –Willingness to pay: determine how much people are willing to pay to keep the environment in tact (e.g. protect an endangered species).

5. ECONOMIC TOOLS FOR IMPROVING ENVIRONMENTAL QUALITY Including external costs in market prices informs consumers about the harmful impact of their purchases the earth’s life- support systems and on human health.

6. Eco-Labeling: Informing Consumers So They can Vote with Their Wallets Certifying and labeling environmentally beneficial goods and resources extracted by more sustainable methods can help consumers decide what goods and services to buy. Figure 24-9

7. Subsidy Shifting Taxes on pollution and resource use can move us closer to full-costing pricing. –Shifting taxes from wages and profits to pollution and waste (green taxes) helps make this feasible. We can improve environmental quality and human health by replacing environmentally harmful government subsidies with environmentally beneficial ones.

8. Fig. 24-10, p. 580 Trade-Offs Environmental Taxes and Fees AdvantagesDisadvantages Helps bring about full-cost pricing Penalizes low income groups unless safety nets are provided Provides incentive for businesses to do better to save money Hard to determine optimal level for taxes and fees Need to frequently readjust levels, which is technically and politically difficult Can change behavior of polluters and consumers if taxes & fees are set at a high enough level Gov’ts may see this as a way of increasing general revenue instead of using funds to improve environmental quality and reduce taxes on income, payroll, & profits Easily administered by existing tax agencies Fairly easy to detect cheaters

9. Fig. 24-12, p. 582 Trade-Offs Tradable Environmental Permits AdvantagesDisadvantages Big polluters and resource wasters can buy their way out Flexible Easy to administer May not reduce pollution at dirtiest plants Encourages pollution prevention and waste reduction Can exclude small companies from buying permits Caps can be too low Can promote achievement of caps Caps must be gradually reduced to encourage innovation Determining caps is difficult Permit prices determined by market transactions Must decide who gets permits and why Administrative costs high with many participants Confronts ethical problem of how much pollution or resource waste is acceptable Emissions and resource wastes must be monitored Confronts problem of how permits should be fairly distributed Sets bad example by selling legal rights to pollute or waste resources Self-monitoring can promote cheating

10. Consumption Patterns Underconsumption LDC Overconsumption MDC –Affluenza: unsustainable addiction to overconsumption and materialism.