Chapter 28 Dollars and Environmental Sense: Economics of Environmental Issues

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

The Environment as a Commons Commons: –Land or another resources owned publicly with public access for private uses

Tragedy of the Commons Revisited: The Chagos Archipelago

Externalities 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 Direct Costs –Those borne by the producer and passed directly on to the user or purchaser

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

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 Many controls have been applied to the use of desirable resources and the control of pollution

Environmental Justice Issues Who pays the external costs of consumption? Mining in the Navajo Nation The Great Pacific Garbage Patch with Van Joneswith Van Jones –What is the major gist of Mr. Jones’ point? –What is he really saying? Do you agree with him?

Control of Pollutants: Which Approach Do You Favor? Market driven solutions to include external costs to product Cap and trade policies: Government determines right amount of pollution, high polluters pay, low polluters can sell allowances Direct legislation: Government mandates of pollution levels- fines and market restriction to those who don’t meet standards