Chapter 24 Economics, Environment, and Sustainability

Economic Resources: The Big Three Three types of resources are used to produce goods and services. Figure 24-2

What is an ecological economist? One who studies the inter- dependence and coevolution between human economics and their natural ecosystems

Ecological economists base their models on the following assumptions: Resources are limited and should not be wasted. We should encourage environmentally beneficial and sustainable forms of economic development. The harmful environmental and health effects of producing goods and services should be included in their market price.

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’s 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 capital

Fig. 24-5, p. 573 CharacteristicUnsustainable Economic Growth Environmentally Sustainable Economic Development Production emphasis QuantityQuality Natural resourcesNot very importantVery important Resource productivity Inefficient (high waste) Efficient (low waste) Resource throughput HighLow Resource type emphasized NonrenewableRenewable Resource fate Matter discarded Matter recycled, reused, or composted Pollution controlCleanup (output reduction) Prevention (input reduction) Guiding principles Risk–benefit analysis Prevention and precaution

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. 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). Willingness to pay: determine how much people are willing to pay to keep the environment in tact (e.g. protect an endangered species).

Cost-Benefit Analysis: a Useful but Crude Tool Comparing likely costs and benefits of an environmental action is useful but involves many uncertainties. ????????????????????

Cost–benefit analyses involves determining:  Who or what might be affected by a particular regulation or project.  Projecting potential outcomes.  Evaluating alternative actions.  Establishing who benefits and who is harmed.

If costs exceed benefit, then the proposed action is rejected. If benefits exceed cost, the proposed action is accepted. If cost = benefit, then a decision has to be made whether to start or stop the proposed action

What is GNP? The sum of all goods and services produced by a country in a given time frame. For example: GNP includes Coca Cola bottled overseas but not Toyotas made in the United States (the profit is still going to the Japanese)

Environmental and Economic Indicators: Environmental Radar We need indicators that reflect changing levels of environmental quality and human health. Gross domestic product (GDP): measures the annual economic value of all goods and services produced in a country without taking harmful effects into consideration. Gross domestic product (GDP): measures the annual economic value of all goods and services produced in a country without taking harmful effects into consideration. Includes Toyotas made in the United States but not Coca Cola bottled overseas. Includes Toyotas made in the United States but not Coca Cola bottled overseas.

What is GPI? Genuine Progress Indicator The GPI subtracts from the GDP costs that lead to a lower quality of life or deplete/degrade natural resources. Kind of a way to see if the economic growth has benefited people overall

Environmental and Economic Indicators: Environmental Radar Comparison of the per capita GDP and the GPI in the U.S. between 1950 and Figure 24-8

What are external costs? External cost refers to something that a business does that is not included in its profit and loss (pollution for example). The business may be responsible for cleaning up “ its mess”. Examples are: Superfund sites, Shoreham nuclear power plant, Love Canal, PCB’s in the Hudson River and General Electric.

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.

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

How do we make the right choice for our wallet and the environment?

Fig , 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

What are Green Taxes? Taxing wages and profits less and pollution and waste more. Figure 24-11

Advantages of green taxes  Decreases depletion and degradation of natural resources  Encourages waste reduction and pollution prevention  Rewards recycling and reuse  Stimulates creativity in solving environmental problems to avoid paying extra

Jobs, Profits, and the Environment: New Industries and New Jobs Shifting to more environmentally sustainable economies will create immense profits and huge numbers of jobs. Shifting to more environmentally sustainable economies will create immense profits and huge numbers of jobs. Figure 24-16

Examples of some environmentally sustainable careers: AquacultureBiofuels Energy efficient product design Environmental Education Environmental Law Environmental Consulting Environmental Engineering Wind energy

Pollution and Public Policy Steps in policy development in response to a human or environmental problem: Steps in policy development in response to a human or environmental problem:

Recognition – admitting there is a problem Formulation – coming up with a solution Implementation – putting a plan into action Control – making sure people adhere to the plan