Environmental Economics: Issues, Instruments and Institutions ECON*4930, Lecture 1 Prof. McKitrick.

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Presentation transcript:

Environmental Economics: Issues, Instruments and Institutions ECON*4930, Lecture 1 Prof. McKitrick

Issues: Air Pollution Ground Level Ozone (O 3 ) Nitrogen Oxides (NOx) Particulate Matter (PM, TSP) Sulphur Oxides (SOx) Volatile Organic Compounds (VOCs) Carbon Monoxide (CO)

Ozone: 11 AM, Bay&Wellesley

Ozone: Monthly Averages

NOx: 11 AM Bay&Wellesley

NO2: Monthly Averages

TSP: Bay&Wellesley

TSP: Monthly Averages

SO 2 : Bay&Wellesley

SO 2 : Monthly Averages

Air Pollution vs Income Is it like this?

Air Pollution vs Income

Air Pollution Since 1940: USA

Air Pollution vs Income: USA

Water Pollution (Kg/worker/day) vs Income

Water Pollution: Great Lakes

Global Issues: Ozone Layer

Instruments Standards Emission Standards Technology Standards Emission Charges (Taxes) Tradable Emission Permits Tort Law

Standards E.g. US motor vehicle emission standards

Tradable Emission Permits E.g. US EPA SO 2 Allowance Market

Tradable Emission Permits Number of trades

Institutions Canada Federal Government Inland waterways, CCME, International Treaties, Environmental Assessment, Motor vehicles, Endangered Species, Toxic Substances Provincial Government Air and water contaminant regulation, Energy, Municipal oversight (e.g. solid waste management) Courts Tort law, property rights

Models of Economic Growth and the Environment Substitution Effect: Growth uses up natural assets Income Effect: Expands resources for environmental protection

Models of Economic Growth and the Environment Output constraints

Models of Economic Growth and the Environment Preferences

Models of Economic Growth and the Environment Combining:

Environmental Kuznets Curve Low income: pollution rises as income rises High income: pollution falls as income rises

Beltratti Model Utility Function Production Function Environmental Quality Capital Stock

Beltratti Model Environment deteriorates according to

Beltratti Model Simple structure, yet: Has no steady state Can generate any relationship between pollution and income U, ∩, ~, etc. Bottom line: growth theory unlikely to make one single prediction about pollution v growth, but might help explain different histories