1. ECONOMICS AND ENVIRONMENT
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NATIONAL UNIVERSITY OF MANAGEMENT
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ENVIRONMENT BUSINESS MANAGEMENT
CHAPTER VI
ECONOMICS AND ENVIRONMENT
PREPARED BY SAY PUNNAREAY, MBA

2.  How much is clean air worth
 How much is clean air worth?  Can you charge somebody for damaging your air?  How much are you willing to pay for clean air?  Should you have to pay for clean air?  What market incentives are there for research on the environment?  How can the environment be priced and sold?  Does Cambodia have any mechanisms for valuing its environment?

3.  What is a market. A system of exchange  What is exchanged
 What is a market? A system of exchange  What is exchanged? Resources: land, labor, capital (goods or services in some form)  How does the market work?  Matching of supply and demand

4. 1. WHAT ENABLES THE MARKET TO WORK?
 Price or Value setting  Profit motive  Private property  Government and other regulating institutions

5.  General market failures:
- What company did you buy your air from?
- How much did you pay for your air? How was that price set?
- How clean was the air you bought? How do you know?
- How can a company stop other companies from dirtying its air? What can you do if someone makes your air dirty after you bought it?
- What rate of return should a company expect to get from investing in air quality?

6.  Environmental market failures: - Unprimed use values; option values; existence values; bequest values. - Lack of information - Externalities - Common Access Resources/Sinks - Discounting the future - Missing Markets

7.  Environmental economics
From Market Failure to Government Failure
 Limited information of how to deal with specific environmental problems (of area or industry) and of firms’ capability to deal with or hide environmental impact.
 Limited resources to regulate, monitor and enforce
Command and Control regulations: uniform standards and technologies

8.  Cost effectiveness: example, emission trading credits
3. POLICY GUIDELINES FROM ENVIRONMENTAL ECONOMICS Benefits of Using the Market (as opposed to CAC)
 Cost effectiveness: example, emission trading credits
 Substitution and technological advance: example, green taxes.
Other institution/market based schemes: deposit refund schemes, environmental bonds, transferable quotas, transfer of development rights.

9. 4. BETTER VALUATION OF NON-MARKET VALUED ASSETS
 Financial Costs
 Averting Behavior
 Travel Cost Method
 Hedonic Pricing
 Contingent Evaluation
For: Better Cost-Benefit Analysis, regulations, fines

10. 5. POLICY GUIDELINES FROM ECOLOGICAL ECONOMICS
Daly Rule
 "Never reduce the stock of natural capital below a level that generates a sustained yield unless good substitutes are available for the services generated."
 Index of Sustainable Economic Welfare (ISEW)
 Ecological tariffs on free trade
 Community based sustainability through self-sufficiency and diversification

11. 6. FREE TRADE LIMITATIONS
 Regional specialization obscures view of resource exploitation, depresses ecological and social laws, weakens terms of trade and impoverishes landholders
 Externalities from the shipping of goods around the world
 Therefore, tariffs to compensate or reduce free trade