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Lecture 2

The document discusses the relationship between the environment and the economy. It states that economic activity relies on resources and services provided by the natural environment. However, economic activities also produce residuals that impact the environment. There is an interdependent relationship between the two systems. The economy affects the environment through extraction of resources and emissions, while the environment provides resources, life support, and amenity services to support the economy. The size of human population and levels of production and consumption determine the scale of environmental impacts.

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Bách Tô Gia
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30 views30 pages

Lecture 2

The document discusses the relationship between the environment and the economy. It states that economic activity relies on resources and services provided by the natural environment. However, economic activities also produce residuals that impact the environment. There is an interdependent relationship between the two systems. The economy affects the environment through extraction of resources and emissions, while the environment provides resources, life support, and amenity services to support the economy. The size of human population and levels of production and consumption determine the scale of environmental impacts.

Uploaded by

Bách Tô Gia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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CHAPTER 2: LINKAGE BETWEEN

THE ECONOMY AND THE


ENVIRONMENT
Question

1. What is the relationship between:


Environment and Economy?
2. From a specific firm’s point of view:
Should the firm invest in environmental
friendly technology for its production? Will it
affect their benefit? In which direction?
3. For a individual, what is the cost and benefit of
taking care of environment in term of economic?
I. Fundamental Relationship
• Economic activity takes place within, and is part
of, the natural environment.
• Economic activities in turn have big impact to
the environment.
Fundamental Relationship
5

A circular flow relationship for the Environment and the Economy

+ Rpd: residuals from production


+ Rcd: residuals from consumption
The first law of Thermodynamics

• To reduce the mass of residuals disposed in the


natural environment, the quantity of raw
materials taken into the system must be reduced

Raw material (M) = output (G) + Production


residuals (Rp) – Recycled amount from
producer (R’p) – Recycled amount from
consumer (R’c)
3 Ways of Reducing M (Reduce Residuals)
M = G + Rp – (rRp + rRc)

• Reduce G: Reduce quantity of Goods and Service


• Reduce Rp: Reduce residuals per unit of output
produced
=> Reduce Residuals intensity production
(Pollution prevention)/Shift to the composition of
output.
• Increase recycling in both production and
consumption. Instead of discharge waste into
environment, try to recycle them.
8

Interdependent relationship

• The environment provides both a direct value as


well as raw material intended for economic
activity, thus making the environment and the
economy interdependent.
• The way in which the economy is managed has
an impact on the environment which, in turn,
affects both welfare and the performance of the
economy.
II. Environment’s functions to the economy
Four functions of the environment to
the economy
1. Source of resource inputs
2. Provides life support services
3. Source of amenity services
4. Receptacle for residuals
1. Source of resource inputs
Classification of natural resources
Natural resources

Stock resources Flow resources


Solar radiation, wave and wind power

Renewable Non-renewable
resources resources

Energy Mineral
resources resources
Productive resource services

• Natural resources used in production are of


several types.
• One characteristic: does the resource exist as a
stock or a flow.
• The difference lies in whether the level of
current use affects future availability.
▫ Flow resources: no link between current use and
future availability.
▫ Stock resources: level of current use does affect future
availability.
Stock resources

• Renewable resources are biotic populations –


flora and fauna: have potential to grow by
natural reproduction.

• Non-renewable resources are minerals,


including the fossil fuels: no natural
reproduction, except on geological timescales.
2. Basic life-support functions

• The biosphere currently provides the basic life-


support functions for humans.
• The environment provides life-support services
such as maintenance of genetic diversity and
stabilization of the ecosystem
3. Amenity Services

• Amenity services flow directly from the


environment to individuals.
• The biosphere provides humans with
recreational facilities and other sources of
pleasure and stimulation.
4. Residual disposed into environment

• Solid waste
• Waste water
• Air pollutants
• Noise
Types of pollutants

ØResidual is material that is left over


after something has been produced
ØPollutant is a substance, energy
form, or action that, when introduced
into the natural environment, results
in a lowering of the ambient quality
level
Classification 1
Accumulative vs. Non-accumulative Pollutants

• Accumulative pollutants: accumulate over time,


stay in the environment in nearly the same
amounts as they are emitted

• Non-Accumulative pollutants: dissipate soon


after being emitted.

Q: Give some examples about these two types of


pollutants?
Classification 2
Local vs. Regional and Global Pollutant

• Local Pollutants: pollutants that have an impact


only in restricted, localized regions:
• Regional Pollutants: pollutants that have wider
impacts over large region
• Global pollutants: pollutants that have impacts
globally.
Classification 3
Point Source vs. Nonpoint Source Pollutants

• Point Source Pollutant: Actual point of discharge


can be identified
• Nonpoint source pollutant: There are no well
defined points of discharge
Classification 4
Continuous vs.
Episodic Emission

• Continuous emissions: Emissions are continuos,


damage are also continuous.
• Episodic Emission: pollutants are emitted on an
episodic basis.
Classification 5
Environmental Damages Not Related
to Emissions
• There are many important instances of
deteriorating environmental quality that are not
traceable to residuals discharges.
• E.g:
-The conversion of land to housing and commercial areas
destroys the environmental value of that land
-Other land uses, such as logging or strip mining, can also
have important impacts.
Types of Pollutants
• Accumulative Radioactive waste, plastics, many chemicals
Noise
• Non-accumulative

• Local Noise, visual


• Regional SO2
• Global CO2, CFCs

Smoke stacks, waste treatment plants


• Point Source
Agricultural runoff
• Non-Point Source

• Stationary Source Factories

• Mobile Source Cars, planes, boats

• Continuous Power plants, factories, waste treatment plants


Emissions
Oil and chemical spills
• Episodic Emissions
III. Economic growth and the environment?

What are essential factors to economic


growth?
Factors Essential to Economic Growth?

²Human resources
²Natural resources
²Physical capital
²Absorptive Capacity of the environment
The drivers of environmental
impact
The environmental impact of economic activity can be
looked at in terms of:

• extractions from the environment


• insertions into the environment
The immediate determinants of the
total level of impact are:
In either case,
• the size of the human population and
• the per capita impact.

The per capita impact depends on:

• how much each individual consumes, and


• the technology of production.
The IPAT identity

• A simple but useful way to start thinking about what drives


the sizes of the economy’s impacts on the environment.
• It can be formalized as the IPAT identity:

I = P×A×T
I: impact, measured as mass or volume
P: population size
A: per capita affluence, in currency units
T: technology, amount of the resource used or waste generated per unit production
The IPAT identity
• Measure impact in terms of mass
• Use GDP for national income.
• Then T is resource or waste per unit GDP.

Then for the resource extraction case, we have:

GDP Resource Use


I ≡ P× ×
P GDP

A T
• https://www.youtube.com/watch?
v=KOaS2vTLeeA&t=204s

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