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Lecture 1 (1)

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46 views18 pages

Lecture 1 (1)

Uploaded by

Lan Anh
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© © All Rights Reserved
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NATURAL RESOURCES &

ENVIRONMENTAL ECONOMICS
AND MANAGEMENT
Course Introduction
Textbooks (Optional)

• Ahmed M. Hussen, Principles of Environmental Economics


(2000), Routledge
• Field B. & Olewiler N. (2005), Environmental Economics,
McGraw-Hill Ryerson Higher Education
• Tietenberg, Tom. Environmental and Natural Resource
Economics. Fifth Edition, Reading, Massachusetts: Addison
Wesley Longman, Inc., 2000
• Nguyễn Mậu Dũng (2009), Kinh tế Môi trường, Nhà xuất bản
ĐH Nông nghiệp
• Lê Thu Hoa & Nguyễn Thế Chinh (2023), Kinh tế và Quản lý
Môi trường, Nhà xuất bản ĐH KTQD
• Class notes.
Test and exam
• Tests will be given in class
• Final exam will be given during the normally
scheduled final examination time.
• Homeworks if any must be turned in on the
assigned date. I do not give make-up
examinations.

4
What is Economics?

• Economics – the study of


how to make trade-offs; the
science of the allocation of
scarce resources.

• Environmental Economics:
the study of trade-offs
between environmental
services and preservation
and other economic and
social activities.

5
Trade-offs occur at every geographic scale

We are experiencing losses of habitat and


the destruction of many renewable
resources including:
– Many of our most important global fisheries.
– Massive losses of tropical forests.
– Rapid die-off of coral reefs.
– Extensive losses of wetlands.
– Conversion of grasslands and other ecosystems to
desert at a fast rate.

6
Why Study Environmental and Resource
Economics?
• Study of natural sciences is not sufficient to
completely analyze problem because these
sciences do not include human behavior.
• The Economics of the Environment has a number of
special features that are not typical of many
economic problems:
– Optimal allocation of environmental resources has implications
for future choice.
– Many decisions regarding environmental resources are
irreversible.
– Market failure is an important characteristic of many
environmental issues.
– Optimal allocation requires understanding the whole ecological
system and how it responds to changes in both ecological and
economic systems.

7
What Is about?
How to use economic principles to better manage the
environment , natural resources and the economy.
Guiding principles
• Anthropocentric emphasis—human concern for and
benefits from nature justifies policy intervention.
• Interdisciplinary emphasis—scientific knowledge
becomes part of the input to the economic analysis.
• Policy emphasis—market failures cause pollution control
and environmental conservation policies.
• Issue orientation.
Major Issues and Problems

• Pollution control—carrot sticks awareness guilt


• Valuation of environmental amenities.
• Conservation policies and environmental protection.
• Natural resources uses.
• Climate change.
• Sustainability of endangered species.
• Risk management.
Course Introduction and Objectives
• The aim of the course is to explore the economic basis of
environmental and natural resources issues and policies.
The course content covers the sustainability issues with
emphasis on current generation efficiency and
intergenerational efficiency.
• Economic principles underlying environmental problems
and policy remedies will be discussed. The class examines
property rights, externalities and the common-property
basis of environmental problems.
• Alternative policies are studied, involving such issues as
air and water pollution, solid-waste disposal, hazardous
substances, wilderness preservation and the protection of
endangered species
Some Preconceived notions?
1. Optimal amount of all pollutants is zero
Not so! Given realities of our ability to produce goods and
services, it will often be worthwhile to accept some
pollution
2. Economics and profits are the inherent enemy
of the environment
Not so! If market forces can be harnessed there is potential
to use economics to improve the environment
3. Economists consider only goods and services
that are bought and sold be have value
Not so! Anything people care about has value. The amount
of economic value depends on how much they are willing
to give up of other goods and services in exchange for
the item

11
Economics and the Environment
• Economics- study of how people use
limited resources to satisfy unlimited wants
– Analytical tools include models
Precepts to study Economics

• Economics is utilitarian
– Goods and services have value that can be
converted to currency
• Rational Actor Model
– Assumes all individuals spend limited
resources to maximize individual utilities
• Ideal economy
– Resources are allocated efficiently
Optimum Level of Pollution
• Optimum Level of Pollution
– Cost to society of having less pollution is
offset by benefits (short-term?) to society
of activity creating pollution.
• Must identify
– Marginal Cost of Pollution- Cost of small
additional amount of pollution.
– Marginal Cost of Abatement- Cost of
reducing small amount of pollution.
Economic Optimum Level of Pollution
Private vs Social Cost of Pollution
Strategies for Pollution Control
• Command and Control Solutions
– Government agency requires limitations to
emissions or pollutants
– Discourages development of low-cost
alternatives
– Economists dislike this
• Environmental Taxes/ Tradable Permits
– If taxes are set at correct level private
marginal cost of pollution = social cost of
pollution
– Economists like this
Critiques of Environmental Economics
• Difficult to assess true costs of environmental
pollution and abatement
– Impacts of pollution on people and nature is
uncertain (not anymore!)
– Ecosystem services have no known value
(not quite!)
• Utilitarian economics may not be appropriate
– Dynamic changes and time are not
considered
– Based only on monetary value – what is
monetary value of clean earth? (A better
question: what is the value of a polluted,
damaged Earth?)

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