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    Lecture 2. Environmental Policy

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    Lecture 2. Environmental Policy

    Uploaded by

    anmolsinghvirk15
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    1 views24 pages

    Lecture 2. Environmental Policy

    Uploaded by

    anmolsinghvirk15

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 24

    Lecture 2: Economics of

    the Environment

    Topic 2. The Environment

    BS1113 Applied Topics in Economics


    Dr Maria Kozlovskaya
    Is the World Economy Sustainable?
    Humanity has transgressed at least
    4 out of 9 planetary boundaries:

    • Climate change
    • Nitrogen & phosphorous loading
    • Land conversion
    • Biodiversity loss

    All of them have to do with


    pollution, or excessive resource use
    Climate Change?
    Costs and Benefits of Environmental Policies

    • Everyone would like a cleaner environment.


    – Not everyone agrees on how much we should pay for it.

    • All environmental policies have a cost:


    – Increasing energy bills
    – Higher prices for “green” products

    • An economist’s job is to assess the costs and benefits of various


    environmental policies.
    The Economy and the Environment
    The environment is part of the
    firms households economy’s circular flow.
    Goods and services
    It is used in three ways:
    Factor services • Amenity to be enjoyed
    Waste • Source of primary goods
    (food, raw materials etc.)
    Amenity
    Resources • Place to dump waste
    value

    environment
    Source of Primary Goods
    Source of primary products - fast fashion

    • Takes 10,000 litres of water to


    cultivate one kg of raw cotton

    • Synthetic fibres such as polyester


    are derived from oil

    • Aral Sea
    Amenity
    Dump for Waste
    Population Pressure and Limited Resources

    • Land and other finite resources are “fixed factors of production”:


    – their amount is unchanged as world population grows
    – Population trebled between 1950 and 2010
    – Diminishing returns to labor ought to occur

    • The same amount of land needs to feed more people


    → Intensive fertilizer use (increased tenfold between 1950 and 2010)
    → Nitrogen and phosphorous pollution (more than twice the safe speed
    of dumping)
    Can the Market Protect the Environment?
    • Environmental degradation is slowed down by:

    – Technical progress leading to more efficient


    use of resources
    – Increasing prices of scarce resources
    leading to more economical use Safe level (350 ppm)
    – Pressure from the public who are now
    more knowledgeable about environmental
    damage
    • However, those trends are not sufficient to limit
    damage to safe levels (e.g., see CO2 graph)
    Environmental Damage is Market Failure
    • Markets fail to protect the environment because…

    – Environmental degradation is an externality for businesses who cause


    it (they do not directly incur the costs of degradation)
    – Many environmental goods are non-excludable (air, rivers etc.), hence
    there is no charge for their use which leads to over-exploitation
    – Lack of knowledge about the damaging effects of some products
    activities (e.g. aerosols, microplastic)
    – Short-term thinking by firms and consumers (ignoring
    intergenerational effects of environmental degradation)
    Recap: Rivalry and Exclusion

    • A good is rivalrous if only one person can consume it

    • rivalrous: a piece of pizza

    • non-rivalrous: music in the room

    • A good is excludable if others can be prevented from consuming it

    • excludable: a piece of pizza

    • non-excludable: air
    (you can’t prevent people from breathing)
    Quiz: Rivalry and Exclusion
    • SOCRATIVE.COM

    • Student login

    • room name: ASTON2023


    Quiz: Rivalry and Exclusion
    Quiz: Rivalry and Exclusion
    Quiz: Rivalry and Exclusion
    Quiz: Rivalry and Exclusion
    Quiz: Rivalry and Exclusion
    Quiz: Rivalry and Exclusion
    Quiz: Rivalry and Exclusion
    Quiz: Rivalry and Exclusion

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