Download Environmental Economics and Pollution

Welcome to Environmental
and
Natural Resource Economics
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First things first…
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Environmental Econonomics
• The study of choice under conditions of scarcity.
– How can we address environmental problems, given our
limited resources?
• 7.2 billion people on earth (+ 1 billion in next 8
years).
– How can we provide _____ to all?
• Safe drinking water, adequate nutrition, housing,
energy, material needs, etc.
– How can we prevent/reduce further environmental
degradation?
• Pollution, deforestation, species extinction, etc.
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How do we analyze environmental issues?
• An analytical topic, not a moral one.
- Morality is subjective (Economics is not).
• Suppose a regulation to reduce pollution may
be imposed on firms. Jobs would be lost.
• Jackie: “I believe pollution is immoral, so the
regulation should be imposed.”
• Skip: “I believe unemployment is immoral, so
the regulation should not be imposed.”
• Who’s right?
• I am! “Will society be better or worse off with 4
this regulation or a different one?”
Analytical Perspective
• All relevant choices involve some costs and
some benefits.
– Should always consider both before deciding
what to do.
• Something should only be done if it improves
overall well-being of society.
• Will improve overall well-being only if
benefits>costs.
• We should not maximize environmental
quality regardless of consequences to
economy nor maximize economic output
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regardless of consequences to environment.
Benefit/Cost Approach
• Benefits/costs are anthropocentric.
– Does not mean that we only consider direct
usefulness to humans.
– Based on clear notion of the value people
place on things.
• Decision Rule:
– If Marginal Benefits>Marginal Costs it should
be done (it makes economic sense).
• Mastercard is wrong – nothing is
“priceless”. Not even human life!
(but maybe….)
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Baby Panda Bears
• Approximately $10,000,000
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Why “price” environmental attributes?
• Does not mean you can buy it!
• Don’t want people to confuse “not having a
value” with “having no value.”
• Make the value of the environment more
apparent.
• Lots of difficult choices need to be made.
Applying values can help us make better
choices.
– If it’s all “priceless” there’s no way to evaluate
anything.
– Often tradeoffs are involved. We can’t do it all.
– Don’t have unlimited resources to devote to
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protect the environment.
Relevant Topics/Questions
• Nonmarket Valuation
• How much is the potential loss of a human life
worth? Clean water or air? An acre of wetlands? An
entire species? A single sea turtle?
• Should a regulation be imposed which will improve
environmental quality but cost jobs?
• Should a project be allowed which will damage the
environment but create jobs?
• How much should BP have to pay as a result of
spilling 200 million gallons of oil in the Gulf of
Mexico?
Relevant Topics/Questions
• Energy/Natural Resources:
• What is our current energy mix and what are
projections for the future?
• What are the most effective policies to ___ ?
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reduce our dependency on oil
reduce our dependency on foreign oil
reduce our dependency on fossil fuels
reduce the price of energy
reduce the environmental impact of energy
increase the amount domestic energy produced
increase the amount of renewable energy produced
increase the number of domestic jobs associated with
energy production
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Relevant Topics/Questions
• Pollution:
• What is the “efficient” level of pollution?
– The amount of pollution that maximizes net
benefits to society.
• How can we calculate it, and what is the most
cost effective way to get to this level?
• Should a coal fueled plant be allowed to emit
unlimited amounts of carbon dioxide into the
atmosphere?
• Should an individual be allowed to drive a
gasoline powered automobile?
What should we do about ____?
• This class is not about providing answers.
• Whether you and I (or anyone else) agree
with each other is irrelevant.
• It’s about how to objectively analyze complex
issues and to help inform decision making.
• Remember this for your paper…
• What could be done?
• What should be done?
• Why?
• See you Thursday!