Download 1. dia

part one
The Basics of
Environmental Economics
George Horváth
Building Q, room A235.
[email protected]
What is environmental
economics?
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
• It is a social science, focussing on the
relationship and interactions of society and
environment
• It employs many concepts from „regular”
economics:
– the theoretic principles (like in externalities)
– and methodology (such as marginal analysis)
• It complements „regular” economics with
interdisciplinary approach (ecology,
environment and chemistry)
How it all began…
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
• In the 1920s, Arthur Cecil
Pigou explored the
relationship between
pollution and economic
externalities
• The school of welfare
economics enabled him to
Arthur Cecil Pigou
investigate environmental
(1877-1959)
problems regularly
• As the questions about the environment grew in
numbers, the area outgrew the „capacities of
microeconomics”
The rivals of
environmental economics
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
• Libertarian school of economics: there is no
need for an extraordinary analysis of
environmental relationships; all we need is to
define ownership rights accurately, and the
markets will do everything
– Really? How?
• Ecological economics: we need to unify the
principles of ecology and economics, and we
need to stress the ecological constraints
– Are these compatible, though?
What are we trying to investigate?
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
• We are trying to understand and describe the
occurrences and processes of pollution and the use of
environmental resources, using the concepts of
economics
– What’s going on?
• We’re trying to discover where the „rules of play of the
economy” are imperfect in treating environmental
resources
– What’s causing it?
• We’re trying to devise alternatives to optimalise the
relationship between the economy and the
environment
– What needs to be changed?
Things we need to pay attention
to
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
• We need to use the precise terminology
– so that we mean what we say
• We need to separate facts from opinions
• We need to distinguish between
consecutive events and cause-andeffect events
– the fallacy of „post hoc ergo propter hoc”
Is everything going like we think it is?
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
• Our economies were booming before the
crisis; the economies expanded by several
percentage points per year
• When the economic crisis broke out, our
economies started contracting, causing havoc
• Is economic growth good for us?
• Does economic growth make us
richer/happier/better?
• Why are our economies growth-orientated,
then?
… in short: no!
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
• Growth may bring more economic wealth, but
the richer we get, the less our sense of
welfare increases
• When our economies started contracting,
signs of rationalisation showed up.
• Economic growth in itself is not good for us
– In fact, some scientists have come up with the idea
that zero growth is ideal
• Our economies are growth oriented,
because… uhm… well…
– Does anybody know?
More about this later.
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
The most important milestones of
environmental economics – part one
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
•
•
•
•
Rachel Carson (1962) – Silent Spring
Foundation of the Club of Rome (1968)
Appeal from UN Sec.-Gen. U Thant (1969)
USA: Earth Day, establishment of EPA, Clean
Air Act (1970)
• UN conference on the human environment
(1972)
• „The Limits to Growth” (MIT, 1972)
• Leontief’s World Model (1973)
Rachel Carson – Silent Spring (1962)
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
• An American marine
biologist, writing about
the adverse effects of
DDT
• Her work is fiction, but it
is based on scientific
facts
• Points the limelight at
the severity of
environmental
problems
Rachel Carson
(1907-1964)
The Limits to Growth (1972)
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
• Aim: to draw the attention of governments and
international organisations by focussing on
and investigating a global problem, ie. a
particular threat to humanity.
Research (1900-1970)
•
•
•
•
•
Outcome
Population
If the current trends in
economic growth persist, we
Industrial
will reach the limits to growth
Food production
by the end of the 21st Century.
Pollution
Depletion of natural
resources
Recommendation: Zero growth
Leontief’s World Model (1973)
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
• The UN was seeking the relationships
between its development strategy and the
problems with the environment
• Research into
– how ecological factors influence economic growth
– how good the international development strategies
are
• Hypothesis:
– Pollution and environmental protection can be dealt
with technically, but it’s rather costly
The most important milestones of
environmental economics – part two
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
• UN establishes the „Brundtland Commission” (19841987)
• Montréal Protocol on the protection of the ozone layer
(1987)
• Brundtland Commission publishes its report: Our
Common Future (1987)
• UN’s Rio Conference (1992) on the environment and
development
• Kyoto Summit (1997)
• Johannesburg Summit (2002)
• Copenhagen Summit (2009)
The Brundtland Commission (1984-1987)
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
Aim:
• To investigate the critical aspects of environmental
protection and development, and a realistic
proposition to solve the issues
• Recommendation on forms of international
cooperation
• Initiation of programmes improving environmental
sensitivity and readiness to take action
Results:
• Mapping of environment and development until 2000,
while developing a global strategy for the period after
that
And now for something
completely different
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
The principles of environmental and
ecological economics
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
• But before we begin:
– what IS the „environment”?
What do we call „environment”?
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
• When we say „environment”, we usually
mean the natural environment
– Vernacular approach
– This also includes living and non-living things
• Built-up environment
– Created by human beings
How can we define „environment”?
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
• It’s the part of the world surrounding
human beings where humans live and
act.
What does our environment consist
of?
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
… or perhaps not.
The „spheres” of our environment
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
• Biosphere:
– „the place on Earth's surface where life
dwells” (Eduard Suess, 1875)
• Lithosphere – the Earth’s crust
• Hydrosphere – the waters of Earth
• Atmosphere – the air on Earth
The macroeconomic problems of
environmental economics
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
• Economic growth
• Scarcity
• Indicators
Economic growth
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
• Growth-oriented economies increase the
demand of natural resources
• Growth produces additional resources needed
for social welfare…
BUT
• It increases the demand for natural resources,
whilst causing pollution
• These adverse effects may over-compensate
the direct economic benefits
– ie.: we may end up worse off than before!
The debate about economic growth
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
• Malthus (1798) claimed that famine is
inevitable, because we cannot feed an
exponentially growing population from a
limited amount of land
• Meadows et al: The Limits to Growth
• Ecological economists:
– Growth is undesirable, the aim is development
– See also: Herman Daly’s „Steady State Economics”
The perspectives of economic growth
• Growth is unacceptable, and is morally wrong
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
– immaterialists, eg. Schumacher and Daly
• Growth is impossible on the long run
– pessimists, eg. Meadows et al
• Growth and technological advancement go hand in
hand, thus the quality of the environment improves
over time
– technocrats
• Growth and environmental deterioration is
unavoidable, unstoppable
– opportunists
• Growth is necessary for the funding of environmental
protection
– optimists
Economic growth and the
environment
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
Fundamental explanatory principles:
• Population growth and the increase in percapita consumption increase the demand for
natural resources, whilst increasing the level
of pollution
• The technological advancements required for
economic growth decrease the relative use of
natural resources, and therefore, pollution
(see: Solow’s growth theorem)
• What is the resultant outcome of these two,
opposing thoughts?
The outcome:
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
• If we take the ecological footprint into
consideration, a larger GDP will mean
more pollution
• If we take the environmental
performance index into consideration, a
larger GDP will mean less pollution
Is there a solution, then?
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
• Economic prosperity and the use of raw
materials must be de-coupled
– Greater welfare with constant or decreasing material
use
• Possible solutions
–
–
–
–
Produce less (towards „Zero growth”)
Produce less waste (cleaner technologies)
Recycle more (…and also, re-use more)
Growth in services and in low raw-material intensive
sectors only
That’s it for today!
• About the course
• Introduction
• Historical
background
• The principles of
environmental
and ecological
economics
See you next week!