Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Chapter 5 Environmental Economics and Environmental Policy Essential Environment: The Science Behind the Stories 4th Edition Withgott/Laposata Lecture Presentations prepared by Heidi Marcum © 2012 Pearson Education, Inc. This lecture will help you understand: • Economic theory • Economic growth and health, and sustainability • Environmental and ecological economics • U.S. and international environmental policy • The environmental policy process • Science and policy © 2012 Pearson Education, Inc. Central Case Study: San Diego and Tijuana • Rain washes pollutants into Mexico’s Tijuana River – Then onto U.S and Mexican beaches • A new sewage treatment facility reached capacity – In 3 years • Poor Mexicans suffer most – Contaminated water, disease, industrial waste © 2012 Pearson Education, Inc. Economics • People say protection threatens economic growth – But environmental protection is good for the economy • Economics studies how people use resources to provide goods and services in the face of demand • Environmental problems are also economic problems • Ecology and economics come from oikos (household) • Economy: a social system that converts resources into: – Goods: manufactured materials that are bought, and – Services: work done for others as a form of business © 2012 Pearson Education, Inc. Types of modern economies • Subsistence economy: people get their daily needs directly from nature or their own production – They do not purchase or trade products • Capitalist market economy: buyers and sellers interact to determine prices and production of goods and services • Centrally planned economy: the government determines how to allocate resources • Mixed economy: governments intervene in the market © 2012 Pearson Education, Inc. Governments intervene in a market economy • In mixed market economies, governments intervene to: – Eliminate unfair advantages held by single buyers or sellers – Provide social services (national defense, medical care, education) – Provide safety nets for elderly, disaster victims, etc. – Manage the commons – Reduce pollution and other threats to health and quality of life © 2012 Pearson Education, Inc. The economy relies on the environment • Economies receive inputs (resources) – Process them – Discharge outputs (waste) • Traditional economics ignores the environment – But still drives most policy decisions © 2012 Pearson Education, Inc. Environmental view of economics Human economies are subsets of the environment and depend crucially on it for goods and services © 2012 Pearson Education, Inc. Environmental systems support economies • Economic activity uses natural resources (sun’s energy, water, trees, rocks, fossil fuels) as “goods” • Ecosystem services: essential services support the life that makes economic activities possible * Soil formation * Pollination * Water purification * Nutrient cycling * Climate regulation * Waste recycling © 2012 Pearson Education, Inc. Economic activities affect the environment • Resource depletion and generating pollution reduces the functioning of ecological systems • Degradation of ecosystem services disrupts economies – Pollution depresses economic opportunities • Ecological degradation hurts poor people the most • Restoring ecosystem services is a prime way to alleviate poverty 15 of 24 global ecosystem services are being degraded or used unsustainably © 2012 Pearson Education, Inc. Adam Smith’s “invisible hand” • Adam Smith believed that self-interested behavior could benefit society – If laws were followed and markets were competitive • Classical economics: when people pursue economic self-interest in a competitive marketplace … – The market is guided by an “invisible hand” and … – Society benefits • This idea is a pillar of free-market thought today © 2012 Pearson Education, Inc. Neoclassical economics includes psychology • Neoclassical economics examines the psychological factors that underlie consumer choices • Market prices reflect consumer preference – Supply vs. demand • Conflict between buyers and sellers leads to …. – Production of the “right” quantities of a product © 2012 Pearson Education, Inc. Cost-benefit analysis: evaluating decisions • Cost-benefit analysis: costs of a proposed action are compared to benefits that result from the action – If benefits > costs: pursue the action • But not all costs and benefits can be easily identified, defined, or quantified – It is easy to quantify the cost of pollution-reducing equipment or jobs created by an activity – But hard to assess the effects of pollution on health • Monetary benefits are overrepresented – Analysis is biased in favor of economic development – Biased against environmental protection © 2012 Pearson Education, Inc. Neoclassical economics hurts the environment • Capitalist market systems operate according to neoclassical economics – Enormous material wealth has been created • Assumptions of neoclassical economics contribute to environmental degradation: – Resources are infinite or substitutable – We should discount the future – All costs and benefits are internal – All growth is good © 2012 Pearson Education, Inc. Assumption: resources are infinite • Economic models treat resources and workers as infinite, substitutable, and interchangeable – Once used up, a replacement resource will be found • Some resources can be replaced but some cannot – Nonrenewable resources (fossil fuels) can be depleted – Renewable resources (forests) can also be used up © 2012 Pearson Education, Inc. Assumption: discount long-term effects • A future event has less value than a present one • Future events are discounted: – Short-term costs and benefits are more important than long-term costs and benefits – Present conditions are more important than future ones • We ignore the long-term consequences of policy decisions • Environmental problems unfold gradually – Discounting causes us to downplay environmental impacts of pollution and resource degradation © 2012 Pearson Education, Inc. Assumption: costs and benefits are internal • Only the buyer and seller experience costs and benefits associated with exchanging goods or services – Pricing ignores social, environmental, or economic costs of pollution and degradation – Taxpayers bear the burden of paying these costs • External costs: affect people other than buyers or sellers – Health problems, resource depletion, property damage • Ignoring external costs creates a false impression of the consequences of choices • Laws and regulations address external costs © 2012 Pearson Education, Inc. People suffer from external costs People who do not participate in a transaction suffer from external costs (health problems, property and aesthetic damage, stress, lower real estate values) © 2012 Pearson Education, Inc. Assumption: all growth is good • Economic growth is needed to keep jobs and social order – It creates opportunities for poor to become wealthier – Progress is measured by economic growth • But economic growth does not ensure well-being – Affluenza: material goods do not always bring contentment to those who can afford them • Runaway growth can destroy our economic system – Resources are ultimately limited © 2012 Pearson Education, Inc. We live in a growth-oriented economy • Modern global economic growth is unprecedented – Americans are in a frenzy of consumption • Economic growth comes from: – Increased inputs (labor, natural resources) – Economic development: improved efficiency of production (technology, ideas, equipment) • Uncontrolled economic growth is unsustainable – Technology can push back limits, but not forever – Resources are finite or have limited rates of extraction © 2012 Pearson Education, Inc. Is the growth paradigm good for us? The dramatic rise in per-person consumption has severe environmental consequences © 2012 Pearson Education, Inc. Ecological economics • Ecological economics: civilizations cannot overcome environmental limitations – Uses principles of ecology and systems science – Natural systems are models for sustainability – Calls for revolution • Ecological economists advocate steady-state economies: – Economies that mirror natural ecological systems – They don’t grow nor shrink but stay stable • Quality of life increases through technological and behavioral changes © 2012 Pearson Education, Inc. Environmental economics • Environmental economics: unsustainable economies have high population growth and inefficient resource use – We can attain sustainability within current economic systems – Calls for reform • Economies grow by modifying neoclassical economics to increase efficiency through technology • Environmental economists assign monetary values to ecosystem goods and services – Integrating them into traditional cost-benefit analysis © 2012 Pearson Education, Inc. Valuing ecosystem goods and services • The market ignores/undervalues ecosystem services • Nonmarket values: values (e.g., ecological, cultural, spiritual) not included in the price of a good or service – Hard to quantify, since there is no traditional measure of economic worth Natural cycles are vital to our existence but markets impose no penalties when we disturb them © 2012 Pearson Education, Inc. How do we quantify an ecosystem’s value? • Surveys determine how much people are willing to pay to protect or restore a resource • Measure the money, time, or effort expended to travel to parks for recreation • Compare housing prices in different areas to infer the dollar value of landscapes, views, and peace and quiet • Measure the cost to restore natural systems, replace systems with technology, or reduce harm from pollution © 2012 Pearson Education, Inc. The global value of ecosystem services • The global economic value of 17 ecosystem services equals $46 trillion – More than the GDP of all nations combined Protecting land gives 100 times more value than converting it to agriculture, logging, or fish farming © 2012 Pearson Education, Inc. Businesses are responding to concerns • Industries, businesses, and corporations make money by “greening” their operations • Recycling, cutting energy use, etc., reduces costs, and increases profits • Greenwashing: consumers are misled into thinking companies are acting more sustainably than they are – Example: “Pure” bottled water may not be safer or better People must support sustainable economics © 2012 Pearson Education, Inc. Markets can fail • Market failure occurs when markets ignore: – The environment’s positive impacts on economies (ecosystem services) – The negative effects of activities on the environment or people (external costs) • Government intervention counters market failure through: – Laws and regulations – Taxing harmful activities – Designing economic incentives to promote fairness, conservation, and sustainability © 2012 Pearson Education, Inc. Environmental policy • Once society agrees that a problem exists, it may persuade its leaders to solve it through policy • Policy: a formal set of general plans and principles to address problems and guide decision making • Public policy: governmental laws, regulations, orders, incentives, and practices to advance societal welfare • Environmental policy: pertains to human interactions with the environment – Regulates resource use or reduces pollution – To promote human welfare and/or protect resources © 2012 Pearson Education, Inc. Policy impacts environmental problems • Science, ethics, and economics help formulate policy – Science: provides information and analysis – Ethics and economics: clarify how society can address problems • Government interacts with – Citizens, organizations, and the private sector © 2012 Pearson Education, Inc. Policies prevent the tragedy of the commons • Capitalist markets are driven by short-term profit – Not long-term social or environmental stability – Little incentive to minimize impacts – Market failure justifies government intervention • Environmental policy tries to protect environmental quality and natural resources – While promoting equity or fairness in resource use • Tragedy of the commons: commonly held resources will become overused and degraded – Best prevented by restriction of use and management © 2012 Pearson Education, Inc. Environmental policies prevent free riders and external costs • Free riders: people are tempted to cheat and not participate in sacrificing to protect the environment – An entity gets a “free ride” by avoiding sacrifices made by others – Private voluntary efforts are less effective than public policies, where everyone sacrifices • Environmental policies also promote fairness by eliminating external costs – Policies ensure that parties do not use resources in ways that harm others © 2012 Pearson Education, Inc. Framework of U.S. environmental policy • The U.S. is a good model to understand environmental policy – It has pioneered innovative policies – Its policies serve as models for other countries – Understanding federal policy helps us understand it at local, state, and international levels • Congress passes legislation (statutory law) – It is signed into law by the president • Laws are implemented and executed by agencies – Regulations: specific rules to achieve objectives of broadly written statutory laws © 2012 Pearson Education, Inc. State and local governmental policies • The structure of the federal government is mirrored at the state level • But state laws cannot violate principles of the U.S. Constitution – If laws conflict, federal laws take precedence • California, New York, New Jersey, and Massachusetts have strong environmental laws – Well-funded agencies – Citizens value protecting the environment © 2012 Pearson Education, Inc. Early U.S. environmental policy • From 1780s to the late 1800s, laws promoted settlement and extraction of resources • General Land Ordinances of 1785 and 1787: encouraged people to move west – The federal government managed unsettled lands – Surveying and readying them for sale • Settlement increased prosperity for citizens – Relieved crowding in eastern cities – Displaced millions of Native Americans • People believed the land was infinite and inexhaustible © 2012 Pearson Education, Inc. Typical laws from the 1780s to late 1800s • Homestead Act (1862): anyone could buy or settle on 160 acres of public land Insert Fig. 5.10a © 2012 Pearson Education, Inc. Typical laws from the 1780s to late 1800s • General Mining Act (1872): people could mine on public land for $5/acre with no government oversight © 2012 Pearson Education, Inc. Typical laws from the 1780s to late 1800s • Timber Culture Act (1873): encouraged the timber industry to clear-cut ancient trees with little government policy to limit logging or encourage conservation © 2012 Pearson Education, Inc. The second wave of U.S. policy • Public perception and government policy shifted – Laws addressed problems caused by westward expansion and encouraged conservation • Congress created Yellowstone National Park, the world’s first national park, in 1872 – Also, national parks, forests, and wildlife refuges • Understood that the nation’s resources were exhaustible – They required legal protection • Land management policies addressed soil conservation • The 1964 Wilderness Act preserves pristine land © 2012 Pearson Education, Inc. The third wave of U.S. environmental policy • In the 20th century, people were better off economically – But lived with dirtier air, dirtier water, and more waste and toxic chemicals • Events increased awareness of environmental problems and shifted public priorities and policies Rachel Carson’s Silent Spring (1962) described the ecological and health effects of pesticides and chemicals © 2012 Pearson Education, Inc. Modern U.S. environmental policy • Ohio’s Cuyahoga River was so polluted that it caught fire in the 1950s and 1960s – The public demanded more environmental protection Today, U.S. health is better protected and the air and water are cleaner mainly because of policies of the 1960s © 2012 Pearson Education, Inc. The National Environmental Policy Act (1970) • NEPA began the modern era of environmental policy – It created the Council on Environmental Quality • Requires an Environmental Impact Statement (EIS) – For any federal action that might significantly impact the environment – To assess the environmental impacts of any federallyfunded project • An EIS usually does not halt projects – Provides incentives to decrease damage – Grants citizens input into the policy process © 2012 Pearson Education, Inc. The EPA shifts environmental policy • In 1970, President Nixon’s executive order created the Environmental Protection Agency (EPA) – To develop an integrated approach to environmental policy • The EPA: – – – – – Conducts and evaluates research Monitors environmental quality Sets and enforces standards for pollution levels Assists states in meeting standards and goals Educates the public © 2012 Pearson Education, Inc. Significant environmental laws • The public demanded a cleaner environment – Environmental problems needed tough regulations Thousands of laws protect health and environmental quality in the U.S. © 2012 Pearson Education, Inc. Environmental policy changes over time • Major advances in environmental policy in the 1960s and 1970s occurred because: – Strong evidence of environmental problems existed – People could visualize policies to deal with problems – The political climate was ripe, with a supportive public and leaders who were willing to act • Pictures of Earth from space made us aware that our planet was finite © 2012 Pearson Education, Inc. Many reacted against regulation • By 1990, many felt that regulations were too strict – Imposed economic burdens on people and businesses • George W. Bush and the Republican-controlled Congresses (1994–2006) tried to weaken laws • “The Death of Environmentalism” (2004): the environmental movement has to be reinvented – It must appeal to core values with an inspiring vision • This new outlook helped elect President Obama in 2008 © 2012 Pearson Education, Inc. Current environmental policy • Other nations have increased attention to issues – The 1992 Earth Summit in Rio de Janeiro, Brazil – The 2002 World Summit on Sustainable Development in Johannesburg, South Africa • This wave of policy focuses on sustainability – Safeguarding ecosystems while raising living standards Climate change dominates discussion on environmental policy © 2012 Pearson Education, Inc. International environmental policy • International law is vital to solving transboundary issues • Customary law: international law arising from longstanding practices or customs held by most cultures • Conventional law: arises from conventions or treaties – Montreal Protocol (1987): 160 nations agreed to reduce ozone-depleting chemicals – Kyoto Protocol: reduces greenhouse gas emissions causing climate change • North American Free Trade Agreement (NAFTA): – Addresses U.S.–Mexico issues © 2012 Pearson Education, Inc. Organizations shape international policy • International organizations influence nations through: – Funding, economic or political pressure, and media attention • United Nations (UN): plays an active role in policy – Sponsors conferences, coordinates treaties, publishes research • UNEP (United Nations Environment Programme) promotes sustainability – Research, outreach activities – Provides information to policymakers and scientists © 2012 Pearson Education, Inc. The World Bank and European Union • The World Bank: one of the largest funding sources for economic development in poor countries – Dams, irrigation, infrastructure, etc. – Funds unsustainable, environmentally damaging projects • The European Union (EU) seeks to promote Europe’s unity and its economic and social progress – Can sign binding treaties and enact regulations – Sees environmental regulations as barriers to trade © 2012 Pearson Education, Inc. The World Trade Organization (WTO) • Represents multinational corporations – Promotes free trade • Can impose penalties on nations that don’t comply with its directives • Interprets environmental laws as unfair barriers to trade – Brazil and Venezuela filed a complaint against U.S. regulations requiring cleaner-burning fuel – The WTO agreed with Brazil and Venezuela, despite threats to human health • Critics charge the WTO aggravates environmental problems © 2012 Pearson Education, Inc. International treaties can weaken protection • International treaties allow industries and corporations to weaken environmental protection laws – They see laws as barriers to trade • Under NAFTA, investors can sue a country for lost profits – Canada sued the U.S. for $300 million for banning beef after finding mad cow disease in Canada cows – Canada sued the U.S. for $1 billion for banning MTBE, a dangerous gasoline additive – The U.S. forced Mexico to pay $16 million and reopen a toxic waste dump © 2012 Pearson Education, Inc. NGOs • Nongovernmental organizations (NGOs): entities that influence international policy • Some do not get politically involved – Example: The Nature Conservancy • Others try to shape policy through research, education, lobbying, or protest – Example: Conservation International, the World Wide Fund for Nature, Greenpeace, Population Connection © 2012 Pearson Education, Inc. Seven steps to making environmental policy • Theoretically, in the U.S., everyone has a voice and can make a difference – But money wields influence – Some people and organizations are more influential than others • Creating environmental policy has several steps – Requires initiative, dedication, and the support of many people © 2012 Pearson Education, Inc. Step 1: Identify a problem • Requires scientific inquiry and data collection © 2012 Pearson Education, Inc. Step 2: Pinpoint causes of the problem • Involves scientific research © 2012 Pearson Education, Inc. Step 3: Envision a solution • Science plays a vital role here, too • Solutions also require social or political action © 2012 Pearson Education, Inc. Step 4: Get organized • Organizations are more effective than individuals – But a motivated, informed individual can also succeed © 2012 Pearson Education, Inc. Step 5: Cultivate access and influence • People gain access to policymakers and influence them through lobbying and campaign contributions – Professional lobbyists are employed by businesses and organizations – Anyone can donate money to a candidate © 2012 Pearson Education, Inc. Step 6: Shepherd the solution into law • Prepare a bill, or draft law, containing solutions • Find members of the House and Senate to introduce the bill and shepherd it through committees • The bill may become law or die in various ways © 2012 Pearson Education, Inc. How a bill becomes law Before a bill becomes law, it must clear multiple hurdles © 2012 Pearson Education, Inc. Step 7: Implement, assess, and interpret policy • Following a law’s enactment – Administrative agencies implement regulations – Policymakers evaluate the policy’s successes or failures – The courts interpret the law © 2012 Pearson Education, Inc. Science plays a role, but can be politicized • A nation’s strength depends on proper use of science – Governments use some tax money to fund research • Sometimes policymakers let ideology determine policy – Politicians ignore scientists and mislead the public – Government scientists have had their work censored, suppressed, or edited and their jobs threatened – Unqualified people are put into powerful positions • Scientifically literate citizens must ensure that our government uses proper use of science When taxpayer-funded research is suppressed or distorted for political ends, everyone loses © 2012 Pearson Education, Inc. Three major types of policy approaches • Environmental policy has 3 major approaches: – Lawsuits – Command-and-control – Economic policy tools © 2012 Pearson Education, Inc. Strategy: lawsuits in the courts • Before legislation, lawsuits addressed U.S. policy issues – Individuals suffering from pollution sued polluters in court – Courts make polluters stop or pay fines • Industrialization and population growth made it harder to control pollution – Also, justices were reluctant to hinder industry • People saw legislation and regulation as more effective in protecting health and safety © 2012 Pearson Education, Inc. Strategy: command and control • Command-and-control approach: a regulating agency prohibits actions, or sets rules or limits – Threatening punishment for violators • This is the approach used for most environmental laws and regulations enforced by agencies today • This simple approach has worked well – It brings cleaner air, water, safer workplaces, and healthier neighborhoods © 2012 Pearson Education, Inc. Strategy: economic policy tools • People don’t like the top-down approaches that dictate particular solutions to problems • Alternative approaches channel innovation and economic policies to benefit the public: – Promote desired, and discourage undesired, outcomes – Encourage market competition to produce new solutions at lower cost • Strategies include: – Green taxes, subsidies, permit trading, and ecolabeling © 2012 Pearson Education, Inc. Green taxes discourage unsustainability • Governments use taxes to benefit the public – Internalizing harmful external costs makes them part of the cost of doing business • Green taxes: tax environmentally harmful activities and products – Businesses reimburse the public for damage they cause – The more pollution, the higher the tax payment • Companies have financial incentives to reduce pollution with freedom to decide how to do so – But costs are passed on to consumers © 2012 Pearson Education, Inc. Who should pay for pollution? • Green taxes are not widely supported in the U.S. – Other “sin taxes” (e.g., on cigarettes and alcohol) are tools of U.S. social policy • Polluter-pays principle: the party that pollutes is held responsible for covering the costs of its impacts – Widely used in Europe • Carbon taxes: controversial taxes on gasoline, coal-based electricity, and other fossil fuels – Used to fight climate change © 2012 Pearson Education, Inc. Subsidies promote certain activities • Subsidy: a government giveaway of cash or resources to encourage a particular industry or activity – Tax break: helps an entity by relieving its tax burden • Subsidies can promote sustainability, but they have been used to support unsustainable activities • The U.S. subsidizes logging, grazing, and mining – Benefits private parties while degrading publically held resources • Nations give $1.45 trillion per year in harmful subsidies U.S. fossil fuel companies received $72 billion taxpayer money (2002–2008)—renewable energy received $29 billion © 2012 Pearson Education, Inc. Permit trading saves money • Permit trading: a government-created market in permits for an environmentally harmful activity – Businesses buy, sell, or trade these permits • Cap-and-trade emissions trading system: the government sets pollution levels (“caps”) – Permits let polluters emit some amount of pollution • Polluters can exchange (sell) permits – The government can set lower emission levels • Companies have an economic incentive to reduce emissions © 2012 Pearson Education, Inc. A cap-and-trade system for air pollution • One U.S. cap-and-trade system decreased sulfur dioxide emissions • Cuts were obtained more cheaply than expected – With no effects on electricity supply or economic growth • Billions of dollars per year are saved – Benefits outweigh costs 40 to 1 © 2012 Pearson Education, Inc. Ecolabeling empowers consumers • Uses the marketplace to counteract market failures • Ecolabeling: tells consumers which brands use environmentally benign processes – Dolphin-safe tuna, labeling recycled paper, etc. Ecolabeling is a powerful incentive for businesses to change © 2012 Pearson Education, Inc. Market incentives work at the local level • Municipalities charge residents for waste disposal – According to the amount of waste generated • Cities tax disposal of costly items (tires, motor oil) • Some cities give rebates for buying water-efficient appliances • Power utilities give discounts to those buying efficient lightbulbs and appliances – It is cheaper than expanding generating capacity © 2012 Pearson Education, Inc. Conclusion • Environmental policy is a problem-solving tool – It uses science, ethics, and economics • Conventional command-and-control approach uses legislation and regulations to make policy – It is the most common approach – Innovative economic policy tools are being developed • Environmental and ecological economists quantify the value of ecosystem services • Economic well-being does not need a trade-off with environmental quality © 2012 Pearson Education, Inc.