Download The Environmental Problem The environmental problem The

If it's Good for the Environment,
is it Bad for the Economy?
The
Environmental
Problem
The environmental problem
The environmental problem
Use
of the environment as:

an amenity

a source of primary products

a dump for waste
The economy and the environment
Labour
Goods and services
Resources
Waste
Amenity value
(Clipart for the environment: e.g. countryside scene)
The environmental problem
The environmental problem
Use
of the environment as:

an amenity

a source of primary products

a dump for waste
The environmental problem
The environmental problem
Use
of the environment as:

an amenity

a source of primary products

a dump for waste
Conflicts
between these uses
The environmental problem
The environmental problem
Use
of the environment as:

an amenity

a source of primary products

a dump for waste
Conflicts

between these uses
productive resource v. amenity value
The environmental problem
The environmental problem
Use
of the environment as:

an amenity

a source of primary products

a dump for waste
Conflicts
between these uses

productive resource v. amenity value

dump for waste v. amenity value
The environmental problem
The environmental problem
Use
of the environment as:

an amenity

a source of primary products

a dump for waste
Conflicts
between these uses

productive resource v. amenity value

dump for waste v. amenity value

dump for waste v. productive resource
The environmental problem
Population
pressure / limited resources
Problem of diminishing returns
 Absorptive capacity of
environment
 Accelerated degradation

Environmental damage
Accelerating environmental damage
O
W1
Waste
Accelerating environmental damage
Environmental damage
Total
damage
O
W1
Waste
The environmental problem
Population
pressure / limited resources
Problem of diminishing returns
 Absorptive capacity of
environment
 Accelerated degradation

Cause
for optimism?
The environmental problem
Population
pressure / limited resources
Problem of diminishing returns
 Absorptive capacity of
environment
 Accelerated degradation

Cause

for optimism?
Increased price of non-renewables
The environmental problem
Population
pressure / limited resources
Problem of diminishing returns
 Absorptive capacity of
environment
 Accelerated degradation

Cause
for optimism?
Increased price of non-renewables
 Technological developments

The environmental problem
Population
pressure / limited resources
Problem of diminishing returns
 Absorptive capacity of
environment
 Accelerated degradation

Cause
for optimism?
Increased price of non-renewables
 Technological developments
 Public opinion

The environmental problem
Population
pressure / limited resources
Problem of diminishing returns
 Absorptive capacity of
environment
 Accelerated degradation

Cause
for optimism?
Increased price of non-renewables
 Technological developments
 Public opinion
 Green business

The environmental problem
Population
pressure / limited resources
Problem of diminishing returns
 Absorptive capacity of
environment
 Accelerated degradation

Cause
for optimism?
Increased price of non-renewables
 Technological developments
 Public opinion
 Green business
 Government action

The environmental problem
Population
pressure / limited resources
Problem of diminishing returns
 Absorptive capacity of
environment
 Accelerated degradation

Cause
for optimism?
Increased price of non-renewables
 Technological developments
 Public opinion
 Green business
 Government action
 BUT growing damage

The OECD environmental 'traffic lights'
PRESSURES
ON THE
ENVIRONMENT
• Industrial point source
pollution
• Some air pollutants
(lead, CFCs, CO, SOx)
• Water use
• Toxic emissions from
industry
• Hazardous waste
generation
• Energy production and use
• Agricultural pollution
• Over-fishing
• Greenhouse gas emissions
• Motor vehicle and aviation air
pollution emissions
• Municipal waste generation
STATE OF THE
ENVIRONMENT
• Forest coverage in
OECD regions
• Surface water quality
• Forest quality in OECD
regions
• Ozone layer integrity
• Biodiversity
• Tropical forest coverage
• Fish stocks
• Groundwater quality
• Urban air quality
• Climate change
• Chemicals in the environment
RESPONSES
• ‘Green’ purchasing
• ‘Green’ agriculture
• Protected areas
• Resource efficiency
• Energy efficiency
• Biotechnology
• Forest plantations
• Aquaculture
• Energy and transport
technologies
• Waste management
Source Environmental Outlook (OECD, 2002)
Increase in car ownership
Cars per thousand population
600
USA
500
Germany
W Germany
Sweden
Belgium
400
UK
Spain
300
200
1980 1982 1984
1986 1988 1990 1992 1994
1996 1998 2000
Energy and Transport in Figures (EC, 2002); Federal Highway Administration: http://www.fhwa.dot.gov/ohim/qfvehicles.htm
An Optimum
Use of the
Environment
An optimum use of the environment
Different approaches to sustainability
The

Prices reflect scarcity of resources
The

conservationist approach
Care for environment for its own sake: importance of
sustainable development
The

social efficiency approach
Market failures: can be corrected
The

free-market approach
Gaia approach
Deep green approach:
environment has rights
Optimum level of an activity that involves pollution
MSC
Marginal
pollution
externality
Costs and benefits (£)
MSC1
S = MPC
Gaia
maximum
output
MPC1
D = MSB
Socially
Conservationist
approach
efficient
output
O
Q4
Q3
Output of good
Q2
Q1
Free-market
outcome
Market
Failures
Market failures
Environment as a public good
The
global ‘commons’
Features of a public good


Non-excludability
BUT rivalry
Over
use at a zero price
Externalities
External
costs from pollution
External benefits from ‘green’ activities
Problems of identifying and measuring
Ignorance
Inter-generational problems
Government
Policy towards
the Environment
Government Environment Policy
Environmental (‘green’) taxes, charges
and subsidies
Taxes
on goods and services
The optimum tax rate
An socially efficient green tax
Costs and benefits (£)
MSC
Optimum
green tax
S = MPC
P
P–t
D = MSB
Q2
O
Output of good
Q1
Government Environment Policy
Environmental (‘green’) taxes, charges
and subsidies
Taxes
on goods and services
The optimum tax rate
Problems with green taxes and subsidies
Government Environment Policy
Environmental (‘green’) taxes, charges
and subsidies
Taxes
on goods and services
The optimum tax rate
Problems with green taxes and subsidies
Effects on business
Weighted average
USA
4
UK
Sweden
Spain
Norway
Netherlands
Japan
Ireland
Greece
Germany
France
Finland
Denmark
Canada
Belgium
Austria
Australia
% of GDP
Green tax revenues as a % of GDP
5
4.5
1995
3.5
3
2.5
2
1.5
1
0.5
0
1995
USA
UK
Sweden
Spain
Norway
Netherlands
Japan
Ireland
Greece
4
Weighted average
Source: Environmentally related taxes database (OECD, 2003)
Germany
France
Finland
Denmark
Canada
Belgium
Austria
Australia
% of GDP
Green tax revenues as a % of GDP
5
4.5
2000
3.5
3
2.5
2
1.5
1
0.5
0
Government Environment Policy
Non-market-based policies
Command-and-control
Alternative




standards
Technology-based standards
Ambient-based standards
Social impact standards
Effects

systems
on business
Advantages
Disadvantages
Voluntary agreements
Education
Government Environment Policy
Tradable permits
Permit

Credits can be traded
Market

to emit
price for permits
Efficient solution?
Use
in USA
Use
in the EU (Kyoto)
Effects
Basis

on business
for international agreements?
Quotas for emissions or use of resources
Government Environment Policy
Can we rely on governments?
Short-termism
The
The
free-rider problem
weakness of international
agreements
If it’s good for the environment, is it
bad for the economy?
Possibly, but not necessarily.
Environmental challenges offer challenges to
business and the government.
Some will gain; some will lose.
Is it another case of survival of the fittest?
Or is it survival of the greenest?
To access these slides, go to:
www.economicsnetwork.ac.uk/archive/A-level_Dec04.ppt