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Environmental and
Natural Resource Economics
Ms. Mangal Gogte
Visions of the Future
 In what seems like nature’s brutal irony, the
gases that make life on Earth possible now
threaten our very existence.
 Future is unknown
 Constant change
What is going to happen? to us?
Old diseases – cure – new - H1N1 – Pandemic?
Do societies sow the seeds of their destruction?
Are we destroying ourselves?
Thomas Malthus: 1798:
“An essay on the Principle of Population”
examples:
1. Mayan Civilization
2. Easter Island
3. Mohenjodaro – Indus Valley civilization
4. Cliff palace – pueblo people
 Easter Island 1992
 Mohenjo Daro, or "Mound of the Dead" is an
ancient Indus Valley Civilization city that flourished
between 2600 and 1900 BCE. It was one of the
first world and ancient Indian cities. The site was
discovered in the 1920s and lies in Pakistan's
Sindh province.
Cliff Palace: Mesa Verde
National Park, Colorado, USA
Ref: Span, March/April 2009
Contact: [email protected]
Mayan Civilization
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Central America- Copàn: a major settlement
Population increasing in 5th century
One crop: maize
Extensive cultivation - Diminishing returns
Demand > production
To get more land – deforestation  erosion
- low productivity - marginal land used malnutrition – high mortality
Easter Island
 2000 miles off the coast of Chile
 Volcanic rocks & little vegetation
 Favourable climate, imposing statues, long
roads ………What happened later?
 Increasing population & heavy reliance on
wood – housing, canoes, transport etc
 Reducing forests  soil erosion  low
productivity  less food  war or may be
cannibalism
Future Environmental Challenges
 Scarcity of resources
– water accessibility
and
 Climate change
– mainly Pollution
Climate Change
 Atmospheric ‘greenhouse gases’ trap Sun’s
energy that is good for earthlings or life is
impossible
 Too much good not good
 Industrial revolution  Greenhouse Gases
increased
 Excessive heat – No white Christmas for long time,
India: Diwali warmer than before
 Committee on Science of Climate Change
(2001): increase in temperature by 1 degree
Fahrenheit in last century
The Greenhouse Effect
 Greenhouse gases (like water vapour,
carbon dioxide, methane, and nitrous oxide)
heat up our planet. They are part of Earth's
atmosphere and trap warmth emitted by the
sun, thus heating Earth. It is this process –
the greenhouse effect – that makes life on
the planet possible.
 Projected
changes in
the Arctic
climate by
2090
Arctic Warming
 Artic warming - occurred at nearly
twice the global average rate
 The artic - ice free in summers by
the end of this century
 Western Siberia - recently begun to
melt
Mercury is Rising!!
 2005 the hottest –– 14.77 degrees C –
Nasa scientists: 1934
 Six hottest years in the last 8 years
 1998 – 2nd warmest – 14.71 degrees C
 past century temperatures rose to 0.8
degrees C
“ World energy outlook 2006” International Energy Agency (IEA)
Mercury is Rising!!
 Northern hemisphere warmer now than any time
in the past 1200 years
 Atmospheric levels of CO2 and Methane are
higher today than at any time in the last 650,000
years.
 Rise in global temperature - rise in health risks
from heat weaves, failing crops, infectious
diseases,. . . . . .
Effects of climate change
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Smog
Respiratory problems
Rising sea level
Storms
Flooding coastal areas - tsunami
Low agricultural Production
Protecting Ozone Layer
 1970s: evidence showing that CFCs were
damaging the ozone layer
 1972: UN - first global conference - to address
environmental issues.
 1987: Montreal Protocol on Substances that
Deplete the Ozone Layer
 2005 Feb: Kyoto Protocol
 2005 July:Asia-Pacific Partnership on Clean
Development
 Bali Meet 2007
Right to Pollute!
 Climate change has a moral dimension
 Developing countries contribute the least hardest to hit as adaptation is not quick
 future climate change agreements - equal
rights
 size of the human population – a critical
variable.
 as population grows - each individual's right
to pollute shrinks
 CO2 per capita per year per country: April 2006
Each country’s share of CO2 emissions
CO2 levels
Projection
Per Capita Emission – 2002 -2006
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global average - 3.9 metric tons
US - 19.7 metric tons – 20.4
Germany - 10.2 metric tons - 9.79
Japan - 9.5 metric tons – 9.84
EU-15 - 8.4 metric tonnes - average
India - 1.0 metric ton – 1.2
Share of gas emissions
countries with most rapidly growing
population - very low p c greenhouse gas
emissions
China: 1980 to 2002 –
 emission of carbon -1.5 to 2.6 m t p c
 population - 984 m to 1.3 b
 2002: 13.5 % of the world's total emission
What are we going to do?
temperature increase depends on what we
do from now on to curb emissions
shift to :
 renewable energy sources and
 more energy - efficient technologies.
What will happen?
 By 2050, population - from 2.8 b to 8.9 b
 rate of future increase - influence earth’s climate
for centuries to come
 people affected by climate change - increase
 redistribution of disease-carrying insects-H1N1
 shifts in many species’ habitats - in search of
cooler temperatures.
 about half of all wild species in the US have
already been affected
Water accessibility
Vital to life – increasing demand but finite supply
World’s 40% population lives in the areas with
moderate to high water stress
Moderate stress: Where human consumption is of
more than 20% of all accessible renewable freshwater
resources
Severe stress: consumption more than 40% of all
accessible renewable freshwater resources
– stress not uniform everywhere
US , China, India: consumption of water faster than it
is replenished - groundwater levels ⇩ steadily
Many rivers dry soon after monsoon in India
Asian and African economies: lack of water supply
and sanitation for 75% of Asians & 50% of Africa’s
urban residents
Contamination of water is common problem
Ganges - no more ‘Holy’ – sewage pipes leakages,
pipe bursting, waste without treatment
Meeting the Challenges
Our ancestors – no sustainable choice
We have fewer options
Use our creativity to find solutions
Economic activity increasing
Problems of lack of bio-diversity, poverty, climate
change, ozone depletion
 Need international action – being together
 Problems affect different countries in different
ways
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If one country
becomes conscious
of the environment
– may run the risk
of making their
business vulnerable
to competition from
less conscious
countries – US &
Europe scared of
‘China price’ – lead
in toys – banning
US cars
India
 SEZs in India – not following ILO standards – US
& Europe’s declining market share – falling
employment (recession) – Asia: a bigger and
growing market
 Not all want to follow stringent policies & want to
maintain status quo – even if it means
environment degradation e g. fishermen – trollers,
farmers - pesticides
How will we respond?
 We need to understand feedback loop
Positive feedback loops: where secondary effects reinforce
the basic trend
 Growth process self-reinforcing
 Climate change
 environment problems intensified
Negative feedback loops: self limiting
 Theory by English scientist: James Lovelock - Gaia
Hypothesis: Mother Earth – a living organism with complex
feedback system – optimal environment – any deviation –
nature restores the balance
Role of Economics
Scarcity is the main concern and how mankind
behaves, individually & collectively, will decide
society’s response.
We need to identify• Circumstances that degrade the environment
• How & why these circumstances support
degradation
Ecological & Environmental Economics provides
basis for identifying these.
 Understanding of the circumstances will help us
design new incentives that will harmonize the
relationship between the economy & the
environment.
 Ignoring those will mean that we live with the
consequences that may be are very expensive
to correct or may be are irreversible.
Ecological economics
Environmental economics
More methodologically
pluralist – uses a variety
of methods including
neoclassical economics
depending on the
purpose of investigation
Based on standard
paradigm of neoclassical
economics – emphasizes
maximizing welfare &
using incentives to modify
destructive human
behaviour
Competitive / complementary approaches
Models to be used
to find / understand complex relationships
between the economy & the environment
– models may yield conclusions that are dead
wrong.
– useful abstractions that should be viewed with
some skepticism as the details that are omitted
may turn out to be crucial in understanding
particular situation.
What is the future?
 Bjorn Lomborg, Director Environmental
assessment Institute, Denmark – “The Skeptical
Environmentalist” : the mankind is intelligent
∴ can face any challenges – history supports 
progress continues
 Worldwatch Institute’s researchers: resources are
shrinking – strain on environment – current
development paths unsustainable – meaning of
Development? Adam & Eve richer than us?
alternatives available but are we using those?
Are societies on self destruction path?
↑ scarcity  behavioural response decides the pressure on
environment - If it intensifies  pessimism and if it reduces
 optimism
Environmental & natural resource economics is helping us to
understand human source of the problems & in crafting
solutions to them.
Market forces: extremely powerful in search of solutions –
attempts to solve the problems shouldn’t ignore these forces.
Or else possibility of failure. Instead use these forces to
channel in right direction - protect the environment.
Environmental & natural resource economics provides a
specific set of directions as how that can be accomplished.
Basic Issues
 Earth's carrying capacity
 Our response to scarcities
 Role of political system – Government’s
intervention – other systems
 Our response to uncertainty
 Eradication of poverty – obligation to
future generations