Environmental economics and sustainability
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Notes de leçon
Economy and environment
- The economy depends on natural inputs and ecosystems and creates waste alongside useful outputs. Environmental effects include resource depletion, noise, pollution, habitat change and climate effects, not carbon alone.
- Biodiversity includes variation within species, between species and among ecosystems. It supports functions valuable to people and other life, but a single money price or count of one species does not capture every ecological or ethical concern.
Costs of pollution
- Negative externalities are third-party costs omitted from the decision-maker’s private calculation. For production external costs, marginal social cost can exceed marginal private cost, leading to excessive market output under the simple model.
- Fictional model: marginal benefit P = 12 − 0.1Q, private marginal cost P = 2 + 0.1Q, social marginal cost P = 4 + 0.1Q. Market quantity is 50 and the model’s efficient quantity 40. This assumes no external benefit, known curves and £2 marginal external cost; it is a teaching illustration, not an estimate of actual pollution damage.
A fictional production external cost
Resources
- Renewable resources replenish naturally over a relevant timescale, but fish and forests can be depleted if harvest exceeds regeneration. Non-renewables do not replenish on a human timescale, although some materials such as metals can be reused or recycled. Renewable energy still requires equipment and resources.
- The commons problem concerns rival use with difficult exclusion, creating a risk that individuals ignore harm to others’ future use. It is not a prediction that every shared resource fails: user associations and enforceable rules can govern use effectively. Compare rights, monitoring and regeneration with extraction.
Common resources can be governed
Policies to protect the environment
- A carbon tax fixes a charge on covered emissions or fuel carbon content; the quantity response is not fixed. A cap-and-trade system limits covered allowances and permits exchange, with a market price and scheme-specific rules. Both require monitoring and credible compliance.
- Other tools include standards, targeted subsidies, information, support for alternatives and cooperation. A subsidy may not fully reach buyers or generate additional improvement. The Paris Agreement adopted in 2015 aims collectively for warming well below 2°C above pre-industrial levels while pursuing 1.5°C; it is a goal rather than proof of an achieved temperature outcome.
Policy tools change different incentives
Sustainable development
- Sustainable development seeks to meet present needs while preserving future opportunities, considering social, economic and environmental goals. Green growth aims to protect natural assets alongside progress but does not automatically reduce every impact.
- Circular approaches extend useful lives through prevention, maintenance, repair, reuse and refurbishment, with recycling of suitable materials. Energy, losses, contamination and safety needs remain, so a circular objective is not costless or perfectly closed material cycling.
Circularity extends useful life
Trade-offs
- Compare avoided harm and future opportunities with transition costs, employment changes, affordability and the opportunity cost of public funds. Cleaner investment may create jobs or reduce costs as well as require resources; not every effect follows the same short-run/long-run pattern.
- Separate total impact from intensity. Fictional output 100 → 150 with emissions 10 → 8 kg CO2e per item gives total 1,000 → 1,200 kg, a 20% rise. Methods and composition can offset scale effects, but the evidence must show it; a per-unit fall is insufficient on its own.
Fictional output and total emissions
Evaluating
- Assess coverage, monitoring, enforcement, available alternatives, response over time and international spillovers. Low-income households with high energy-budget shares or little ability to adapt may be vulnerable; compensation and accessible alternatives can change fairness. Domestic measures can still help even when coordination is incomplete.
- Fictional cap example: two firms initially emit ten tonnes each. Sixteen allowances are allocated eight each; A emits six and transfers two to B, which emits ten. Covered total remains sixteen if one allowance is required per tonne and the rule is enforced. Trading changes distribution; it does not itself increase this fixed cap or prove every real scheme has the same rules.
A fictional fixed 16-tonne cap
Diapos
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Questions d'entraînement
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1.What is pollution?
Easy- Aharmful substances or energy, such as noise, entering the environment
- Ba type of tax
- Ca subsidy
- Da profit
2.What is sustainable development?
Easy- Agrowth at any cost
- Bno growth
- Cdestroying nature
- Dmeeting present needs while preserving future generations’ ability to meet theirs
3.What is a renewable resource?
Easy- Acoal
- Boil
- Cone that naturally replenishes on a relevant timescale
- Done that runs out
4.What is a non-renewable resource?
Easy- Asolar
- Bone that does not replenish on a relevant human timescale
- Cone that replenishes
- Dwind
5.What is depletion?
Easy- Ausing up a resource
- Breplacing a resource
- Csaving a resource
- Dcreating a resource
6.What is a carbon tax?
Easy- Aa subsidy
- Ba loan
- Ca quota
- Da charge on covered emissions or fuel carbon content
7.What is a subsidy for renewable energy?
Easy- Aa prohibition on all energy generation
- Ban unsubsidised loan on full commercial terms
- Cfinancial support for eligible renewable-energy activity
- Da required fine for excessive noise
8.What are tradable permits?
Easy- Asubsidies
- Btradable emissions allowances within a defined regulated system
- Ctaxes
- Dbans
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