17 th miller/spoolman living in the environment chapter 23 economics, environment, and...
TRANSCRIPT
Case Study: Making Microloans to the Poor (1)
• Micro-lending or microfinance
• 1983: Muhammad Yunus• Grameen (Village) Bank in Bangladesh• Provides microloans; mostly to women• “Solidarity” groups• How does it work?
• Half of borrowers eventually live above the poverty line
Case Study: Making Microloans to the Poor (2)
• 2006: Muhammad Yunus• Nobel Peace Prize
• 2006: Citibank and TIAA-Cref • Microloans
23-1 How Are Economic Systems Related to the Biosphere?
• Concept 23-1 Ecological economists and most sustainability experts regard human economic systems as subsystems of the biosphere
Economic Systems Are Supported by Three Types of Resources
• Economic systems are supported by• Natural capital• Human capital, human resources• Manufactured capital, manufactured resources
Market Economic Systems Depend on Interactions between Buyers and Sellers (1)• Supply, demand, market price equilibrium point
• True free market system• No company or group controls prices of a good or
service• Market prices include all direct and indirect costs (full-
cost pricing)• Consumers have full information about beneficial and
harmful environmental effects of goods and services
Market Economic Systems Depend on Interactions between Buyers and Sellers (2)
• Real world• Tax breaks• Subsidies • Trade barriers• Withholding of negative information
Economic Growth and Economic Development
• Economic growth• Increased capacity to supply goods and services• Requires increased production and consumption• Requires more consumers
• Economic development• Improvement of living standards
• Environmentally sustainable economic development
Governments Intervene to Help Correct Market Failures
• Private goods
• Public services• Environmental protection• National security• Police and fire protection• Safe food and water• Provided by government because private companies
can’t or won’t
Economists Disagree over Natural Capital, Sustainable Economic Growth (1)
• High-throughput economies• Resources flow through and end up in planetary sinks
where pollutant can be at harmful levels
• Models of ecological economists • Economic systems as subsystems of biosphere• Conventional economic growth unsustainable• Wealth from depletion of natural capital
Economists Disagree over Natural Capital, Sustainable Economic Growth (2)
• Ecological models’ three assumptions1. Resources are limited and shouldn’t be wasted2. Encourage environmentally beneficial and
sustainable forms of economic development3. Full-cost pricing needed to take into account
harmful environmental and health effects of some goods and services
• Environmental economists take middle ground between classical and ecological economists
Fig. 23-4, p. 617
Inputs (from environment)
System throughputs Outputs (into environment)
High-quality energy
Low-quality energy (heat)
High-waste economy
High-quality matter
Waste and pollution
Fig. 23-5, p. 617
Solar Capital
Goods and services
Economic Systems
Heat
ProductionNatural Capital
Depletion of nonrenewable resourcesNatural resources such as
air, land, soil, biodiversity, minerals, and energy, and natural services such as air and water purification, nutrient cycling, and climate control
Consumption
Degradation of renewable resources (used faster than replenished)
Pollution and waste (overloading nature’s waste disposal and recycling systems)
What Is the Purpose of a Business?
• Make a profit for its owners and investors• Sustainability is about staying in business• Another definition – “Making a quality product and
earn a profit without harming the environment.”
23-2 How Can We Put Values on Natural Capital and Control Pollution and Resource Use?
• Concept 23-2A Economists have developed several ways to estimate the present and future values of a resource or ecological service, and optimum levels of pollution control and resource use.
• Concept 23-2B Comparing the likely costs and benefits of an environmental action is useful, but it involves many uncertainties.
Protecting Natural Capital
• Estimating the values of the earth’s natural capital
• Estimate nonuse values • Existence value• Aesthetic value• Bequest value, option value
Estimating the Future Value of a Resource Is Controversial
• Discount rates• Estimate of a resource’s future economic value
compared to its present value
• Proponents of a high discount rate
• Critics of a high discount
We Can Estimate Optimum Levels of Pollution Control and Resource Use
• Marginal cost of resource production
• Optimum level of resource use
• Optimum level for pollution cleanup
Fig. 23-6, p. 620
High
Marginal cost of resource productionMarginal benefit
of resource use
Cost
Optimum level of resource use
Low
0 25
Coal removed (%)
75 10050
Cost-Benefit Analysis Is a Useful but Crude Tool
• Cost-benefit analysis follows guidelines• State all assumptions used• Include estimates of the ecological services• Estimate short-and long-term benefits and costs• Compare the costs and benefits of alternative courses
of action
• Always uncertainties
23-3 How Can We Use Economic Tools to Deal with Environmental Problems?
• Concept 23-3 We can use resources more sustainably by including their harmful environmental and health costs in the market prices of goods and services (full-cost pricing); by subsidizing environmentally beneficial goods and services; and by taxing pollution and waste instead of wages and profits.
Most Things Cost a Lot More Than We Might Think
• Market price, direct price
• Indirect, external, or hidden costs
• Direct and indirect costs of a car
• Should indirect costs be part of the price of goods?• Economists differ in their opinions
Environmental Economic Indicators Could Help Us Reduce Our Environmental Impact
• Measurement and comparison of the economic output of nations• Gross domestic product (GDP) • Per capita GDP
• Newer methods of comparison• Genuine progress indicator (GPI) • Gross National Happiness (GNH)
Fig. 23-7, p. 622
35,000
30,000
25,000
20,000
Per capita gross domestic product (GDP)15,000
1996
Dol
lars
per
per
son
10,000
5,000Per capita genuine progress indicator (GPI)
0
1950 1960 1970 1980 1990 2000Year
We Can Include Harmful Environmental Costs in the Prices of Goods, Services
• Environmentally honest market system
• Why isn’t full-cost pricing more widely used?1. Many businesses would have to raise prices and
would go out of business2. Difficult to estimate environmental and health costs3. Businesses have strong influence on government –
preferential regulations, tax breaks, subsidies
Label Environmentally Beneficial Goods and Services
• Product eco-labeling
• Certification programs
• Greenwashing
Reward Environmentally Sustainable Businesses
• Phase out environmentally harmful subsidies and tax breaks
• Phase in environmentally beneficial subsidies and tax breaks for pollution prevention
• Political difficulties
Tax Pollution and Wastes Instead of Wages and Profits
• Green taxes, ecotaxes • So that harmful products and services are at true cost
• Steps for successful implementation of green taxes
• Success stories in Europe
Fig. 23-8, p. 624
Trade-Offs
Environmental Taxes and Fees
Help bring about full-cost pricing
Low-income groups are penalized unless safety nets are provided
Encourage businesses to develop environmentally beneficial technologies and goods to save money
Hard to determine optimal level for taxes and fees
Governments may use money as general revenue instead of improving environmental quality and reducing taxes on income, payroll, and profits
Easily administered by existing tax agencies
DisadvantagesAdvantages
Environmental Laws and Regulations Can Discourage or Encourage Innovation
• Environmental regulation
• Command and control approach
• Incentive-based environmental regulations
• Innovation-friendly regulations
We Can Use the Marketplace to Reduce Pollution and Resource Waste
• Incentive-based regulation example• Tradable pollution or resource-use permits
• Cap-and-trade approach used to reduce SO2
• Advantages
• Disadvantages
Fig. 23-9, p. 625
Tradable Environmental Permits
Advantages Disadvantages
Big polluters and resource wasters can buy their way out
Flexible
Easy to administerMay not reduce pollution at dirtiest plantsEncourage pollution
prevention and waste reduction Caps can be too high
and not regularly reduced to promote progress
Permit prices determined by market transactions
Self-monitoring of emissions can allow cheating
Trade-Offs
Reduce Pollution and Resource Waste by Selling Services Instead of Things
• 1980s: Braungart and Stahl• New economic model
• Service-flow economy, eco-lease (rent) services• Xerox• Carrier• Ray Anderson: lease carpets in the future
Individuals Matter: Ray Anderson
• CEO of Interface, largest commercial manufacturer of carpet tiles
• Goals• Zero waste• Greatly reduce energy use• Reduce fossil fuel use• Rely on solar energy• Copying nature
• How’s it working?
23-4 How Can Reducing Poverty Help Us to Deal with Environmental Problems?
• Concept 23-4 Reducing poverty can help us to reduce population growth, resource use, and environmental degradation.
The Gap between the Rich and the Poor Is Getting Wider
• Poverty• 1.4 billion people live on less than $1.25 per day
• Trickle-down effect
• Flooding up
• Wealth gap
We Can Reduce Poverty (1)
• South Korea and Singapore reduced poverty by• Education• Hard work• Discipline• Attracted investment capital
We Can Reduce Poverty (2)
• Important measures• Combat malnutrition and infectious diseases• Universal primary school education• Stabilize population growth• Reduce total and per-capita ecological footprints• Large investments in small-scale infrastructure
Revisiting Microlending
• Microloans give hope to the poor
• Microloans help more than direct aid
• Spreading around the world
• Kiva.org
Achieve the World’s Millennium Development Goals
• 2000: Millennium Development Goals• Sharply reduce hunger and poverty• Improve health care• Empower women• Environmental sustainability by 2015• Developed countries: spend 0.7% of national budget
toward these goals
• How is it working?
Fig. 23-12, p. 629
Expenditures per year needed to
Expenditures per year (2008)
Reforest the earth $6 billion World military $1.4 trillion
Protect tropical forests $8 billion U. S. military $734 billion
Restore rangelands $9 billionU. S. dog food $39 billion
U. S. highways $29 billionStabilize water tables $10 billion
U. S. foreign aid $27 billionDeal with global
HIV/AIDS $10 billionU. S. potato chips and similar snacks $22 billion
Restore fisheries $13 billion U. S. cosmetics $8 billionProvide universal primary
education and eliminate illiteracy
$14 billion U. S. EPA $7.2 billion
Protect topsoil on cropland
$24 billion
Protect biodiversity $31 billionProvide basic health
care for all $33 billionProvide clean drinking
water and sewage treatment for all
$37 billion
Eliminate hunger and malnutrition
$48 billion
Total Earth Restoration and Social Budget
$245 billion
23-5 Making the Transition to More Environmentally Sustainable Economics
• Concept 23-5 We can use the three principles of sustainability as well as various economic and environmental strategies to develop more environmentally sustainable economies.
We Are Living Unsustainably
• Depleting natural capital
• Environmental alarm bells going off
• Matter recycling and reuse economies• Mimic nature
Use Lessons from Nature to Shift to More Sustainable Economies
• Donella Meadows: contrasts the views of neoclassical economists and ecological economists
• Best long-term solution is a shift to• Low-throughput low-waste, economy
Fig. 23-13, p. 631
Inputs (from environment)
Outputs (into environment)
System throughputs
High-quality energy
Energy conservation
Low-quality energy (heat)
Low-waste economyWaste and
pollution prevention
Pollution control Waste and pollution
High-quality matter
Recycle and reuse
Make Money and Create Jobs by Shifting to an Eco-Economy
• Hawken, Brown, and other environmental business leaders• Transition to environmentally sustainable economies• Some companies will disappear• New jobs will be created• Economic succession• Green jobs
Fig. 23-14, p. 631
Environmentally Sustainable Economy (Eco-Economy)
EconomicsReward (subsidize) environmentally sustainable economic developmentPenalize (tax and do not subsidize) environmentally harmful economic growthShift taxes from wages and profits to pollution and wasteUse full-cost pricingSell more services instead of more thingsDo not deplete or degrade natural capital
Live off income from natural capitalReduce povertyUse environmental indicators to measure progress
Certify sustainable practices and productsUse eco-labels on products
Resource Use and PollutionCut resource use and waste by reducing, reusing, and recyclingImprove energy efficiencyRely more on renewable solar, wind and geothermal energyShift from a nonrenewable carbon-based (fossil fuel) economy to a non-carbon renewable energy economy
Ecology and PopulationMimic naturePreserve biodiversityRepair ecological damageStabilize human population
Fig. 23-14, p. 630
Environmentally Sustainable Economy (Eco-Economy)
EconomicsReward (subsidize) environmentally sustainable economic development
Penalize (tax and do not subsidize) environmentally harmful economic growthShift taxes from wages and profits to pollution and waste
Use full-cost pricingSell more services instead of more things
Do not deplete or degrade natural capital
Live off income from natural capitalReduce poverty
Use environmental indicators to measure progressCertify sustainable practices and productsUse eco-labels on products
Stepped Art
Resource Use and PollutionCut resource use and waste by reducing, reusing, and recyclingImprove energy efficiencyRely more on renewable solar and geothermal energy
Shift from a nonrenewable carbon-based (fossil fuel) economy to a non-carbon renewable energy economy
Ecology and Population
Mimic nature
Preserve biodiversity
Repair ecological damage
Stabilize human population
Fig. 23-15, p. 632
No-till cultivationProduction of energy-efficient electric cars recharged by wind and solar energy
Forest conservation
Sustainable fishing and aquaculture
Sustainable organic
agriculture and drip-irrigation
High-speed trains
Solar-cell fields
Ecovillage
Wind farms
BicyclingWater conservation
Communities of passive solar homes (ecovillage)
Recycling, reuse, and composting
Recycling facility
Fig. 23-16, p. 633
Environmentally Sustainable Businesses and Careers
Aquaculture Environmental law
Biodiversity protection
Environmental nanotechnology
Biofuels Fuel cell technology
Climate change research
Geographic information systems (GIS)
Conservation biology Hydrogen energy
Geothermal geologistEcotourism management
HydrologistEnergy-efficient product design Marine science
Pollution preventionEnvironmental chemistry
Selling services in place of products
Environmental design and architecture
Recycling and reuse
Sustainable agriculture
Environmental economics
Solar cell technology
Sustainable forestryEnvironmental education
Urban gardeningEnvironmental engineering
Waste reductionUrban planning
Environmental entrepreneur Watershed
hydrologist
Environmental healthWind energyWater conservation
Three Big Ideas
1. Making a transition to more sustainable economies will require finding ways to estimate and include the harmful environmental and health costs of producing goods and services in their market prices.
2. Making this economic transition will also mean phasing out environmentally harmful subsidies and tax breaks, and replacing them with environmentally beneficial subsidies and tax breaks.