The Economics of Environmental Disruption

1
The Economics of Environmental Disruption
2
What are your Environmental Concerns?
3
Three Economic Problems to Consider

• The Common Pool Problem or
• the Tragedy of the commons
• Open Access or Non-Use Value
• Externalities

4
Common Pool Problem

• Unclear Property rights leads to overuse of
  resources.
• Migratory birds
• Fish in the sea
• French fries?

5
Property Rights

• Excludable

• Non-Excludable

6
How to Resolve the Common Pool Problem?

• Government Regulations
• Fishing or hunting licenses
• Hunting seasons
• Protected species
• Pollution Markets
• Consumer Activism
• Green Peace and tuna
• The green movement
• Business Actions
• Ben and Jerrys
• Trader Joes

7
Incentives of Remedies

• Example Endangered species Act

8
Open access or Non-Use Value
9
How much Would you Pay in your electric bill per
month to keep the Grand Canyon as it is today?
10

• How much Would you have to be compensated if the
  Grand Canyon was flooded?

11
Benefit/Cost Analysis
12
Externalities

• External Costs Costs of production or
  consumption that are borne by a third party.
• (e.g. pollution)

13
Goods with External Costs are Overproduced
14
Externalities

• External Benefits The consumption or production
  of a good benefits a third party

15
Goods with External Benefits are Underproduced
16
The Ultimate common Pool
17
Global Warming
18
Scientific Opinion

• 3,146 Earth Scientists
• Have mean global temperatures risen compared to
  pre-1800s levels?
• 90 said yes.
• Has human activity been a significant factor in
  changing mean global temperatures?
• 82 said yes.
• Climatologists who are active in research showed
  the strongest consensus on the causes of global
  warming, with 97 percent agreeing humans play a
  role.

19
Carbon and Temperature
http//www.nrs.fs.fed.us/niacs/climate/
20
polardiscovery.whoi.edu
21
How much in carbon emissions does the U.S
produce? The U.S in 2000 produced 1,583 million
metric tons of carbon from burning fossil fuel,
nearly 14 more than its levels in 1990.
Transportation, mostly exhaust from motor
vehicles, accounted for 515 million metric tons,
or 33.  Electricity generation from fossil
fuel burning accounts for about 33 of the U.S's
carbon emissions, also.
http//www.ecobridge.org/content/g_faq.htmemissio
ns
22
Possible Effects of Global Warming

• Ice is melting worldwide
• Sea level rise became faster over the last
  century.
• Sea levels are expected to rise between 7 and 23
  inches (18 and 59 centimeters) by the end of the
  century, and continued melting at the poles could
  add between 4 and 8 inches (10 to 20
  centimeters).
• Hurricanes and other storms are likely to become
  stronger.
• Species that depend on one another may become out
  of sync. For example, plants could bloom earlier
  than their pollinating insects become active.

23
Effects Continued

• Floods and droughts will become more common.
  Rainfall in Ethiopia, where droughts are already
  common, could decline by 10 percent over the next
  50 years. Less fresh water will be available.
• Some diseases will spread, such as malaria
  carried by mosquitoes.
• Ecosystems will changesome species will move
  farther north or become more successful others
  wont be able to move and could become extinct.
• Source for climate information IPCC, 2007

24
Government Reaction to Externalities

• Provide Incentives

25
Positive Incentives

• The Cash for Clunkers Program
• Dual Purpose
• Stimulate the economy
• Get gas guzzlers off of the highways

26
Positive Incentives

• Solar tax Breaks

27
Negative Incentives

• Emissions taxes

28
Negative Incentives

• Tiered Water Rates

29
Market to Pollute
30
Cap and Trade Right to Pollute

• Each large scale emitter of carbon will receive
  an emissions permit.
• These permits can be traded.
• Permission to pollute will fall over time.
• What are the incentives?

31
Kyoto Protocol

• The Kyoto Protocol sets binding targets for 37
  industrialized countries and the European
  community for reducing greenhouse gas (GHG)
  emissions .These amount to an average of five per
  cent against 1990 levels over the five-year
  period 2008-2012.
• http//unfccc.int/kyoto_protocol/items/2830.php

32
(No Transcript)
33
Consumer Activism
34
Put our Money where our Mouth is

• Drive less
• Fly less
• Use less electricity
• Use less gasoline
• Buy less
• Recycle more
• Use transit more
• What else?

35
Business Actions
36
Everything is Green now
37
The Green Empire State Building
38
Questions? Comments?