The

1
The invisible in ESPP A Retrospective

• Recognizing that nature is not a natural
  category need not be an impediment to consensus.
  It can open more space for human expression and
  creativity.
• Seeing how knowledge and technologies are
  constructed does not disable us from making
  better-worse judgments. We just have different
  tools.
• Admitting uncertainty need not block all action.
  Precaution can be seen as a starting point for
  seeing fresh alternatives.
• A critical approach to environmental knowledge
  may reveal systematic biases, e.g., neglect of
  social science evidence about risk at WTO.

2
Outline of Economics Section

• Environment and economics
• A particular way of modeling environmental
  problems and solutions
• History
• How did we learn to think in this way about the
  environment?
• Components of Economic Model
• Modeling institutions (government vs. market)
• Modeling human behavior (incentives,
  information)
• Modeling nature (externalities, ecosystem
  services)
• Questions
• How good is the economic model?
• What are its most salient deficiencies?
• What implementation problems and opportunities
  does the model present?

3
Estranging Markets

• Economy
• A recent term
• Pervasive green, fuel, bio, hydrogen, renewable
• Forgotten history (cf. Mitchell 2002)
• Calculability
• Institutions
• Relations of power (whose exchange values
  prevail?)
• Not mere construction/representation

4
The Idea of Exchange
5
The Concept of Value A Carbon Market
6
Arguments for Economic Models

• Makes unseen environmental costs visible
  (externalities)
• Allows comparison with benefits (already
  monetized) cost-benefit analysis
• Enables comparison of unlike activities (based on
  use and degradation of same natural resources)
• Offers instrument of global environmental
  governance (world environmental market)
• Produces measures for better accounting
  (ecosystem services, ecological footprints)

7
Modeling Human Behavior Homo Economicus

• Economics is a model of human (and
  organizational) behavior
• Economics is descriptive (is) and normative
  (ought)
• Basic elements
• Behavioral theory utility maximization
• Normative assumption efficiency is highest good
• Analytic strategy weigh everything relevant in
  economic terms
• Decision rule pick cost-effective solution
  (regulation) or allow cost-effective solution to
  be picked (market)

8
Modeling Governing Institutions

• Features of regulation
• Style command and control
• Assumptions
• Perfect information (but see TSCA)
• Adequate state capacity (analysis, design,
  monitoring, control)
• Sufficient political will (capture, resistance)
• Features of market
• Style entrepreneurial
• Assumptions
• Incentives drive behavior (buy-in)
• Releases creativity from below (performance
  standards)
• Can get pricing right

9
Early Environmental Economics Policies of
Allocation

• Allocating costs of information
• Whoever introduces a new product should
  demonstrate its safety (e.g., FIFRA of 1972)
• Whoever releases a pollutant should tell the
  public what it is releasing (e.g., Toxics Release
  Inventory of 1986)
• Allocating costs of clean-up
• Whoever damages the environment should be
  responsible for clean-up polluter pays
  principle (e.g., Superfund law of 1980)
• Allocating costs of unequal performance
• Whoever needs to emit more should trade with
  whoever is emitting less (e.g., carbon offsets
  under 1977 and 1990 Clean Air Act amendments)

10
From Descriptive to Normative

• This is how people do behave this is
  how people should behave
• Rationale for deregulation
• Justification for creating new markets
• Privatization (of water, for example)
• Tradable permits (in carbon, for example)
• A self-fulfilling model problems are explained
  in terms of market failure
• Reform efforts tend to remain inside the model
  (single-loop learning)

11
Ecosystem Services-The Shadolator Story
12
A Green Infrastructure Calculus

• What counts as a demonstration?
• A single substitution of trees for cooling tower
• How is the service calculated?
• North or south planting
• Stream angle
• Species of trees cf. Cronon, wrong nature
• Who makes the calculations?
• Rise of private consultancies
• What does not get asked?

13
Quarreling with Stern - internal

• The discount rate debate
• Foundations for discounting
• People prefer the present
• Marginal utility of consumption lower in future
• Uncertainty
• Technological change
• Largely an argument about practices of economic
  analysis
• Is discounting ethical or scientific?

14
Quarreling with Stern - external (Hulme)

• Recognise that for climate policy-making
  institutional limits to global sustainability are
  at least as important as environmental limits.
• Employ the full range of analytic perspectives
  and decision aids from the natural and social
  sciences and humanities in climate change
  policymaking.
• Direct resources to identifying vulnerability and
  promoting resilience, especially where the
  impacts of climate change will be largest.