Environmental Economics and

1
Chapter 23-24
Mother nature doesnt do bailouts.

• Environmental Economics and
• Environmental Policy
• (23.1 24.1-24.3)

2
Economics

• Study of how humans allocate scarce resources in
  the production, distribution, and consumption of
  goods and services

3
Economic System

• social institution through which goods are
  produced, distributed and consumed to satisfy
  peoples needs and wants, EFFICIENTLY
• Three types of capital are used to produce goods
  and services
• Natural capital
• Earths natural processes
• Human capital
• Human knowledge and abilities
• Manufactured capital
• machinery, equipment and factories (all goods and
  services produced)

4

• economic growth increase in a nations capacity
  to provide goods and services to its people
• Goods and services initially depend on
  environmental systems
• economic development improvement of human living
  standards through economic growth
• Can come up with solutions for environmental
  problems caused by initial economic growth
• environmentally sustainable economic development
  use political and economic systems to encourage
  environmentally beneficial and more sustainable
  forms of economic development and discourage
  environmentally harmful practices

5
Market-based Economy

• Most global economies function this way.
• Costs are determined by supply and demand
• Delicate balance between the two, as supply
  increases demand decreasessupply decreases
  demand increases
• Price determined by quantity available
• interaction of DEMAND and SUPPLY and PRICE
• companies try to increase profits any way
  possible...push for government subsidies, tax
  breaks, relaxed regulations, withhold information
  about harmful environmental effects
• Will do anything to get you to buy their product
  and maximize their profit
• government doesnt require companies to disclose
  environmental impacts of manufacturing products
• market price of an object doesnt reflect
• the actual cost to manufacture
• (environmental costs)
• externality

6
Market-based economy

• economists believe that an economic system based
  on private ownership without government
  interference is the best way to solve problems
• Completely dependent on the marketsupply and
  demand
• Driven by the desires of the people for goods and
  services
• Inferior products forced out of the market
• Informed decisions made on information about
  entire cost of product (consumers have all
  information)

7

• Measuring Economic Progress--Wealth of a Country
• GDP value of all products and services produced
  in a year (does not include the cost of land
  degradation and pollution)
• Includes consumer spending, government spending,
  investments, and exports minus imports
• Omits services provided by ecosystems
• developed countries can purchase goods that lead
  to environment improvements, but they consume
  more which leads to degradation
• many problems decline as income levels rise
• some problems increase then decline as they are
  identified and addressed
• some problems increase without an end in sight
• Not an accurate measure of wealth, and does not
  reflect the true cost of production

8

• Measuring Economic Progress--Wealth of a Country
• Genuine Progress Indicator (GPI) assumes some
  types of economic activity are sustainable and
  others are not.
• Includes labor in housework, parenting,
  volunteering costs of crime, pollution,
  depletion of nonrenewable resources, loss of
  farmland, general health of the population
• Ex. US GPI for 2004 was 4.42 trillion
• GDP was 11.71 trillion

GDP has steadily increased over time, while GPI
has stayed the same or decreased
9
Conflicting views on economics and the environment

• Natural resources important but can find
  substitutes if needed (classic view)
• unlimited potential for economic growth
• increase the amount of matter/energy entering
  system to produce more goods and services
• waste products end up in environmental sinks
  (air, water, soil, organisms) where they cause
  harmful side effects

10
Conflicting views on economics and the environment

• No substitutes for vital natural resources,
  humans depend heavily on these resources
  (ecological view)
• when the capacity of the environment is exceeded
  to remove waste products economic growth will
  become unsustainable
• encourage full-cost pricing of goods

11
Government Role in Environmental Issues

• Impose limits on the unsustainable exploitation
  of natural resources promote the common good
• Balance between halting free enterprise and
  innovation (too much regulation) and
  environmental degradation and social injustice
  (too little regulation)
• work toward full-cost pricing, leveling the
  playing field between companies, regulating the
  commons (preserving open-access resources)

12
Environmental Timeline Assignment

• What are the environmental regulations that are
  currently enforced to maintain our environment?

13
Environmental Policy

• environmental laws and regulations that are
  designed, enforced and implemented by government
  agencies
• Developed to solve problems brought on by
  economic growth.
• Many current regulations focus on cleanup instead
  prevention
• Major Policy Changes began in the late 1960s to
  early 1970s (environmental revolution)
• Most of the major US environmental laws were
  passed during this time period. Many have been
  amended as needs change.

14
Environmental Policy

• Development of PolicyThe Policy Life Cycle.
• A cyclical feedback system that adjusts and
  monitors the creation of environmental policy
• Four Stages
• Recognition (identify problem)
• Scientific research, public and media involved
• Formulation (look for solutions)
• Debate about policy options, media coverage,
  lobbying
• Consider effectiveness, efficiency and equity in
  policy
• Implementation (implement solutions)
• Policy moves to regulatory agencies, emphasis
  shifts to enforcement
• Control (monitor and adjust)
• Most difficult to reach
• Policies amended if needed
• Agencies regulate implementation of laws

15
President
Office of Management and Budget
Council on Environmental Quality
White House Office

• Overall policy
• Agency coordination

• Budget
• Agency coordination and management

• Environmental policy
• Agency coordination
• Environmental impact statements

Department of Health and Human Services
Environmental Protection Agency
Department of the Interior
Department of Agriculture
Department of Defense
Department of Justice

• Air and water
• pollution
• Noise
• Pesticides
• Solid waste
• Radiation
• Toxic substances

• Environmental
• litigation

• Endangered species
• Energy
• Minerals
• National parks
• Public lands
• Fish and wildlife
• Water development

• Civil works construction
• Dredge and fill
• permits
• Pollution control
• from defense
• facilities

• Soil conservation
• Forestry

• Health

Department of Housing and Urban Development
Nuclear Regulatory Commission
Department of Labor
Department Of Transportation
Department of State
Department of Commerce

• Licensing and
• regulation of
• nuclear power

• International
• environment

• Oceanic and
• atmospheric
• monitoring and research

• Housing
• Urban parks
• Urban planning

• Airplane noise
• Mass transit
• Oil pollution
• Roads

• Occupational health

Department of Energy
Tennessee Valley Authority

• Energy policy
• Petroleum allocation

• Electric power generation

16
Environmental Policy

• Principles that Guide the Development of Policy
• Our understanding of how nature works is limited
  (humility)
• Dont make a decision that cant be reversed
  later (reversibility)
• Dont use technology that spreads low net-energy
  yields (net-energy)
• Take measures to reduce harm to human health and
  the environment (precautionary)
• Prevent a problem from occurring or becoming
  worse (prevention)
• Ensure polluters bear the cost of dealing with
  pollutants and waste (polluter-pays)
• Develop policy so no one group bears an unfair
  share of the burden (environmental justice)

17
Role of Environmental Legislation

• environmental law body of laws and treaties that
  broadly define what is acceptable environmental
  behavior
• Most environmental laws have resulted from civil
  suits. Difficult to win due to burden of proof,
  statute of limitations, and identifying exactly
  who is responsible.
• too many variables

18
Major Types of Environmental Laws

• set standards for pollution
• screens new substances for safety and sets
  standards
• encourage resource conservation
• set aside or protect certain species, resources
  or ecosystems.
• evaluate environmental impact of activities

19

• Many environmental laws under attack due to...
• large corporations influence
• difficult to pinpoint who is responsible (not
  easy to measure)
• Many laws are pressured to be weakened
• Drilling for oil in ANWR
• Endangered Species Act and Polar Bears

20
A local example

• Initiative 522 Labeling Genetically Modified
  Foods (GMOs)
• Put on the 2013 November Ballot as a result of
  petition signatures
• Controversial due to way law is currently
  written, costs associated with implementation,
  alignment with current labeling standards, and
  enforcement. As proposed, the law states no
  label is necessary if
• If the food is from or derived from an animal
  that isnt genetically engineered itself (even if
  it was fed or injected with GM products)
• If the crop/food was grown without knowing or
  intentional use of GM products (farmer must
  testify)
• Processed food made with enzymes from genetic
  engineering
• Alcohol
• If the GM materials are less than .9 of the
  total weight of the processed food
• Organic food (already must be non-GMO)
• Food not packaged for retail sale or
  non-immediate human consumption (restaurants)

21

• Against I-522

• Pro I-522

• Give information about what is in our food
  (consumers useful information)
• 64 countries already label for GMO ingredients
• Not enough data investigating the impacts of GM
  organisms on people
• Argue wont cost more at the grocery store
• Follows current labeling framework
• More marketable to overseas countries with
  regulations
• Sponsored by organic farmers/organic food
  companies

• Food labeled as GM even if not
• GE foods have been used successfully for 20
  years
• USDA deems safe
• Purified food ingredients dont contain the GM
  protein..so why label it GM
• Estimated to increase grocery cost by 450 per
  year (due to labeling)
• Too many exemptions for certain food products
• Added costs for farmers, food producers and
  grocery companies
• Sponsored by GM agriscience companies and grocer
  associations

22

• In the 1992 policy, FDA also addresses the
  labeling of foods derived from new plant
  varieties, including plants developed by
  bioengineering. The 1992 policy does not
  establish special labeling requirements for
  bioengineered foods as a class of foods. The
  policy states that FDA has no basis for
  concluding that bioengineered foods differ from
  other foods in any meaningful or uniform way, or
  that, as a class, foods developed by the new
  techniques present any different or greater
  safety concern than foods developed by
  traditional plant breeding.
• FDA has reviewed information in the comments
  received in response to the 1992 policy and the
  1993 information request as well as the comments
  from the 1999 meetings. Most of the comments that
  addressed labeling requested mandatory disclosure
  of the fact that the food or its ingredients was
  bioengineered or was produced from bioengineered
  food. However, these comments did not provide
  data or other information regarding consequences
  to consumers from eating the foods or any other
  basis for FDA to find under section 201(n) of the
  act that such a disclosure was a material fact.
  Many of the comments expressed concern about
  possible long term consequences from consuming
  bioengineered foods, but they did not contend
  that any of the bioengineered foods already on
  the market have adverse health effects. The
  comments were mainly expressions of concern about
  the unknown. The agency is still not aware of any
  data or other information that would form a basis
  for concluding that the fact that a food or its
  ingredients was produced using bioengineering is
  a material fact that must be disclosed under
  sections 403(a) and 201(n) of the act. FDA is
  therefore reaffirming its decision to not require
  special labeling of all bioengineered foods.
  Labeling is voluntary
• http//www.fda.gov/Food/GuidanceRegulation/Guidanc
  eDocumentsRegulatoryInformation/LabelingNutrition/
  ucm059098.htm