Subfield of economics concerned with the environment
The environment, ecosystem services, & natural resources have economic value
Money & economic principles are the basis of most policy decisions
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Environmental Economics
Economic value based on: market value, value provided by unharvested resources, future value of resources
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Market Value
What people are willing to pay for the resources, harvest and direct use value
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Value provided by unharvested resources
Tourism Value
Ecosystem service value
Indirect use value
Cost to protect or replace a species, service, or resource
Cost to fix a problem
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Future value of resources
Option value
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Definition of Externalities
Hidden costs and benefits that affect parties who didn’t agree to incur the costs or benefits
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Externalities continued
Market failure: few benefit at the expense of society
Tragedy of the Commons: Loss of open-access resources
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Government Subsidies
Taxpayers moeny provided to industries by the government are not considered in valuation
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Common resources definition
Ownership of common resources (wild animals, air, water)
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Common resources continued
Common resources are not owned by an individual or specific group, they are exclusive to everyone
Common resources are not excludable: available to all
Common resources are rival goods: one person’s use limits use of availability to other people
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Market Failure
When goods are available free of charge, the market forces that normally allocate resources in a free market economy are absent
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Market Failure Continued
When a good does not have a price attached to it, a free market economy cannot ensure that the good is produced and consumed in the proper amounts (Common resources tend to be overused which can lead to their loss)
In such cases, government policy can potentially remedy the market failure that results, and raise economic well-being (Policy that enforces optimal use allows common resources to be renewed)
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Ecosystem services
Often ignored in economic valuations
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Example of market failure & establishment of policy
Caught on fire 13 times: (1952 fire caused $1.3 million in damages)
1969 fire inspired creation of the National Environmental Protection Act (NEPA), Environmental Protection Agency (EPA), & Clean Water Act
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Tragedy of the commons & extinctions case study
Exploitation (overhunting)
Habitat loss, fragmentation, & degradation
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Why is overhunting the major threat?
Economic changes in Congo contributed to the problem: (Opening of forests to mining & logging)(Construction of roads that connect once impenetrable places to towns allowed easy access for poachers)(3 weeks after opening up a Congo forest, animal density fell by 25%)
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Why is overhunting the major threat?
Globalization & increased access to international markets lead to the sale of meat, skin, & other animal parts worldwide Increased demand for bushmeat as people move to urban centers & increase their income (In 2010, it was estimated that 5000 kg (11000 lbs) of bushmeat enters Europe every week)
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Environmental Policy
Established principles for guiding decisions to maintain the environment, ecosystem services, & natural resources
Addresses potential and realized human impacts on the environment
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Precautionary Principle
When an activity raises threats of harm to human health or the environment, precautionary measures should be taken even if some cause and effect relationships are not fully established scientifically
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Input pollution control
Pollution prevention: reduces or eliminates production of pollutants
Reduce use of pollution-causing substance
Use technology to reduce pollution during use of pollution-causing substance
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Output pollution control (pollution cleanup)
Cleaning or dilution of pollution after it happens
Often not possible
When it is possible, it is generally extremely expensive
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Clean Air Act
The clean air act and other U.S. environmental policy was effective
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Intrinsic value
Every species has a right to exist
The environment is important outside of its value to people
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People should be stewards of the Earth
Religious and spiritual beliefs and values
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People have a responsibility to each other
Environmental justice
Protect future generations
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All species are interdependent
Protect functionality to protect ourselves
Protect our life support systems & economy
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Aesthetic & inspirational value
Nature is beautiful & inspires art, philosophy, & religion
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Environmental Justice definition
The fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income, with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies
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Environmental Justice continued
All people are represented in decision making & have access to reliable, high quality resources such as clean air and water
\ Eliminate negative externalities • Avoid market failure & the tragedy of the commons
Studied by 15 people
