Environment and Resource Econ Test 1

Command and Control Approach

The government directly regulates pollution by setting rules or standards. It may limit how much pollution a firm can release or require firms to use a specific pollution-control technology. Firms have little flexibility in how they comply.

Market Approach

The government uses economic incentives, such as pollution taxes or emissions fees, to encourage firms to reduce pollution. Firms retain flexibility to determine the least-cost way to respond.

Polluter-Pays Principle

States that a firm must pay for each unit of pollution it releases. This forces the firm to account for environmental damage as a cost of production rather than passing that cost on to society.

Environmental Economics

Studies the flow of residuals or waste from economic activity back into nature. Focuses on pollution created by production and consumption.

Natural Resource Economics

Studies the flow of natural resources from nature into the economy. Focuses on how resources like eater, minerals, soil, fossil fuels are extracted, allocated and conserved.

Materials Balance Model

Expands the circular flow model by connecting economic activity to the natural environment. Shows two man flows: 1)Natural resources flow from nature into the economy for production and consumption. 2) Residuals and waste flow from households and firms back into nature.

Population growth effect on Materials Balance Model

Increases demand for goods and services, causing greater production, resource use and residual generation. The flow expands

Technological change effect on Materials Balance Model

Technology that increases productive capacity generally expands economic activity and the materials flow. However, cleaner of more efficient technology can reduce the amount of resources and pollution required per unit of output.

Labor productivity effect on Materials Balance Model

When workers produce more output/hour, the economy can produce more goods and services. This generally inceseses economic activity and expands the flow.

Capital accumulation effect on Materials Balance Model

More factories, equipment, infrastructure and other productive assets increase the economy’s production capacity. This expands resource use and residual flows

Natural phenonena such as droughts or floods effect on Materials Balance Model

These events usually damage resources and productive capacity, reducing production and shrinking the normal economic flow.

Recovery in environmental economics

Collecting materials from the waste or residual stream before they are released into the environment. Recovery makes reuse or recycling possible and reduces the immediate amount of waste entering nature.

Reuse

Using a recovered product or material again in its existing form, with little or no processing. It extends a products useful life and reduces the need to extract new natural resources.

Recycling

Processing recovered waste into a usable material or a new product. It returns materials to the economy, reducing virgin resource use and delaying their release into the enviornment as residuals.

Causes of enviornmental damage

Natural pollutants: Produced by nonhuman process in nature (volcanic ash, ocean salt spray, and pollen.)
Anthropogenic Pollutants: Produced by human consumption and production. Examples include vehicle exhaust, fossil-fuel emissions, industrial chemicals, and household waste.

Sources of enviornmental damage

Stationary source
Mobile source
Point source
Non point source

Stationary source

Fixed site pollution producer ( factory, power plant, sweage treatment facility)

Mobile source

A pollution source that moves (cars, trucks, etc.)

Point source

A single, identifiable discharge location (smokestack, wastewater pipe)

Nonpoint Source

A diffuse source that cannot be traced to one precise location (urban stormwater runoff, agricultural fertilizer runoff)

Scope of environmental damage

Local Pollution: Damage remains close to its source and usually effects one community (urban smog, landfill pollution)
Regional pollution: Travels well beyond its original source (acid rain, large oil spill affecting several states)
Global pollution: Damage has worldwide consequences and generally requires international cooperation (climate change, ozone layer depletion)

Environmental objectives

Enviornmental quality
Sustainable development
Biodiverstiy

Environmental quality

Reducing anthropogenic pollution to a level considered acceptable by society. Does not mean eliminating all pollution because some occurs naturally and eliminating all human pollution would stop most production and consumption

Sustainable development

Balancing economic growth with the preservation of natural resources so that current development does not prevent future generations from meeting their needs

Biodiversity

Variety of species, genetic variation within species, variety of ecosystems those species inhabit. Important because the loss of one species can affect other species and human welfare.

Risk assesment

Scientific process of identifying and evaluating the risk than an environmental hazard poses to human health or ecosystems. It determines whether the hazard causes harm and how the harm changes as exposure increases.

Risk management

Decision making process of evaluating and selecting a policy response to that risk. Possible responses include pollution limits, required technologies, emissions fees, or taxes on pollution-generating products.

Criteria when conducting risk management

Allocative efficiency: Resources are allocated so that the additional benefit to society from pollution reduction equals the additional cost of achieving it. Helps determine the socially optimal amount of pollution reduction
Cost-effectiveness: Predetermined enviornmental objective acheived using the least amount of resources or at the lowest cost. Does not determine if the objective is optimal

Environmental Justice

Fairness in how enviornmental risks and protections are distributed across different populations and geographic areas. Important because pollution often affects low income communities, EJ ensures that one group does not bear an unfair share of pollution.

Excludable

People who do not pay can be prevented from using the good (movie theatre)

Nonexcludable

Difficult or impossible to prevent nonpayers from benefiting (no one pays for pollution control)

Rival

One person’s consumption reduces the amount available to others (no one can eat my sandwhich)

Nonrival

One person’s consumption does not reduce another person’s ability to benefit (my benefit from clean air does not prevent you from breathing that air)

Why are property rights important

They allow markets to determine who controls resources and create incentives for responsible use. When ownership is clearly defined, resources can be exchanged, prices can communicate their value, and owners have an incentive to maintain them