L2 Key concepts

environment functions to the economy

• source of resource inputs

• source of amenity services

• receptacle for wastes

• provides life support services

all functions co-exist and interact with each other in different ways → waste disposed of in river but this lowers amenity value

types of natural resources

Flow resources like solar and wind, current use doesn’t affect future availability as there is always a flow of the resource (but could fluctuate per day/seasonally)

stock resources: level of current use affects future availability

RENEWABLE (timber, plants, stock falls if use/harvest rate>natural growth, if < = sustainable yield)

or NON-RENEWABLE fossil fuels etc. no natural growth rate (takes millions of years)

materials balance principle

matter cannot be created or destroyed

belief that economic activity TRANFORMS material extracted FROM the environment → so transforms resources into products

different production function

micro: doesn’t consider environment so environmental economist don’t accept

resource economist: natural resources extracted from environment are a key input

env econ: more concerned with impact of waste released into environment than resources used so M is the flow of waste from amount of production

with ambient: considers ADDITION of waste to stock rather than just the flow

combine env with resource: recognises production has material base and flow of emissions, there are feedback effects

the economic and environmental sustainability problem and evidence

How can we alleviate poverty and raise living standards without degrading the natural environment and compromising future economic prospects?

at face value seems to be a trade off between economic growth and the natural system, particularly with individual resource demands increasing despite limited resources

Meadows et al. world 3 computer model simulated global trends in populations and resources and found exponential growth is expected to overshoot resource availability and cause economic collapse (BUT THIS IGNORES TECH INNOVATION)

Brundtland Report

NCED 1987

Defined sustainable development as meeting present needs without compromising the ability of future generations

poverty eradication requires economic growth but one that is less resource and energy intensive

drivers of environmental impact of eonomic activity

• extractions from environment (resource use)

• insertions into environment (resource waste, emissions)

• size of population

• per capita impact (depends on how much each individual consumes and technology of production - impacts how much production impacts emissions)

demographic transition model

looks at the population change as countries go from developing to developed

underdeveloped countries have higher birth rates and higher death rates

more developed have lower birth rates (better women status, planned family sizes and better sex ed) and low death rates (better medicine)

generally as countries develop population starts increasing = greater stress on production and environment (may be a dip for countries like Japan where there is an aging population)

The IPAT identity

used to measure environmental impact from economic activity

Impact = population size x per capita Affluence x Technology (resource used or waste generated generally measures resource intensity, lower T is better as indicates less waste per output and greater technological efficiency

= population x GDP per capita x resource use/GDP

for I reduction (could be carbon) can reduce any of the three factors so policies could focus on them

Environmental Kuznets curve

based on Kuznets 1955 belief: the view that greater economic activity hurts the environment assumes static technology and investments but in reality tech and innovation increases with greater economic activity allowing countries to address environmental concerns better

curve shows relationship between environmental impact (I/population) and affluence (GDP per capita)

instead of linear relationship curve where e = B0y - B1y²

if this hypothesis proves true growth is a source of improvement rather than a threat

Empirical studies on Kuznets hypothesis

• holds for local regional pollutants like sulfur dioxide but fails for global pollutants like CO2 and solid waste (which are arguably more important to address)

studies measured in world development report 1992 looked at 10 indicators

• thermodynamic limits imply exponential income growth will eventually cause total environmental impact to rise (resources return as pollution, waste etc. and 100% recycling isn’t possible as process requires energy)

• even if it holds in some regions will not hold globally as may need to be aided by strong climate policies which aren’t prevalent in areas like China and India who are getting more affluent and increasing environmental impact