Basic concepts in environmental economics

Bibliography Underlying the meaning and ultimate effect of this study are two unarguable premises: In this chapter we shall develop concepts based on these premises, which will lead to an understandable and workable definition of "environmentally sound development"; we will do this by an examination of the terms: Human life quality depends on the physical and psychological health or welfare of an individual or a society. Health and welfare in turn, depend on the degree to which a person's or a society's respective environments satisfy their needs.

Basic concepts in environmental economics

Valuation[ edit ] Assessing the economic value of the environment is a major topic within the field. Use and indirect use are tangible benefits accruing from natural resources or ecosystem services see the nature section of ecological economics.

Basic concepts in environmental economics

Non-use values include existence, option, and bequest values. For example, some people may value the existence of a diverse set of species, regardless of the effect of the loss of a species on ecosystem services.

The existence of these species may have an option value, as there may be the possibility of using it for some human purpose. For example, certain plants may be researched for drugs.

Individuals may value the ability to leave a pristine environment to their children. Use and indirect use values can often be inferred from revealed behavior, such as the cost of taking recreational trips or using hedonic methods in which Basic concepts in environmental economics are estimated based on observed prices.

Non-use values are usually estimated using stated preference methods such as contingent valuation or choice modelling.

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Contingent valuation typically takes the form of surveys in which people are asked how much they would pay to observe and recreate in the environment willingness to pay or their willingness to accept WTA compensation for the destruction of the environmental good. Hedonic pricing examines the effect the environment has on economic decisions through housing prices, traveling expenses, and payments to visit parks.

Under this plan, the economic impact has to be estimated by the regulator. Usually this is done using cost-benefit analysis. There is a growing realization that regulations also known as "command and control" instruments are not so distinct from economic instruments as is commonly asserted by proponents of environmental economics.

The main difference an environmental economist would argue exists between the two methods, however, is the total cost of the regulation. Some firms, in this system, can abate inexpensively, while others can only abate at high cost. Because of this, the total abatement has some expensive and some inexpensive efforts to abate.

Consequently, modern "Command and control" regulations are oftentimes designed in a way, which addresses these issues by incorporating utility parameters. For instance, CO2 emission standards for specific manufacturers in the automotive industry are either linked to the average vehicle footprint US system or average vehicle weight EU system of their entire vehicle fleet.

Environmental economic regulations find the cheapest emission abatement efforts first, then the more expensive methods second. This leads to a lower cost for the total abatement effort as a whole. Often it is advocated that pollution reductions should be achieved by way of tradeable emissions permitswhich if freely traded may ensure that reductions in pollution are achieved at least cost.

In theory, if such tradeable quotas are allowed, then a firm would reduce its own pollution load only if doing so would cost less than paying someone else to make the same reduction. In practice, tradeable permits approaches have had some success, such as the U.

Taxes and tariffs on pollution. Increasing the costs of polluting will discourage polluting, and will provide a "dynamic incentive," that is, the disincentive continues to operate even as pollution levels fall.

A pollution tax that reduces pollution to the socially "optimal" level would be set at such a level that pollution occurs only if the benefits to society for example, in form of greater production exceeds the costs.

Some advocate a major shift from taxation from income and sales taxes to tax on pollution - the so-called " green tax shift. The Coase Theorem states that assigning property rights will lead to an optimal solution, regardless of who receives them, if transaction costs are trivial and the number of parties negotiating is limited.

For example, if people living near a factory had a right to clean air and water, or the factory had the right to pollute, then either the factory could pay those affected by the pollution or the people could pay the factory not to pollute.

Or, citizens could take action themselves as they would if other property rights were violated. The US River Keepers Law of the s was an early example, giving citizens downstream the right to end pollution upstream themselves if government itself did not act an early example of bioregional democracy.Environmental quality in some writings refers to "ambient environmental quality" i.e.

the "state of air, water, land, and human artifacts" (Hufschmidt et al, , p.2). However, as used here, it is the relative capability of an environment to satisfy the needs and wants of an individual or society.

Environmental and Natural Resource Economics: An Encyclopedia offers the critical information needed to comprehend these complex issues. The entries cover topics in a manner parallel to how environmental economics is commonly taught, addressing basic concepts, environmental policy, natural resource economics, market failure, exhaustible and renewable resources, benefit-cost analysis, and applied .

Concepts and Principles for Environmental Economics James J.

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Sullivan James J. Sullivan & H. F. Arias,Concepts and Principles for Environmental Economics, 2B.C. Envtl. Aff. L. Rev (), we can consider the set of environmental resources with the same basic .

TECON Understanding Economics (5) I&S, QSR Examines fundamental concepts of economic analysis with application to contemporary problems. Cannot be taken for credit if credit received for TECON or TECON or equivalent.

View course details in MyPlan: TECON TECON Introduction to. Basic Concepts • Environmental Economics: Economic effects of the environment and how economic processes affect that environment, including its living resources. Globalization of the economy, the explosion of population growth, technological changes and international competition compels the student to understand, both personally and globally, production, distribution, and consumption of goods and services.

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