All Notes Flashcards

1
Q

What are the conditions for a free market to produce an efficient outcome?

A

Markets exist for all goods and services
All markets are perfectly competitive
Property rights are fully assigned in all resources
No externalities exist

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Define static efficiency?

A

Allocation of resources lead to a maximisation of economic surplus

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Give examples of market failure?

A
Absent Property Rights
Externalities
Public Goods
Government Failure
Imperfect Market Structure
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are the 3 strucutres required for property rights to be efficent?

A

Exclusivity - All benefits are accrued to the owner
Transferability - Should be transferable to others
Enforceability - Should be secure from seizure or encroachment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are the 5 types of property rights?

A

Private Property Regimes - Individuals hold entitlement
State Property Regimes - Governments own all property
Common Property Regimes - Property jointly owned and managed by a specific group
Common Pool Resources - Non exclusivity and diversity
Open Access Regimes - No one owns the resources

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are the three types of externalitiy?

A

Negative: Costs to a third party : Pollution
Positive: Benefits to a third party: Airport construction
Pecuniary: External effect comes from a change in price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is the Coase Theorem?

A

When negotiation costs are negligible and affected parties can freely negotiate an efficient allocation will be reached

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are some methods of Government Failure?

A

Rent Seeking - Resources are used in lobbying government for protection rather than efficency

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Define Dignity?

A

If an item does not have a price, there is no equivalent hence dignity.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

A project will go ahead where the CBA shows:

A

The NPV = Benefits - Costs - Environmental Costs >0

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are the four costs?

A
Use Value (UV) -  The cost that arises from the use of the service
Existence Value (EV) - The cost that arises from  the services existsance
Option Value (OV) - The cost of the willingness to pay to preserve availability of a good for future use
Quasi Option Value (QOV) - The willingness to pay to not commit to an irreversible commitment
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

How does the Kaldor and Hicks valuation method work?

A

Preferences of individuals through willingness to pay for a benefit /accept compensation for a cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is Pareto optimality?

A

You can not make somebody better off without making somebody worse off

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Name some critics of environmental CBA.

A

Scitovsky (1941) - Contradiction in hypothetical compensation logic
Samuelson (1942) - Marginal utility of income is not constant
Lipsey / Lancaster (1956) - Second best theorem
Arrow (1951) – “Impossibility theorem”. We cannot reasonably go from individual preferences to a social ordering of states

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is the formula for a CBA?

A

Sum[WTPG(1+S)^-t] - Sum[WTPL(1+S)^-t >0

S = Discount Rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is the formula for a CBA if the loosers have property rights?

A

Sum[WTPG(1+S)^-t] - Sum[WTAL(1+S)^-t >0

S = Discount Rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

How is risk treated in a CBA?

A

The PVNB is weighted by its probability of occurrence.

EPVNB = Pi*PVNB.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is discounting?

A

Reducing the value of future assets

A high discount rate means future assets have a low value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is the formula for a discount factor?

A

W = 1/(1+s)^t

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Why could discounting be classed as rational?

A

Time preference: Pure impatience, Risk of death, Risk and uncertainty, Diminishing Marginal Utility
Productivity of Future Capital:
Next generation will be even more advanced and richer so do not need our help

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What are some critiques of discounting?

A

Not enough info for consumers to maximise utility
Interests may conflict with those of society
Society lives longer than individuals
Productivity of Capital:
Will the definitely be better in the future?

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Name some methods of environmental Valuation.

A

Stated Preference: Methods to elicit respondents (WTP) when the value is not observable
Revealed Preference: Methods based on actual observable choice from which values can be inferred

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What is contingent valuation?

A

A survey based on stated preference techinque.Can be distributed by face to face, mail or telephone.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Why is there disparity between WTP and WTA?

A

WTP is less than WTA as:
Individuals view changes from the normal
Gains and losses are subject to diminishing returns
Value function is steeper for losses than gains

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
What are some methods of stated preference valuation?
Direct: Contingent Valuation Indirect: Choice Experiments
26
What is the main problem with contingent valuation, give examples.
Part – whole bias. The value for a specific good the same as for a more inclusive good. Hypothetical bias - The question is hypothetical Interviewer bias - Yea saying - to please the interviewer Strategic bias – respondents believe answers will affect their tax liability Starting point bias – anchoring
27
What is choice experiments?
Indirect stated preference technique. | Respondents are presented with a number of discrete alternatives and asked to state which they prefer
28
What are the benefits of choice experiments?
Monetary values implicit – no WTP question Can deal with non-use values Avoids yea and nay-saying WTP values can be transferred across project analyses
29
What is the formula for choice experiments?
V= a+ B1X1 + B2X2 +BNXN +BCXC V=utility, a = constant B1=Ratio of coefficients X1 = other attributes C = Cost
30
What are some problems with Choice Experiments?
CE places greater strain on cognitive abilities Respondents then resort to simple rules of thumb as a way of ‘solving’ the CE puzzle Respondents might select one alternative regardless due to its name What attributes to include and how to desribe them
31
What are some methods of revealed preference valuation?
Indirect:Travel Cost Indirect: Hedonic Property Values
32
What is the Travel Cost Method?
Indirect revealed preference | Based on the cost of travel to the site revealing its value
33
What is the formula for travel cost method?
``` Ln(Vi)= a-bc +e Vi= visit per cost per person per year a=Constant C=Cost per trip e= Error term ```
34
What are some problems with the travel cost method?
Travel costs are usually ‘researcher estimates’ Assumes visitors react to variations in TC as they would to price (entrance fee) variation If he does not go, he gains no utility. What about non-use values Assignment of costs to components of multi-purpose trips is problematic Substitute sites – a properly specified demand function for site ‘i’ would include prices of substitute sites.
35
What is the Hedonic Pricing Method?
Indirect revealed preference | Describes the price of a quality differentiated commodity in terms of its quality attributes
36
What is the formula for the Hedonic pricing method?
``` Pi= f(Eit...Eim, Nil...Nin, Sit...Siq) m=Environmental Attributes of I n=Neighbour attributes of N q= site attributes of S Pi=The price of the house ```
37
What is a damage function?
DF represents the relationship between containment of a pollutant and the damage reduction (in physical terms)
38
Define Dynamic Efficency?
The allocation of resources across time maximises the present value of net benefits
39
What is the social welfare function in general, utilitarian and continuous time with infinite horizon form?
General W=W(U0,U1...Un) Utalitarian: W = U0 + U1/1+P + U2/(1+P)^2...UT/(1+P)^T P =social discount rate Infinite Horizon W=INT[U(Ct)e^-pt)] between infinity 0
40
What is hatwicks rule?
If all scarcity rent is invested in capital, total capital will not decline Scarcity rent is the surplus value after all costs and normal returns have been accounted for
41
What are the 3 sustainability criterion?
Strong Sustainability- Maintenance of stock of natural capital Weak Sustainability- Maintain the value of total capital Environmental Sustainability- Maintain certain physical flows of certain individual resources
42
What is the difference between renewable flow & stock resources?
Flow: Cannot be depleted e.g. solar Stock: Can be depleted e.g.living orgranisms
43
What is the formula for the basic growth process?
Gt=St+1-st | G= Amount of Growth S= Stocksize
44
What is the simple logistics growth function?
G(s)= gs(1- [s/smax]) G= Amount of Growth S=Stock size SMAX=The finite upper bound of stock i.e.. Carrying capacity g= The intrinsic fixed growth rate of the population, the rate it would grow when it is small relative to carrying capacity
45
Explain a steady state harvest.
G= Net Natural Growth H= Harvest | In a steady state, G=H and this gives a sustainable yield Therefore stock remains constant over time
46
What is a Maximum sustainable yield?
The harvest that occurs when natural growth is maximised
47
Why would economists state the MSY is not efficent?
If the cost of harvest is included (effort) the MSY is no longer the best outcome
48
Why will open access resources lead to over exploitation?
There is no incentive to save resources, hence each agent will increase until AR=AC instead of MR=MC
49
What external costs does open access create?
Contemporaneous external costs: Imposed on the current generation from overfishing Inter-generational external costs: Imposed on the future generation from the exploitation of the stock today Overfishing reduces stocks and thus future profits.
50
What factors make extinction more likely?
Higher market price, Lower harvest cost, Higher discount rate, a larger critical minimum threshold
51
What is the DPSIR model?
Land Use Indicator Framework :Measures of land use as indicators of environmental condition and quality Driving forces: Climate change, agricultural markets Pressures: Urbanisation, deforestation State: Stock of land cover, production of food Impacts: Loss of landscape quality, Biodiversity Responses, Planning decisions, control and regulation
52
What are the sources of inefficient land use and conversion?
Sprawl and Leapfrogging: Sprawl- When land is inefficiently dispersed Leapfrogging - A situation in which new development continues futher out The Public Infrastructure Problem: Low marginal cost of driving (Ownership vs use) Free Parking Incompatible Land Uses: One traditional Remedy is zoning but this promotes urban sprawl Undervaluing Environmental Amenities
53
What are the three hypothesis to explain global malnourishment?
A global Scarcity of Food A Mal-distribution of food among and within nations Temporary shortages caused by natural phenomenon
54
What are the four services of ecosystems?
Supporting - Nutrient cycling, soil formation Provisioning - Food, fresh water Regulating - Climate, flood Cultural - Aesthetic, recreational
55
How could we decide to conserve wildlife?
Could protect the species: there intrinsic value | Could protect their genetic information
56
What are the two types of damage polution?
Flow - Damage Pollution: Damage results from the flow of residuals Stock - Damage Pollution: Damages depend on the stock of pollutant at any point in time
57
What is a UM polutant?
A pollutant is Uniformly Mixing (UM) if it is quickly dispersed and its spatial distribution if uniform e.g. Concentration does not vary from place to place The location of the source is thus irrelevant What matters is the amount of emissions
58
What is a non UM pollutant?
A pollutant is non uniformly mixing if it does not disperse and hence the location of the source matters
59
What are the three pollutant control instruments?
Institutional Approach Command and Control Economic Instrument
60
What are the three forms of institutional approach?
Facilitation of bargaining: Reduce bargaining costs Specification of liability Development of social responsibility: Promote Citizenship
61
What are two variants of the facilitation of bargaining?
Improve the effectiveness of property rights | Encourage greater social responsibility in making choices
62
What is the Coase bargaining solution?
Establish legally enforceable property rights Assume zero transaction cost This yields efficient outcome, internalised externalities and no intervention
63
Name some limitations of the bargaining solution
Bargaining unlikely unless there is well defined property rights Requires expected gains > expected costs Bargaining over time and across generations
64
What are the two variations of liability: incentive mechanisms.
Strict Liability PR2V: The injurer pays full compensation to victim Negligence LiabilityPR2I: The injurer only pays if he is not taking sufficient precautions
65
What are the problems with liability
If a public bad, the use of liability is not feasible | Difficult where damage appears long after discharge
66
Name the command and control instruments
``` Input controls over quantity and mix of inputs Technology controls Output quotas or prohibitions Emissions licences Location controls ```
67
Evaluate Command and control.
Attractive: Certainty of outcome Quick Unattractive Likely to be cost inefficient Fails to equalize marginal abatement costs They generally lack good dynamic incentives
68
Name the two types of economic instruments.
Emissions charges / Taxes | Pollution Permits
69
Name the types of emission charges.
Natural resource taxes Product charges / taxes Emissions abatement and resource subsidies
70
Name the types of polution permits
Deposit-refund systems Non-compliance fees Performance bonds Liability payments
71
What is the optimal pigovian tax?
Optimum Pigovian tax is equal to marginal damage at the optimal level of pollution
72
Name the advantages of a pigovian tax
Producer pays and has an incentive to produce at optimal level Taxes allow firms freedom to reduce emissions
73
Name the disadvantages of a pigovian tax
The polluter is penalised twice – once by paying the tax and once by losing profits Political difficulties and opposition from industry Information requirements
74
Compare the following instruments: Command and Control (C&C) Pollution Tax (PT) Emissions Abatement Subsidies (EAS) Marketable Permits (MP)
PT, EAS, MP can achieve targets at least cost C&C may also, be cost efficient For them to be so, the authority will need to know each polluter’s marginal cost of abatement
75
What does VSL and VOLY stand for?
VSL: The value of a statistical life Number of deaths associated with air pollution VOLY: The value of a life year Loss of life expectancy (Years)
76
What is the Command & Control Approach?
Establish a set of pollutant standards, Primary to protect human health Secondary to protect ecological values
77
Is command and control efficent?
``` Benefits and Costs Uniformity of standards Pollution density Concentration versus exposure C&C likely inefficiency, at least 78% more costly ```
78
What are the innovative approaches to solving air pollution?
Emissions Charges | Smog Trading
79
What is an emissions charge?
Economists usually suggest two types An efficiency charge: Achieve an efficient outcome by forcing the polluter to compensate for all damage A cost effective charge: Designed to achieve an ambient standard at lowest possible cost
80
What is SMOG Trading?
The 400 participating industry polluters under RECLAIM receive an annual pollution limit with falls by 5-8% annually for the next 10 years Polluters are allowed to use flexible approach such as purchasing credits from other firms - CAP & Trade Problems: Over allocation - To many permits originally Excessive cost due to deregulation of electricity market switched to temporarily lower fees
81
What is an implicit subsidy and what are the consequences?
Employee parking or free parking is an implicit subsidy that creates bias toward automobile travel Congestion Pollution
82
What are some possible reforms for polltuon?
``` Fuel Taxes Congestion Pricing Private Toll Roads Pay-as-you-drive insurance Parking Cash-Outs Feebates Accelerated Retirement Strategies ```
83
What are the key uses of water and why is this bad for the UK?
Public supply, transport, agriculture, industries, leisure, energy UK imports a lot of water (62%) - 6th largest in world
84
Discuss resource and impact decoupling
Splits the effects of water usage with respect to time Environmental impact worsens as human wellbeing increases A small increase in water leads to a greater increase in wellbeing
85
Discuss water scarcity and sources
A replenishable resource, if rate of replenishment is exceeded, supply declines Surface water, groundwater, quality
86
Discuss surface water
Sum MNB to give AggNB
87
Discuss ground water
Inter-temporal opportunity cost | If withdrawals exceed rechange, supply will decline
88
What are the sources of inefficiency in the current allocation system?
Restrictions on transfers - absence of property rights, use it or loose it, Municipal water pricing - subsidised water leads to inefficient waste, requires power to move, price should reflect distance
89
What are remedies to the sources of inefficency in the current allocaiton system
Relax use it or loose it through encouraging conservation and allowing the sale of conserved water Water markets & Water banks Elimnation of subsidies
90
Discuss the first tier methods of water pricing?
Best: Volumetric - based on volume - difficult to implement Tiered Block Rates - based on thresholds - less difficult Two part pricing - based on thresholds - longer time horizon Water markets - brought and sold on free market - very difficult
91
Discuss the second tier methods of water pricing
Second Best is output Output - Tax water if it is used to make money - easy Input - measure as input into process - easy Per Area - Allocate based on land size - easy but difficult to control demand
92
Discuss variable rate structures for water pricing
Flat fee- Constant regardless of output Uniform rate PU - most common, constant Declining Block - Price PU falls as use increases ?? Inverted Block - Price PU increases as use increases - Necessity -> luxury -> ridiculous Seasonal - price varies with season
93
List some sources of water pollution
Industrial waste, sewage treatment, leachate from landfils, fertillisers
94
Discuss the types of contamination sources
Point Source - Discharged at a specific point | Non Point Source - Run off from a variety of sources
95
What are the two types of pollutants?
Uniformly mixing, non uniformly mixing
96
Discuss the atmospheric deposition of pollution
Wet - Fall to ground with rain | Dry - Depostiion occurs when they become to heavy
97
Discuss fund and stock pollutants
Fund - Can be assimilated - Thermal pollution | Stock - No absorptive capacity, therefore accumulate
98
What are the control instruments for water pollution
Regulation, Voluntary means Economic incentives - Difficult for non uniform pollutnants, the use of a pollution tax will cause firms to reduce to Marginal tax rate, pollution permits allow compensation for abatement
99
Discuss economic incentives for non-point pollution sources
Qj = g(N,Z) Qj = Water Quality, N = Fertilise, Z = all other factors A tax will raise prices and lower quantity
100
How is the level of precaution on oil tankers decided?
Equate MC of precaution with MC of expected penalty | Minimise total expected costs
101
What are the four vertically independant activities in energy genertaion?
Generation - Production Transmission- Transportation at high voltage Distribution - Local transportation at low voltage Supply - Sake to end uses + metering & billing
102
Discuss electricity as an industry and a product
Industry: Capital intensive, huge sunk costs, supply=demand in real time Product: Derivrd demand, non storable, homogenous product, flexible and clean at point of consumption
103
Discuss the key characteristics of electricity
Non Storable - S=D continuously and Instantaneously When above average to we can build excess power to be released D&S are erratic Supply is inelastic
104
Discuss the cost characteristics of energy generation
Base load: High capital costs, low variable costs, constantly running Mid-Merit: Medium costs, used when needed Peak load, low capital, high variable, used at peak times
105
What is demand side price setting
Supply is a block system, price is based on what the demand lies within
106
What are the main electricity generation technologies?
Thermal - Nuclear, Coal, Oil Hydro - Reservoir, run of river Alternative - Wind, Solar
107
What are the consequences of power generation?
``` Airborn Emissions Heating of Water Waste Hazard for wildlife Noise & Visual Land Requirements ```
108
What is the key trend in land requirements
The more renewable the greater the land requirement
109
Discuss nuclear power
Safety - Risk of dissaster High decomimissioning and waste management costs No carbon costs
110
Discuss wind power
Low energy density Power related to turbine diameter and wind speed (increases with height) Reliable generation is 10% of capacity
111
Discuss solar energy
Thermal : Heating of Water Photovoltaic: Generation of energy BioMass: Using trees to make building materials, food
112
Discuss marine energy
Wave energy, tidal streams
113
What are the main methods for promoting renewable energy genration?
Renewable Obligation Certificates (ROC): A green certificate issued in the UK Contract for Difference (CFD): Difference between cost of investment and market price is paid, increases certainty -investment in green Feed in Tariffs (FITs): People are rewarded for feeding excess energy back into grid
114
What are the stages of development penetration for energy generation
``` RandD RDandD Pre-Commercial Supported Commercial Fully Commercial ```
115
What are the main innovation policy issues
RandD - Public support is limited, private is subject to market failure Innovation chain -Long and expensive path to market Valleys of Death- Projects make huge losses and require support Barriers to investment differ along the investment chain
116
Discuss the innovation chain
New technolgies recieve inital pushes from privatge investments but are then pulled to market by the Government Basic RandD -> Applied RandD -> Demonstration -> Comercialisation -> Market Accumualtion -> Diffusion
117
What are teh main barriers to investment at each stage of the investment chain
``` Basic RandD: Technical Applied RandD: Technical Demonstration: Economic Comercialisation: Economic Market Accumualtion: Social Diffusion: Politcal (rock boat) ```
118
What are the basic concepts of technological change?
Theory- invention and Innovation (early) Applied - Research, Demonstration (funding) Policy - Technolgical Push and Market Pull (efficiency up)
119
What are the effects of learning by doing?
A fall in unit costs
120
What are the effects of sector liberalisation on innovation?
Creates innovation at the margin | However, difficult to acquire private capital in early life
121
What where the main energy reforms in different Countries that led to market deregulation
``` US: High prices triggered deregulation UK: Determined Government Nordic countries: Low prices, exported EU: View change LCDCs: Inefficient sectors and power shortages ```
122
What are the methods of energy sector liberalisation?
``` Vertical Separation Competition in generation Regulation of transmission and distribution Competition in retail Independent regulation Privitisation ```
123
What is the difference between the US and UK wholesale electricity markets?A
US: Ran by system operator European: Markets separate from system
124
What are the different states in the electricity market?
Long: Supply > Demand - Fixed by short generator | Short Supply < Demand - Fixed by long generator
125
What are the key terms of market prices
Market Index Price (MIP), wholesale price of electricity; System Buy Price (SBP): price paid by an operator when short of its contracted electricity sales System Sell Price (SSP): price paid by an operator when long on their contracted sales.
126
What are the causes of an energy policy change?
``` Low carbon sources Maintain energy security Congested Networks Fuel Poverty Climate Change Innovation ```
127
What are the impacts of climate change?
``` Sea level rise Sea temperature Rise Water resource pollution Human health Tourism decline ```
128
What are the strategies of climate change reduction
Adaptation: Modify systems to minimise harm Mitigation: Moderate temperature rise by reducing emissions Climate Engineering: Carbon dioxide removal, Solar radiation management
129
Discuss mitigation:
Reduce emissions to prevent climate change Without, rate will increase Global benefits Stabilisation at lower levels reduces cost of adaptation
130
Discuss Adaptation
Protect against and live with climate change Those who can pay benefit Can reduce damage whilst mitigation takes effect Important for unavoidable impacts Without mitigation, less effective and more expensive
131
Discuss adaptation and mitigation in LDC's
Generally use adaptation first
132
What are the effects of adaptation and mitigation graphically
Adaptation shifts the cost of climate change down | Mitigation reduces emissions
133
What are the key features of natural monopolies?
Capital intensive Low MC < AC Economies of scale enormous Regulated price >MC else negative profits
134
How would you transfer efficiency gains to consumer
``` R=bE + (1-b)*c R=Regulated Revenue E=Revenue required for efficient operation C=Network utility own cost b=Power of incentive ```
135
What are the key points of the population problem?
Number of people Geography - Rich v Poor Composition Quality of Human Capital The population is both growing and ageing - dependency ratio
136
What are the two main growth limits
Limited nature of resources | Scale of global population and over crowding
137
What is the population environment connection?
Population density has a negative effect on environment Induced Innovation Hypothesis : Increasing population will increase demand for agriculture increasing innovation Downward Spiral Hypothesis : Poverty and degradation are reinforcing
138
Discuss population growth and economic growth
MP of labour > 0, population grows | MP
139
Define output
o=l∗x O=Output level L=Number of workers X==Average output per worker Dividing both sides by population o/p=L/P∗x
140
Discuss technolgical progress and diminishing returns
Tech progress has removed the population problem | However, as tech improves, it is marginally less benefical
141
Discuss demographic transformaton
High Birth and Death Rates Low Death Rates therefore pop growth Low birth rates: Stable Negative correlation between GDP and birth rates
142
What are the two market failures of population growth?
Congestion externalisation | Income inequality
143
Why bother with environmental justice
Practical and ethical Issues | Social Justice
144
What are the main types of environmental justice
Distributive Justice - concerned with how the environmental good and bad are distributed among different groups Procedural Justice - Concerned with fairness and equity of access to decision making process Policy Justice - Concerned with principles and outcomes of environmental policy decisions and how these effect social groups
145
What the the economics of waste site location?
Incetives: Owners: Low cost, Community: can be compensated Lower income communities more attractive due to lower WTP
146
Discuss compensation as a policy instrument
Benefits the local community, internalizing the costs However may fail as: People may see it as a bribe People may realise how bad the thing is and reject
147
Discuss third parties in market allocaitons
Liability law can internalize external costs for third parties Can force sources to compensate victims and thus use sufficient precaution
148
What is a performance bond?
Everybody pays into bond which can then be used in the event of a disaster In the event of no disaster, money is returned to firms thus incentive No legal fees required to produce money in event of disaster
149
Discuss ocupational hazards
Occuptations with more risk attract workers who are less adverse to risk Higher risk = higher pay (risk premium) Ethical concerns if job is only one available
150
Discuss international externalities
Natural resources and environmental pollution do not recognise administrative borders Unintended / uncompensated by product of one countries consumption Exploitation of shared water, oil and gas Emissions Extinction of specifies Trade in endangered species
151
What are the economic instruments for reducing CFC's used in the US
Tradeable emissions allowances Ensured efficent production of most needed CFC's Output Tax Ensure people do not gain due to higher prices
152
What where the flexible mechanisms used in the Kyoto Protocol/
International Emissions trading among signatories | Countries recieve credits for financing emissions reduction in non signatories
153
On what basis should Green house gases be reduced?
Equiproportional reductions? bility to pay - reduction based on current income Polluter pays principle (PPP) - base reductions on current / past contribution to the problem Equal per capita emissions - everyone equal right to the same level of global environment
154
Discuss traditional Regulation
``` Certianty of reduciton depends on type No certianty on price or cost Does not encourage innovaton Does not raise public revenue Somewhat harms regulated industries Very poltically fesable No new institutions required ```
155
Discuss a cap and trade scheme
``` Certianty of emissions No certianty about price or cost Encourages innovation Yes, only if auctioned Harms competetiveness Is not very feasable A new institution is required ```
156
Discuss Carbon taxes
``` Unertianty around emissions reduction Certiaty about prices and cost Encourages innovation Raises revenue Harms competetivenes Low politcal feasability Mininal institutions required ```
157
Summarise international agreements
Ineffective if large no of counrties | Co-Operative sollution is in best interest of all as a collective
158
What are the main concerns surrounding the environment and trade?
Will footloose industries migrate to ‘pollution havens’? ‘Race to the bottom’ - Will countries competitively lower environmental standards to generate trade benefits? Will some countries engage in ‘ecological dumping’ by lowering emissions standards to gain competitive advantage What about the environmental impact of transporting goods internationally?
159
What is the north south model of trade and the environment
Suggests LDC source of benefit is unregulated use of resources Argues north also benefits from this through trade
160
What is the formula for teh scale, composition and techique effects
Emissions = Scale of Activity x Share of dirty goods x Emissions per unit of dirty good Taking logs gives Change in emissions = Change in Output x Change in share of dirty commodity x change in emissions intensitty
161
What is Change in Output, Change in share of dirty commodity ,change in emissions intensitty also known as?
Change in Output : Scale effect Change in share of dirty commodity : Decomposition effect Change in emissions intensitty: Technique effect
162
What are the main elasticiites of SO2 emissions?
``` Scale effect (GDP/km2) 0.315 Composition effect (capital/labour) 0.993 Technique effect (income per capita) -0.1577 Trade intensity (export + imports)/GDP -0.394 ```
163
What is the environmental kuznets curve?
As a country grows environmetnal damage will worsen then improve Is shifted down by improvements in policies
164
What are the key points of ecological economics?
Takes a broader perspective and recognises that there is more than built capital Human, Social and Natural
165
How does ecol economics help with sustainability?
Illustrates the relationship between ESE, ecological, social and economics Reminds us of the complexity of ecological systems
166
Discuss the different production functions
Y=f(K,L) - Microeconomics Y=f(K,L,R) - Resource Economcis Y=f(K,L,M) - Environmental Y=f(K,L,M,A,SUM(M)) -Ambient Pollution Y=f(K,L,R,MR,A,SUM(M)) - Emissions linked to resource use A = Ambient concentration of pollution, R = Resource, M = Waste
167
Discuss IPAT dentity
I=PAT Impact = Population size * per captia y * resource waste This cancels to Impact = Mass
168
What is the formual for the environmental Kuznets Curve?
e=By-B1Y^2 | e=pollution
169
Discuss the differing views on Kuznets?
Implies there is no point curtailing economic environmental damage However, others view that whilst this is possible, it is certainly not autonomic Should not use growth policies as environmental damage policies
170
Define Hicksian Income.
The maximum amount a man can consume and still be as well off at the end of the week as he was at the beginning
171
What are some measures of growth that include environmental welfare
Adjusted net savings - includes environmental degredation Wealth Estimates - includes produced capital Geunine Progress Indicator Ecological Footprint HDI
172
Discuss the social limits of growth
Once basic material needs are satisfied, further growth is associated with an increasing proportion of income being spent on positional goods As a consequence, growth in developed economies is a less socially desirable objectives. It does not deliver the increased personal satisfactions that it is supposed to
173
Discuss hapiness economics
As income increases, so does happiness at a diminishing rate