All Notes Flashcards
What are the conditions for a free market to produce an efficient outcome?
Markets exist for all goods and services
All markets are perfectly competitive
Property rights are fully assigned in all resources
No externalities exist
Define static efficiency?
Allocation of resources lead to a maximisation of economic surplus
Give examples of market failure?
Absent Property Rights Externalities Public Goods Government Failure Imperfect Market Structure
What are the 3 strucutres required for property rights to be efficent?
Exclusivity - All benefits are accrued to the owner
Transferability - Should be transferable to others
Enforceability - Should be secure from seizure or encroachment
What are the 5 types of property rights?
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
What are the three types of externalitiy?
Negative: Costs to a third party : Pollution
Positive: Benefits to a third party: Airport construction
Pecuniary: External effect comes from a change in price
What is the Coase Theorem?
When negotiation costs are negligible and affected parties can freely negotiate an efficient allocation will be reached
What are some methods of Government Failure?
Rent Seeking - Resources are used in lobbying government for protection rather than efficency
Define Dignity?
If an item does not have a price, there is no equivalent hence dignity.
A project will go ahead where the CBA shows:
The NPV = Benefits - Costs - Environmental Costs >0
What are the four costs?
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 does the Kaldor and Hicks valuation method work?
Preferences of individuals through willingness to pay for a benefit /accept compensation for a cost
What is Pareto optimality?
You can not make somebody better off without making somebody worse off
Name some critics of environmental CBA.
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
What is the formula for a CBA?
Sum[WTPG(1+S)^-t] - Sum[WTPL(1+S)^-t >0
S = Discount Rate
What is the formula for a CBA if the loosers have property rights?
Sum[WTPG(1+S)^-t] - Sum[WTAL(1+S)^-t >0
S = Discount Rate
How is risk treated in a CBA?
The PVNB is weighted by its probability of occurrence.
EPVNB = Pi*PVNB.
What is discounting?
Reducing the value of future assets
A high discount rate means future assets have a low value
What is the formula for a discount factor?
W = 1/(1+s)^t
Why could discounting be classed as rational?
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
What are some critiques of discounting?
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?
Name some methods of environmental Valuation.
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
What is contingent valuation?
A survey based on stated preference techinque.Can be distributed by face to face, mail or telephone.
Why is there disparity between WTP and WTA?
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
What are some methods of stated preference valuation?
Direct: Contingent Valuation
Indirect: Choice Experiments
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
What is choice experiments?
Indirect stated preference technique.
Respondents are presented with a number of discrete alternatives and asked to state which they prefer
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
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
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
What are some methods of revealed preference valuation?
Indirect:Travel Cost
Indirect: Hedonic Property Values
What is the Travel Cost Method?
Indirect revealed preference
Based on the cost of travel to the site revealing its value
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
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.
What is the Hedonic Pricing Method?
Indirect revealed preference
Describes the price of a quality differentiated commodity in terms of its quality attributes
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
What is a damage function?
DF represents the relationship between containment of a pollutant and the damage reduction (in physical terms)
Define Dynamic Efficency?
The allocation of resources across time maximises the present value of net benefits
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
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
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
What is the difference between renewable flow & stock resources?
Flow: Cannot be depleted e.g. solar
Stock: Can be depleted e.g.living orgranisms
What is the formula for the basic growth process?
Gt=St+1-st
G= Amount of Growth S= Stocksize
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
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
What is a Maximum sustainable yield?
The harvest that occurs when natural growth is maximised
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
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
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.
What factors make extinction more likely?
Higher market price, Lower harvest cost, Higher discount rate, a larger critical minimum threshold
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
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
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
What are the four services of ecosystems?
Supporting - Nutrient cycling, soil formation
Provisioning - Food, fresh water
Regulating - Climate, flood
Cultural - Aesthetic, recreational
How could we decide to conserve wildlife?
Could protect the species: there intrinsic value
Could protect their genetic information
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
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
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
What are the three pollutant control instruments?
Institutional Approach
Command and Control
Economic Instrument
What are the three forms of institutional approach?
Facilitation of bargaining: Reduce bargaining costs
Specification of liability
Development of social responsibility: Promote Citizenship
What are two variants of the facilitation of bargaining?
Improve the effectiveness of property rights
Encourage greater social responsibility in making choices
What is the Coase bargaining solution?
Establish legally enforceable property rights
Assume zero transaction cost
This yields efficient outcome, internalised externalities and no intervention
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
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
What are the problems with liability
If a public bad, the use of liability is not feasible
Difficult where damage appears long after discharge
Name the command and control instruments
Input controls over quantity and mix of inputs Technology controls Output quotas or prohibitions Emissions licences Location controls
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
Name the two types of economic instruments.
Emissions charges / Taxes
Pollution Permits
Name the types of emission charges.
Natural resource taxes
Product charges / taxes
Emissions abatement and resource subsidies
Name the types of polution permits
Deposit-refund systems
Non-compliance fees
Performance bonds
Liability payments
What is the optimal pigovian tax?
Optimum Pigovian tax is equal to marginal damage at the optimal level of pollution
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
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
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
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)
What is the Command & Control Approach?
Establish a set of pollutant standards,
Primary to protect human health
Secondary to protect ecological values
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
What are the innovative approaches to solving air pollution?
Emissions Charges
Smog Trading
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
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
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
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
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
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
Discuss water scarcity and sources
A replenishable resource, if rate of replenishment is exceeded, supply declines
Surface water, groundwater, quality
Discuss surface water
Sum MNB to give AggNB
Discuss ground water
Inter-temporal opportunity cost
If withdrawals exceed rechange, supply will decline
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
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
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
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
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
List some sources of water pollution
Industrial waste, sewage treatment, leachate from landfils, fertillisers
Discuss the types of contamination sources
Point Source - Discharged at a specific point
Non Point Source - Run off from a variety of sources
What are the two types of pollutants?
Uniformly mixing, non uniformly mixing
Discuss the atmospheric deposition of pollution
Wet - Fall to ground with rain
Dry - Depostiion occurs when they become to heavy
Discuss fund and stock pollutants
Fund - Can be assimilated - Thermal pollution
Stock - No absorptive capacity, therefore accumulate
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
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
How is the level of precaution on oil tankers decided?
Equate MC of precaution with MC of expected penalty
Minimise total expected costs
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
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
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
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
What is demand side price setting
Supply is a block system, price is based on what the demand lies within
What are the main electricity generation technologies?
Thermal - Nuclear, Coal, Oil
Hydro - Reservoir, run of river
Alternative - Wind, Solar
What are the consequences of power generation?
Airborn Emissions Heating of Water Waste Hazard for wildlife Noise & Visual Land Requirements
What is the key trend in land requirements
The more renewable the greater the land requirement
Discuss nuclear power
Safety - Risk of dissaster
High decomimissioning and waste management costs
No carbon costs
Discuss wind power
Low energy density
Power related to turbine diameter and wind speed (increases with height)
Reliable generation is 10% of capacity
Discuss solar energy
Thermal : Heating of Water
Photovoltaic: Generation of energy
BioMass: Using trees to make building materials, food
Discuss marine energy
Wave energy, tidal streams
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
What are the stages of development penetration for energy generation
RandD RDandD Pre-Commercial Supported Commercial Fully Commercial
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
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
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)
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)
What are the effects of learning by doing?
A fall in unit costs
What are the effects of sector liberalisation on innovation?
Creates innovation at the margin
However, difficult to acquire private capital in early life
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
What are the methods of energy sector liberalisation?
Vertical Separation Competition in generation Regulation of transmission and distribution Competition in retail Independent regulation Privitisation
What is the difference between the US and UK wholesale electricity markets?A
US: Ran by system operator
European: Markets separate from system
What are the different states in the electricity market?
Long: Supply > Demand - Fixed by short generator
Short Supply < Demand - Fixed by long generator
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.
What are the causes of an energy policy change?
Low carbon sources Maintain energy security Congested Networks Fuel Poverty Climate Change Innovation
What are the impacts of climate change?
Sea level rise Sea temperature Rise Water resource pollution Human health Tourism decline
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
Discuss mitigation:
Reduce emissions to prevent climate change
Without, rate will increase
Global benefits
Stabilisation at lower levels reduces cost of adaptation
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
Discuss adaptation and mitigation in LDC’s
Generally use adaptation first
What are the effects of adaptation and mitigation graphically
Adaptation shifts the cost of climate change down
Mitigation reduces emissions
What are the key features of natural monopolies?
Capital intensive
Low MC < AC
Economies of scale enormous
Regulated price >MC else negative profits
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
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
What are the two main growth limits
Limited nature of resources
Scale of global population and over crowding
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
Discuss population growth and economic growth
MP of labour > 0, population grows
MP
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
Discuss technolgical progress and diminishing returns
Tech progress has removed the population problem
However, as tech improves, it is marginally less benefical
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
What are the two market failures of population growth?
Congestion externalisation
Income inequality
Why bother with environmental justice
Practical and ethical Issues
Social Justice
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
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
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
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
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
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
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
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
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
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
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
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
Discuss Carbon taxes
Unertianty around emissions reduction Certiaty about prices and cost Encourages innovation Raises revenue Harms competetivenes Low politcal feasability Mininal institutions required
Summarise international agreements
Ineffective if large no of counrties
Co-Operative sollution is in best interest of all as a collective
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?
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
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
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
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
What is the environmental kuznets curve?
As a country grows environmetnal damage will worsen then improve
Is shifted down by improvements in policies
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
How does ecol economics help with sustainability?
Illustrates the relationship between ESE, ecological, social and economics
Reminds us of the complexity of ecological systems
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
Discuss IPAT dentity
I=PAT
Impact = Population size * per captia y * resource waste
This cancels to Impact = Mass
What is the formual for the environmental Kuznets Curve?
e=By-B1Y^2
e=pollution
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
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
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
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
Discuss hapiness economics
As income increases, so does happiness at a diminishing rate
