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Environmental Economics > All Notes > Flashcards

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

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2
Q

Define static efficiency?

A

Allocation of resources lead to a maximisation of economic surplus

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3
Q

Give examples of market failure?

A 
Absent Property Rights
Externalities
Public Goods
Government Failure
Imperfect Market Structure
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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

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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

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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

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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

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8
Q

What are some methods of Government Failure?

A

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

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9
Q

Define Dignity?

A

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

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10
Q

A project will go ahead where the CBA shows:

A

The NPV = Benefits - Costs - Environmental Costs >0

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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
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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

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13
Q

What is Pareto optimality?

A

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

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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

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15
Q

What is the formula for a CBA?

A

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

S = Discount Rate

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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

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17
Q

How is risk treated in a CBA?

A

The PVNB is weighted by its probability of occurrence.

EPVNB = Pi*PVNB.

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18
Q

What is discounting?

A

Reducing the value of future assets

A high discount rate means future assets have a low value

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19
Q

What is the formula for a discount factor?

A

W = 1/(1+s)^t

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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

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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?

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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

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23
Q

What is contingent valuation?

A

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

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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

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25
Q

What are some methods of stated preference valuation?

A

Direct: Contingent Valuation
Indirect: Choice Experiments

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26
Q

What is the main problem with contingent valuation, give examples.

A

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

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27
Q

What is choice experiments?

A

Indirect stated preference technique.

Respondents are presented with a number of discrete alternatives and asked to state which they prefer

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28
Q

What are the benefits of choice experiments?

A

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

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29
Q

What is the formula for choice experiments?

A

V= a+ B1X1 + B2X2 +BNXN +BCXC
V=utility, a = constant B1=Ratio of coefficients
X1 = other attributes C = Cost

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30
Q

What are some problems with Choice Experiments?

A

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

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31
Q

What are some methods of revealed preference valuation?

A

Indirect:Travel Cost
Indirect: Hedonic Property Values

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32
Q

What is the Travel Cost Method?

A

Indirect revealed preference

Based on the cost of travel to the site revealing its value

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33
Q

What is the formula for travel cost method?

A 
Ln(Vi)= a-bc +e
Vi= visit per cost per person per year
a=Constant
C=Cost per trip
e= Error term
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34
Q

What are some problems with the travel cost method?

A

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.

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35
Q

What is the Hedonic Pricing Method?

A

Indirect revealed preference

Describes the price of a quality differentiated commodity in terms of its quality attributes

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36
Q

What is the formula for the Hedonic pricing method?

A 
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
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37
Q

What is a damage function?

A

DF represents the relationship between containment of a pollutant and the damage reduction (in physical terms)

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38
Q

Define Dynamic Efficency?

A

The allocation of resources across time maximises the present value of net benefits

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39
Q

What is the social welfare function in general, utilitarian and continuous time with infinite horizon form?

A

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

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40
Q

What is hatwicks rule?

A

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

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41
Q

What are the 3 sustainability criterion?

A

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

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42
Q

What is the difference between renewable flow & stock resources?

A

Flow: Cannot be depleted e.g. solar
Stock: Can be depleted e.g.living orgranisms

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43
Q

What is the formula for the basic growth process?

A

Gt=St+1-st

G= Amount of Growth S= Stocksize

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44
Q

What is the simple logistics growth function?

A

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

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45
Q

Explain a steady state harvest.

A

G= Net Natural Growth H= Harvest

In a steady state, G=H and this gives a sustainable yield Therefore stock remains constant over time

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46
Q

What is a Maximum sustainable yield?

A

The harvest that occurs when natural growth is maximised

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47
Q

Why would economists state the MSY is not efficent?

A

If the cost of harvest is included (effort) the MSY is no longer the best outcome

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48
Q

Why will open access resources lead to over exploitation?

A

There is no incentive to save resources, hence each agent will increase until AR=AC instead of MR=MC

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49
Q

What external costs does open access create?

A

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.

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50
Q

What factors make extinction more likely?

A

Higher market price, Lower harvest cost, Higher discount rate, a larger critical minimum threshold

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51
Q

What is the DPSIR model?

A

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

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52
Q

What are the sources of inefficient land use and conversion?

A

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

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53
Q

What are the three hypothesis to explain global malnourishment?

A

A global Scarcity of Food
A Mal-distribution of food among and within nations
Temporary shortages caused by natural phenomenon

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54
Q

What are the four services of ecosystems?

A

Supporting - Nutrient cycling, soil formation
Provisioning - Food, fresh water
Regulating - Climate, flood
Cultural - Aesthetic, recreational

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55
Q

How could we decide to conserve wildlife?

A

Could protect the species: there intrinsic value

Could protect their genetic information

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56
Q

What are the two types of damage polution?

A

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

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57
Q

What is a UM polutant?

A

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

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58
Q

What is a non UM pollutant?

A

A pollutant is non uniformly mixing if it does not disperse and hence the location of the source matters

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59
Q

What are the three pollutant control instruments?

A

Institutional Approach
Command and Control
Economic Instrument

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60
Q

What are the three forms of institutional approach?

A

Facilitation of bargaining: Reduce bargaining costs
Specification of liability
Development of social responsibility: Promote Citizenship

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61
Q

What are two variants of the facilitation of bargaining?

A

Improve the effectiveness of property rights

Encourage greater social responsibility in making choices

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62
Q

What is the Coase bargaining solution?

A

Establish legally enforceable property rights
Assume zero transaction cost
This yields efficient outcome, internalised externalities and no intervention

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63
Q

Name some limitations of the bargaining solution

A

Bargaining unlikely unless there is well defined property rights
Requires expected gains > expected costs
Bargaining over time and across generations

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64
Q

What are the two variations of liability: incentive mechanisms.

A

Strict Liability PR2V: The injurer pays full compensation to victim
Negligence LiabilityPR2I: The injurer only pays if he is not taking sufficient precautions

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65
Q

What are the problems with liability

A

If a public bad, the use of liability is not feasible

Difficult where damage appears long after discharge

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66
Q

Name the command and control instruments

A 
Input controls over quantity and mix of inputs
Technology controls
Output quotas or prohibitions
Emissions licences
Location controls
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67
Q

Evaluate Command and control.

A

Attractive: Certainty of outcome
Quick
Unattractive Likely to be cost inefficient
Fails to equalize marginal abatement costs
They generally lack good dynamic incentives

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68
Q

Name the two types of economic instruments.

A

Emissions charges / Taxes

Pollution Permits

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69
Q

Name the types of emission charges.

A

Natural resource taxes
Product charges / taxes
Emissions abatement and resource subsidies

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70
Q

Name the types of polution permits

A

Deposit-refund systems
Non-compliance fees
Performance bonds
Liability payments

71
Q

What is the optimal pigovian tax?

A

Optimum Pigovian tax is equal to marginal damage at the optimal level of pollution

72
Q

Name the advantages of a pigovian tax

A

Producer pays and has an incentive to produce at optimal level
Taxes allow firms freedom to reduce emissions

73
Q

Name the disadvantages of a pigovian tax

A

The polluter is penalised twice – once by paying the tax and once by losing profits
Political difficulties and opposition from industry
Information requirements

74
Q

Compare the following instruments: Command and Control (C&C)
Pollution Tax (PT)
Emissions Abatement Subsidies (EAS)
Marketable Permits (MP)

A

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
Q

What does VSL and VOLY stand for?

A

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
Q

What is the Command & Control Approach?

A

Establish a set of pollutant standards,
Primary to protect human health
Secondary to protect ecological values

77
Q

Is command and control efficent?

A 
Benefits and Costs
Uniformity of standards
Pollution density
Concentration versus exposure
C&C likely inefficiency, at least 78% more costly
78
Q

What are the innovative approaches to solving air pollution?

A

Emissions Charges

Smog Trading

79
Q

What is an emissions charge?

A

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
Q

What is SMOG Trading?

A

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
Q

What is an implicit subsidy and what are the consequences?

A

Employee parking or free parking is an implicit subsidy that creates bias toward automobile travel
Congestion
Pollution

82
Q

What are some possible reforms for polltuon?

A 
Fuel Taxes
Congestion Pricing
Private Toll Roads
Pay-as-you-drive insurance
Parking Cash-Outs
Feebates
Accelerated Retirement Strategies
83
Q

What are the key uses of water and why is this bad for the UK?

A

Public supply, transport, agriculture, industries, leisure, energy
UK imports a lot of water (62%) - 6th largest in world

84
Q

Discuss resource and impact decoupling

A

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
Q

Discuss water scarcity and sources

A

A replenishable resource, if rate of replenishment is exceeded, supply declines
Surface water, groundwater, quality

86
Q

Discuss surface water

A

Sum MNB to give AggNB

87
Q

Discuss ground water

A

Inter-temporal opportunity cost

If withdrawals exceed rechange, supply will decline

88
Q

What are the sources of inefficiency in the current allocation system?

A

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
Q

What are remedies to the sources of inefficency in the current allocaiton system

A

Relax use it or loose it through encouraging conservation and allowing the sale of conserved water
Water markets & Water banks
Elimnation of subsidies

90
Q

Discuss the first tier methods of water pricing?

A

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
Q

Discuss the second tier methods of water pricing

A

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
Q

Discuss variable rate structures for water pricing

A

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
Q

List some sources of water pollution

A

Industrial waste, sewage treatment, leachate from landfils, fertillisers

94
Q

Discuss the types of contamination sources

A

Point Source - Discharged at a specific point

Non Point Source - Run off from a variety of sources

95
Q

What are the two types of pollutants?

A

Uniformly mixing, non uniformly mixing

96
Q

Discuss the atmospheric deposition of pollution

A

Wet - Fall to ground with rain

Dry - Depostiion occurs when they become to heavy

97
Q

Discuss fund and stock pollutants

A

Fund - Can be assimilated - Thermal pollution

Stock - No absorptive capacity, therefore accumulate

98
Q

What are the control instruments for water pollution

A

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
Q

Discuss economic incentives for non-point pollution sources

A

Qj = g(N,Z)
Qj = Water Quality, N = Fertilise, Z = all other factors
A tax will raise prices and lower quantity

100
Q

How is the level of precaution on oil tankers decided?

A

Equate MC of precaution with MC of expected penalty

Minimise total expected costs

101
Q

What are the four vertically independant activities in energy genertaion?

A

Generation - Production
Transmission- Transportation at high voltage
Distribution - Local transportation at low voltage
Supply - Sake to end uses + metering & billing

102
Q

Discuss electricity as an industry and a product

A

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
Q

Discuss the key characteristics of electricity

A

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
Q

Discuss the cost characteristics of energy generation

A

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
Q

What is demand side price setting

A

Supply is a block system, price is based on what the demand lies within

106
Q

What are the main electricity generation technologies?

A

Thermal - Nuclear, Coal, Oil
Hydro - Reservoir, run of river
Alternative - Wind, Solar

107
Q

What are the consequences of power generation?

A 
Airborn Emissions
Heating of Water
Waste
Hazard for wildlife
Noise & Visual 
Land Requirements
108
Q

What is the key trend in land requirements

A

The more renewable the greater the land requirement

109
Q

Discuss nuclear power

A

Safety - Risk of dissaster
High decomimissioning and waste management costs
No carbon costs

110
Q

Discuss wind power

A

Low energy density
Power related to turbine diameter and wind speed (increases with height)
Reliable generation is 10% of capacity

111
Q

Discuss solar energy

A

Thermal : Heating of Water
Photovoltaic: Generation of energy
BioMass: Using trees to make building materials, food

112
Q

Discuss marine energy

A

Wave energy, tidal streams

113
Q

What are the main methods for promoting renewable energy genration?

A

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
Q

What are the stages of development penetration for energy generation

A 
RandD
RDandD
Pre-Commercial
Supported Commercial
Fully Commercial
115
Q

What are the main innovation policy issues

A

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
Q

Discuss the innovation chain

A

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
Q

What are teh main barriers to investment at each stage of the investment chain

A 
Basic RandD: Technical
Applied RandD: Technical
Demonstration: Economic
Comercialisation: Economic
Market Accumualtion: Social
Diffusion: Politcal (rock boat)
118
Q

What are the basic concepts of technological change?

A

Theory- invention and Innovation (early)
Applied - Research, Demonstration (funding)
Policy - Technolgical Push and Market Pull (efficiency up)

119
Q

What are the effects of learning by doing?

A

A fall in unit costs

120
Q

What are the effects of sector liberalisation on innovation?

A

Creates innovation at the margin

However, difficult to acquire private capital in early life

121
Q

What where the main energy reforms in different Countries that led to market deregulation

A 
US: High prices triggered deregulation
UK: Determined Government
Nordic countries: Low prices,  exported
EU: View change
LCDCs: Inefficient sectors and power shortages
122
Q

What are the methods of energy sector liberalisation?

A 
Vertical Separation
Competition in generation
Regulation of transmission and distribution
Competition in retail
Independent regulation
Privitisation
123
Q

What is the difference between the US and UK wholesale electricity markets?A

A

US: Ran by system operator
European: Markets separate from system

124
Q

What are the different states in the electricity market?

A

Long: Supply > Demand - Fixed by short generator

Short Supply < Demand - Fixed by long generator

125
Q

What are the key terms of market prices

A

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
Q

What are the causes of an energy policy change?

A 
Low carbon sources
Maintain energy security
Congested Networks
Fuel Poverty
Climate Change
Innovation
127
Q

What are the impacts of climate change?

A 
Sea level rise
Sea temperature Rise
Water resource pollution
Human health
Tourism decline
128
Q

What are the strategies of climate change reduction

A

Adaptation: Modify systems to minimise harm
Mitigation: Moderate temperature rise by reducing emissions
Climate Engineering: Carbon dioxide removal, Solar radiation management

129
Q

Discuss mitigation:

A

Reduce emissions to prevent climate change
Without, rate will increase
Global benefits
Stabilisation at lower levels reduces cost of adaptation

130
Q

Discuss Adaptation

A

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
Q

Discuss adaptation and mitigation in LDC’s

A

Generally use adaptation first

132
Q

What are the effects of adaptation and mitigation graphically

A

Adaptation shifts the cost of climate change down

Mitigation reduces emissions

133
Q

What are the key features of natural monopolies?

A

Capital intensive
Low MC < AC
Economies of scale enormous
Regulated price >MC else negative profits

134
Q

How would you transfer efficiency gains to consumer

A 
R=bE + (1-b)*c
R=Regulated Revenue
E=Revenue required for efficient operation
C=Network utility own cost
b=Power of incentive
135
Q

What are the key points of the population problem?

A

Number of people
Geography - Rich v Poor
Composition
Quality of Human Capital

The population is both growing and ageing - dependency ratio

136
Q

What are the two main growth limits

A

Limited nature of resources

Scale of global population and over crowding

137
Q

What is the population environment connection?

A

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
Q

Discuss population growth and economic growth

A

MP of labour > 0, population grows

MP

139
Q

Define output

A

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
Q

Discuss technolgical progress and diminishing returns

A

Tech progress has removed the population problem

However, as tech improves, it is marginally less benefical

141
Q

Discuss demographic transformaton

A

High Birth and Death Rates
Low Death Rates therefore pop growth
Low birth rates: Stable
Negative correlation between GDP and birth rates

142
Q

What are the two market failures of population growth?

A

Congestion externalisation

Income inequality

143
Q

Why bother with environmental justice

A

Practical and ethical Issues

Social Justice

144
Q

What are the main types of environmental justice

A

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
Q

What the the economics of waste site location?

A

Incetives:
Owners: Low cost, Community: can be compensated
Lower income communities more attractive due to lower WTP

146
Q

Discuss compensation as a policy instrument

A

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
Q

Discuss third parties in market allocaitons

A

Liability law can internalize external costs for third parties
Can force sources to compensate victims and thus use sufficient precaution

148
Q

What is a performance bond?

A

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
Q

Discuss ocupational hazards

A

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
Q

Discuss international externalities

A

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
Q

What are the economic instruments for reducing CFC’s used in the US

A

Tradeable emissions allowances
Ensured efficent production of most needed CFC’s
Output Tax
Ensure people do not gain due to higher prices

152
Q

What where the flexible mechanisms used in the Kyoto Protocol/

A

International Emissions trading among signatories

Countries recieve credits for financing emissions reduction in non signatories

153
Q

On what basis should Green house gases be reduced?

A

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
Q

Discuss traditional Regulation

A 
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
Q

Discuss a cap and trade scheme

A 
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
Q

Discuss Carbon taxes

A 
Unertianty around emissions reduction
Certiaty about prices and cost
Encourages innovation
Raises revenue
Harms competetivenes
Low politcal feasability
Mininal institutions required
157
Q

Summarise international agreements

A

Ineffective if large no of counrties

Co-Operative sollution is in best interest of all as a collective

158
Q

What are the main concerns surrounding the environment and trade?

A

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
Q

What is the north south model of trade and the environment

A

Suggests LDC source of benefit is unregulated use of resources
Argues north also benefits from this through trade

160
Q

What is the formula for teh scale, composition and techique effects

A

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
Q

What is Change in Output, Change in share of dirty commodity ,change in emissions intensitty also known as?

A

Change in Output : Scale effect
Change in share of dirty commodity : Decomposition effect
Change in emissions intensitty: Technique effect

162
Q

What are the main elasticiites of SO2 emissions?

A 
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
Q

What is the environmental kuznets curve?

A

As a country grows environmetnal damage will worsen then improve
Is shifted down by improvements in policies

164
Q

What are the key points of ecological economics?

A

Takes a broader perspective and recognises that there is more than built capital
Human, Social and Natural

165
Q

How does ecol economics help with sustainability?

A

Illustrates the relationship between ESE, ecological, social and economics
Reminds us of the complexity of ecological systems

166
Q

Discuss the different production functions

A

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
Q

Discuss IPAT dentity

A

I=PAT
Impact = Population size * per captia y * resource waste
This cancels to Impact = Mass

168
Q

What is the formual for the environmental Kuznets Curve?

A

e=By-B1Y^2

e=pollution

169
Q

Discuss the differing views on Kuznets?

A

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
Q

Define Hicksian Income.

A

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
Q

What are some measures of growth that include environmental welfare

A

Adjusted net savings - includes environmental degredation
Wealth Estimates - includes produced capital
Geunine Progress Indicator
Ecological Footprint
HDI

172
Q

Discuss the social limits of growth

A

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
Q

Discuss hapiness economics

A

As income increases, so does happiness at a diminishing rate

Environmental Economics (1 decks)

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