Chapter 23: Economics, Environment, and Sustainability (Sofia) Flashcards
What is a free-market economic system?
Controlled only by interactions of supply and demand and price, without government control.
What is the market price equilibrium point?
supplier’s price matches what consumers are willing to pay
What are subsidies?
Payment to help a business thrive
What is natural capital?
Resources provided by the earth’s natural processes: air, land, soil, biodiversity, minerals, energy, and ecosystem services
What is human capital?
People’s physical and mental talents that provide labor and innovation
What is manufactured capital?
Tools such as machinery, materials and factories
what are open-access resources?
clean air, the open ocean, Earth’s life support system: governments tend to fail at protecting these
why do markets typically fail to protect the environment?
because they do not assign monetary value to natural capital or the harmful effects degrading ecosystems can have on human health
What can be done by the government to protect the environment through economics?
They can use economic tools like regulations, taxes, subsidies, and tax breaks
What are planetary sinks that pollutants can fall into?
air, water, soil, organisms
Important ecosystem services include…
air and water purification, nutrient cycling, and climate control
What are the kinds of value placed on ecosystems that are not represented in the marker (are not bought and sold)?
existence value, aesthetic value, and bequest (option) value: the amount people are willing to pay to protect the natural capital for future generations.
What is the discount rate, in relation to the economic value of ecosystems?
The idea that ecosystem values will continue to decrease, and in the future they will be less valuable than they are today
What is the optimum level of pollution cleanup?
When the cost of cleanup matches the cost of the harmful effects the pollution has on human life. As pollution gets cleaned up, the cost of cleaning goes up because the pollution has a lower concentration and therefore takes more energy to get the same amount of pollution removed than it did before.
what is full-cost pricing?
the idea that harmful external costs (to environment) should be included in the market price of goods
Why is full-cost pricing not used more widely?
- ) producers of environmentally harmful products would have to change their ways
- ) It is difficult to estimate environmental costs now and in the future
- ) Government subsidies favoring politically powerful companies (rich ones who usually harm the environment)
What are perverse subsidies?
subsidies leading to environmental damage
Advantages to environmental taxes and fees
- bring about full-cost pricing
- encourage businesses to develop environmentally friendly products and technologies
- easy to administer by existing tax agencies
Disadvantages to environmental taxes and fees
- low-income groups harmed unless baseline rates and safety nets are provided
- hard to determine optimal level for taxes and fees
- if set too low, wealthy polluters can just pay the taxes and use less money than they would to change their practices
What is said to be needed for successful implementation of green taxes?
- should be eased in to over 10-20 years so businesses can adjust
- income, payroll, or other taxes would have to be reduced so there would not be a net increase in taxes
- the poor and and lower-middle class needs a safety net in place for their basic needs (baseline rates and such)
Advantages of cap-and-trade pollution policies (tradable environmental permits)
- flexible and easy to administer
- encourage pollution prevention and waste reduction
- Permit prices to be determined by market trabsactions
Disadvantages of cap-and-trade pollution policies (tradable environmental permits)
- wealthy polluters and resource users can buy their way out
- caps can be too high and not regulated, leading to low progress
- self-monitoring of emissions can allow cheating
