Environmental 1: Foundations Flashcards
What is ‘IPAT’?
IPAT is an accounting identity that decomposes emissions levels I into population levels P, affluence per-capita A, and technology T. Since A is income/person, T is environmental impact / unit of income and P is population, I=PAT is total environmental impact. Changes to emissions must come through changes to one of these terms, and any increases to P or A require falls in T in order not to harm the environment.
Why might we expect to see an environmental Kuznets curve?
As countries first industrialise, their marginal benefit from environmental damage greatly exceeds the marginal cost. Poor countries have high marginal utility of money, so the marginal rate of substitution between environmental damage and consumption is high. We therefore expect the first heavy industries to develop a country and degrade its environment. However, as a country grows richer, the marginal utility of money falls and therefore the demand for environmental quality increases. The marginal damages of environmental degradation are therefore much higher, and more conservationist and environmental efforts will be put in place. We therefore expect environmental quality to first fall, and then to rise again.
Does there appear to be an environmental Kuznets curve in practice?
For some pollutants, we can see a clear environmental Kuznets curve in the data. Urban concentrations of sulphur dioxide and particulate matter rise with income, and then sharply fall. Pollutants like CO2 do not yet show this effect, but we should note that many countries have ‘decoupled’ income growth and emissions growth.
What is a marginal external cost? How is it related to income?
The marginal external cost of a pollutant q is the marginal rate of substitution between consumption x and q. As normal, therefore, it is the ratio of the marginal utility of q and the marginal utility of x. Since the marginal utility of income usually decreases with x, marginal external costs tend to increase with income.
Why are there multiple solutions to externality problems? How do we choose between them?
We have two choice variables: the pollutant q and a wealth transfer x. ‘Marginal benefit = marginal external cost’ fixes only one of these values, so there are multiple solutions. A welfare weighting between u1 and u2 determines the optimal choice of q. Note that q is constant across solutions only in the case of quasilinear preferences.
Why does the Coase theorem not usually apply to bargaining problems in practice?
Transaction costs cannot be assumed to be negligible. With small numbers of parties, private information leads to inefficient bargaining, under the Myerson-Satterthwaite theorem. But, with large numbers of agents, coordination costs are likely to be large.
Why can assigning property rights not solve public goods problems?
Even if assigned property rights, the incentive is to free-ride on others’ provision of public goods, since they remain non-excludable. Assigning private property rights could solve the problem, but this requires that non-excludability is removed, which may not be feasible in cases like clean air.
When is common governance of the commons most likely to work? Why?
Elinor Ostrom’s work on common governance shows that sustainable consumption is most likely to work when:
- The resource can be easily monitored: eg is stationary, and clearly delineated.
- Shared norms are adhered to: the resource is owned by a small, homogenous social network with existing practices of reciprocity.
- Rules can be easily enforced: eg users cannot leave the community, they are mutually dependent in many ways.
These conditions suggest that common land for grazing may be used well, but the global atmospheric commons is unlikely to be sustainably used.
What can go wrong with government control of natural resources?
Government mandates can impose rules that do not align with local interests, and incentives to follow the centre’s rules may be inadequate. They lack information on the efficient use of the resource, and the social power to effectively manage it.
