Environmental sustainability

Question 1

Ecologically sustainable development

Answer 1

Ecologically sustainable development involves conserving and enhancing the communities’ resources so that ecological processes and quality of life are maintained. It is a level of economic activity which is compatible with the long-term preservation of the environment, rather than merely the maximum level of growth possible in the short term.

Question 2

The tragedy of the commons

Answer 2

The tragedy of the commons relates to the market failure that arises from overuse, destruction or depletion of environmental resources. As there are no property rights associated with environmental resources, their value is not properly accounted for by producers, and the resource is used beyond what is socially optimal. Examples include overfishing the seas and releasing carbon dioxide emissions into the atmosphere.

Question 3

Private cost

Answer 3

Private cost refers the expenditure by producers on resources to produce output and the costs incurred by consumers in spending part of their income to by G&S

Question 4

Private benefits

Answer 4

Private benefits refer to the profits made by producers in selling goods and services in the market, the utility (satisfaction) gained by consumers from the consumption of goods and services to satisfy their needs and wants.

Question 5

Social costs

Answer 5

Social costs refers to the costs imposed on society as result of private actions. E.g.: negative externality of pollution caused by private production.

Question 6

Social benefits

Answer 6

Social benefits are the positive spill-over effects of private production on the community E.g: shopping centre, car park

Question 7

the price mechanism

Answer 7

the price mechanism (the interaction of the market forces of supply and demand) does not effectively stake into account the long-term effect of economic activity and the environment. This is because producers enjoy a private benefit. From the activity that depletes resources or pollutes the environment.

Question 8

Market failure

Answer 8

Market failure occurs when the price mechanism takes account of private benefits and costs of production to consumers and producer but fails to take into account the indirect. Ie.g. social and environmental) costs such as damage to the environment.

Question 9

• Negative externality

Answer 9

• Negative externality is an unintended negative outcome of an economic activity whose cost is not reflected in the operation of the price mechanism. Goods and services that have negative externalities are known as demerit goods.

Question 10

• Positive externality

Answer 10

• Positive externality is an unintended positive outcome of an economic activity whose value is not reflected in the operation of the price mechanism. Goods and services that have positive externalities are also known as merit goods.

Question 11

Public good

Answer 11

o Provided by the government as private firms are unwilling to provide them as they can’t restrict the benefits and usage to those willing to pay.
o Non-excludable: once the public good is provided it be used exclusively
o Non-rival: consumption by one consumer does not reduce the quantity or quality available for other consumers.

Question 12

Private good

Answer 12

o Provided by private enterprise, private goods are temporarily/permanently used up when they are consumed.
o Easy to exclude from consumers unwilling to pay for the good

Question 13

Free riders

Answer 13

Free riders refer to groups or individuals who benefit from a good ir service without contributing to the cost of supplying the good or service.

Question 14

Governments often face significant problems in trying to preserve the natural environment:

Answer 14

• Governmental polices may result in a reduction in economic growth
• Industries will face higher costs if they have to comply with rigorous environmental standards
• The cost of repairing damage to the environment is often borne by taxpayers

Question 15

Preservation of the environment may include:

Answer 15

Preservation of the environment may include:
o Restrictions on development in environmentally sensitive areas, such as mining in national parks
o Controls over emissions of waste products
o Requiring new plantation in areas where logging has occurred
o Actively protecting the natural environment from threats such as non-native plants and animals (laws)

Question 16

Affect of climate change on GDP

Answer 16

Domestically, it is estimated that climate change could reduce Australia’s GDP by 4.8 per cent by 2100. Lost productivity and absenteeism due to extreme heat is already costing the Australian economy an estimated $8 billion a year.
The World Health Organisation predicts that between 2030 and 2050, climate change is expected to cause approximately 250,000 additional deaths per year, from malnutrition, malaria, diarrhoea and heat stress

Question 17

China EG and climate change example

Answer 17

Trade-off that exists between high economic growth sourced from non-renewable production and environmental sustainability as industrial growth increased the demand for coal and fossil fuels, with Chinas CO2 emissions in 2012 doubling that of the US and EU combined.

Question 18

Major tools for policy makers are:

Answer 18

• Regulations and legislation (known as command-and-control instruments)
• Market based policies to influence behaviour and reduce the impact on the environments.

Question 19

Short and medium term targets

Answer 19

• Short term targets - reduce emissions by 5% on 2000 levels by 2020
• Medium term target -26-28% on 2005 levels by 2030 (Paris Climate Agreement).
  Australia’s current 2030 emissions reduction target of 26-28% (below 2005 levels) falls significantly short of what is required to effectively tackle climate change. The Climate Change Authority (2015) recommended a 45-65% emissions reduction target for 2030, based on scientific evidence, what comparable countries are doing and what is in the best interests of Australia.

Question 20

DIRECT CONTROLS

Answer 20

traditional policy tool, laws or rules that govern economic behaviour. May prohibit a person/business from causing environmental damage. Regulation can also specify how a good or service is consumed or produced (agricultural or mining techniques)

Question 21

Ban of a product

Answer 21

To achieve emissions reductions, the government could introduce a total ban on emissions. This would reduce emissions entirely, but would be detrimental for industries that produce emissions and sharply reduce economic growth. For example, since 2002 it has been illegal to sell leaded petrol in Australia, and motorists who formally used leaded petrol must use lead-replacement petrol instead. Banning a product will eliminate all externalities associated with the use, to the extent that its use can be stopped.since 2009 Australia has banned the sale of incandescent light bulbs and replaced them with more energy efficient light bulbs with the goal of reducing greenhouse gas emissions by 0.14%. Another example, is the banning of retailers providing all single use plastic bags by Australian state and territory governments.

Question 22

Imposition of a tax

Answer 22

The government could introduce a tax on emissions, which would ‘internalise the externality’ by making producers take into account the social cost of emissions, which is higher than the private cost of production. Carbon tax aims to ‘internalise the externalities’ - forces firms to take the social costs of their activities into account when pricing their goods.
e.g to curb Aus’ greenhouse gas emissions, Gillard govt. introduced tax on carbon emissions in July 2012 (carbon tax) although it was repealed by Abbot govt. 2 years later

Question 23

Do governments prefer taxes or subsidies?

Answer 23

Governments usually prefers taxes over subsides when they want to ion fluence economic behavior discourage environmentally damaging activities → raise government revenue that can be used for other environmental programs.

Question 24

Policy incentive

Answer 24

The government could also consider a subsidy for producers of emissions reduction technology. This would introduce a cost to the government, and would not directly reduce emissions by producers, but would incentivise the development of technology to indirectly reduce emissions in the longer term.
e.g the Clean Energy Innovation Fund was established in 2016, with $1bn to encourage the availability of new energy technologies

Governments also introduce polices to encourage firms and induvial to use more environmentally-friendly goods and services. In every major Australian city, governments provide subsidised public transport services such as buses, trains and ferries to offer induvial with an alternative to motor vehicles

Question 25

What is the relationship between sustainability and economic growth

Answer 25

There is a mixed relationship between environmental sustainability and economic growth. In the short term, policymakers may face a conflict: pursuing rapid economic growth could see resources overused and depleted. However, regulations to improve sustainability may also raise costs, and their effect may be limited if other countries’ economic behaviour continues to contribute to environmental damage (such as through carbon emissions which accelerate global warming). At the same time, there are opportunities created by governments fostering greater environmental sustainability. For example, new technologies such as energy-efficient cars or solar panels could be a source of exports and economic growth. In the long term, economic growth depends on managing natural resources, in sectors such as mining and manufacturing, and farming. Policies to enhance sustainability should therefore help achieve economic growth objectives in the long term.