Environmental Sustainability Flashcards
What is ecologically sustainable development?
The conservation of environmental resources to maintain long-term growth and quality of life
What is a market failure?
An inefficient allocation of resources by a free market
What is a public good?
A product that is both non-rival and non-exclusive
What does non-rival mean?
Use of the product by one person does not affect the use of it by another person
What does non-exclusive mean?
It is impossible to prevent a person from using the product even if they didn’t pay for it
What is a negative externality?
When production or consumption of a product results in a cost for a third party
What is a positive externality?
When production or consumption of a product results in a benefit for a third party
What does the diagram of a negative externality look like?
The ‘social cost’ is shown by a supply line that is above (left of) the ‘private cost’ supply line
What does the diagram of a positive externality look like?
The ‘social benefit’ is shown by a demand line that is above (right of) the ‘private benefit’ demand line
What is the difference between a social cost and a private cost, and what is an example of each for a type of electricity generation?
The private cost is the cost of producing the good, such as buying coal to burn. Whereas the social cost is the impact on a third party, such as the impact of emissions from burning coal on the climate
What is the difference between a social benefit and a private benefit, and what is an example of each for a type of electricity generation?
The private benefit is the benefit of using the good, such as cheaper electricity bills if a person installs solar panels on their roof. Whereas the social benefit is the impact on a third party, such as the benefit from the solar panels of reducing greenhouse gas emissions and the extent of climate change
What is a free rider?
A person who benefits from something without paying for it
Why are environmental issues caused by market failure?
If the full cost of an action is not reflected in the price, such as pollution, then firms will continue to produce it.
Likewise, if the price does not reflect the full benefit of doing something, such as reducing emissions or planting trees, then firms will have an insufficient incentive to do it.
What is climate change and why is it occurring?
Greenhouse gas emissions from burning fossil fuels and deforestation are trapping heat in the earth’s atmosphere
Why is climate change an economic risk for Australia?
More extreme weather events such as droughts, floods and cyclones will reduce productivity and will incur costs for rebuilding
What is the difference between renewable and non-renewable resources? (and give an example of each)
A renewable resource will replenish to replace the portion that has been used, such as fish or solar energy.
A non-renewable resource is one that will not replenish, such as coal or oil.
Why is it important to protect natural environments?
1) Provide resources (e.g. clean water, food chains)
2) Carbon sequestration
3) Tourism
4) Intrinsic value
What are 4 types of environmental policies?
1) Targets
2) Regulations
3) Market-based mechanisms
4) International agreements
Why are environmental targets useful?
1) inform government policy-making
2) increase certainty for business investment
What is the limitation of environmental targets?
There is no guarantee the target will be achieved unless backed up with other policies
Why are regulations useful to protect the environment?
Laws will guarantee that desirable activities will be undertaken and undesirable activities will not
What are the limitations of using regulations to protect the environment?
1) May create compliance costs for firms (e.g. following the rules, completing paperwork)
2) Does not let firms find the cheapest way to reduce the negative externality
What is a market-based mechanism for environmental management, and what are 3 types of market-based mechanisms?
A price signal to internalise environmental externalities, which can be done with:
1) subsidies
2) Pigovian taxes
3) cap-and-trade schemes
Why are market-based mechanisms useful for protecting the environment?
Utilise the free market to find the cheapest way to reduce the negative externality
What are the limitations of market-based mechanisms for protecting the environment?
1) Politically unpopular and regressive (because they increase prices)
2) Difficult to monitor and enforce resource use
What are the limitations of international agreements for protecting the environment?
It is hard for countries to agree, so often the only way to gain agreement is if:
a) countries can choose their own (unambitious) targets, and
b) the agreement to have weak enforcement powers
What are 2 international environmental agreements that Australia is part of?
1) Paris Agreement
2) Montreal Protocol
