Final Exam (Unit 3-5)

Question 1

The Malthusian theory

Answer 1

• As early as 1800, English economist Robert Malthus pointed out the possibility of a limit to economic growth, when he observed the population grew in geometrical progression while food production grew in arithmetic progression.
• According to Malthus, poverty pockets in England were proof of the inability of the economy to produce enough food.
• Although Malthu’s statistical observations were really advanced for his time, his predictions were finally proved wrong, because he failed to foresee the importance of technological developments.

Question 2

The limits of growth (1972)

Answer 2

Trough a series of computer simulations, the report concluded that the limits to growth were to be reached during the 20th century, due to the lack of availability of agricultural land, scarcity of non-renewable resources and the limit of the ecological system to assume larger quantities of waste.

Why was it wrong? Underestimated price as a mechanism to deal with scarcity
- price rice and demand goes down, then the stock is not used as fast as we thought it would

Question 3

The three main services the environment provides to the economy:

Answer 3

• resources
• direct enjoyment
• waste disposal

Question 4

The environmental Kuznets curve

Answer 4

• Two variables: GDP per capita and environmental degradiation

-The relationship between these two variables had an inverted U shape: income distribution became more inequitable in a first moment, but inequality began to decrease once a certain level of growth was reached

-In the first part of economic development the environment aspect decreases, but once it reaches a certain point and economic development is better we start protecting the environment –> based in “the gap of power” concept

• Problem: difficult to prove if its true or not- main reason is we don’t have historical environmental data available- we only have recent data

Question 5

Possible explanations of the EKC hypothesis (Kuznetsk Curve)

Answer 5

1) Equity of income distribution
2) International trade: the pollution haven hypothesis
3) Structural change and technical progress
4) Energy intensity
5) Institutional framework
6) Consumer´s preferences

Question 6

Pollution havens

Answer 6

As environmental degradation rises, more severe regulations are imposed → firms relocate production to low-income countries with less strict environmental regulation.

–> This may have been the case for developed countries but may not be feasible for current developing countries : the world is finite and there may be no other countries to relocate.

Question 7

Jevons paradox

Answer 7

A theory that says the consumption of a certain good increases as the efficiency of its use increases as well

• Example:

Gasoline- if cars use less gasoline the consumption will be lower- no, because then the use of cars become cheaper, more people use it and the consumption increases as well
- another example is for flights- even more people travel since its cheaper so the fact it uses less gasoline than before doesn’t change anything

Question 8

Empirical approach to the EKC:

Answer 8

Empirical studies about the EKC face important problems :

• It is difficult to isolate the effect of different variables that are usually related to one another.
• Some variables that should be studied are difficult to quantify ( how do we measure environmental degradation?)
• Historical environmental data is not available

EKC processes were firstly observed in developed countries, but it is dangerous to extrapolate their history to developing ones, as initial global conditions were not the same.

Question 9

Economic growth vs economic development

Answer 9

Economic growth and economic development are related concepts, but they are not equivalent.

▪ Economic growth refers to the increase of the aggregate demand (GDP growths).
▪ Economic development includes technological, institutional and social transformations.

If we have economic development– > we normally have economic growth

If we have economic growth –> doesn’t not mean we have economic development

Question 10

Resources and development in developing countries:

Answer 10

If initial growth is based on the exploitation of non-renewable resources or overexploitation of renewable ones (beyond their renewing capacity), income obtained should be invested in long term productive capital (material – infrastructure – or immaterial – education, stable institutions, governmental agencies, etc. –).

If this investment does not occur (for example, because the exploitation is made by foreign corporations that take their profits out of the country), the economy will grow in a first moment, but economic development will not occur.

Question 11

Evolution of environmental indicators (3 indicators)

Answer 11

1) Indicators that improve from first stages of economic development: access to drinking water and sanitation services.

2) Indicators that deteriorate in a first moment, but improve once a certain level of development is reached: air pollution provoked by sulphur dioxide or particulate matters.

3) Indicators that deteriorate progressively from the first moment: greenhouse effect gases emissions or waste production.

Question 12

GDP

Answer 12

GDP is the monetary measure of all final goods and services produced in a certain territory in a specific period of time.

GDP is the most used measure to describe economic growth, as well as the “richness” of any country. However, some precautions should be taken when using it as a reliable measure of development.

Question 13

What is not included in GDP:

Answer 13

• Domestic work is not included in GDP
• Its does not include distributive variables
• Leisure value is not included in GDP
• Environmental damage is not explicitly considered.
• Natural resources do not receive proper consideration.

Question 14

Adjusted GDP

Answer 14

GDP fails to represent environmental factors when valuing economic growth. In order to improve the representation of environmental considerations, some adjustments should be done.

Adjustments related to the use of resources:
- Measuring GDP implies knowing the current stock of productive assets, to see how these assets grew or got reduced during a period of time.
- Environmental resources should be included in that measure, since natural capital is a necessary input for any productive system.

Environmental services:
- The environment provides services not included in GDP. For instance, forests provide recreational services and protect crops from wind and soil erosion.
- Measuring the value of these services is difficult, but can be done through sophisticated statistical methods.
→ example: forest
→ the value of the environmental services are difficult to measure since we cant measure them like markets

Question 15

Ways to value the environment (two methods):

Answer 15

1) Revealed preferences methods: take data from another market in order to approximate the value of an environmental good
- Hedonic prices, cost of travel and cost of maintenance
- Example: national parks- use real estate markets
- Example: US lake- used the increase of value for the houses because of the lake/the view

2) Stated preferences methods: ask consumers what they believe the value of certain environmental goods are- make a survey

Question 16

Sustainable development and inequality

Answer 16

Higher inequality is related to lower levels of sustainability

Why?
- Highly uneven distributions require higher levels of growth required to lift people out of poverty. In other words, we would need smaller growth to end with poverty if that growth was focused on poorest people.
- Higher inequality is related with the overconsumption of private goods and weaker demand of public and merit goods

Question 17

Ecological footprint

Answer 17

Is a measure of how much area of biologically productive land and water an individual, population or activity requires to produce all the resources it consumes and to absorb the waste it generates, using prevailing technology and resource management practices.

Question 18

Biocapacity

Answer 18

Is the capacity of ecosystems to regenerate what people demand from these surfaces. The ecological footprint and biocapacity are related through another concept : carrying capacity.

Question 19

Carrying capacity

Answer 19

Is the maximum population size of a given species that can be indefinitely sustained by an ecosystem.
- It is often determined by the abundance of a certain resource. The nature of this resource depends on the environmental conditions of the ecosystem.

Example:
What resource is it in Spain? Water- dry country
In England: Water is not a problem, more likely it is land with the population density

Question 20

European Law- shared competence

Answer 20

EU and member states can both pass legislation, applying the subsidiarity principle : internal market; social policy; economic cohesion; agriculture; environment etc..

Question 21

The subsidiarity principle

Answer 21

Environment is a shared competence. Therefore, the EU will only intervene if its action is more effective of that of the individual member states.

• Most environmental problems happen at a global scale and the fight against their causes cannot be addressed at a national scale. Consequently, the EU has passed legislation on most environmental issues.

Question 22

Most environmental policies take the form of:

Answer 22

Directives! Not regulations or decisions!!

Regulations are acts that apply automatically and uniformly to all EU countries as well as to EU institutions.

Directives require EU countries to achieve a certain result, but countries are free to choose how to do so. Directives should be incorporated into national law. This process is known as transposition ( the deadline to do is generally 2 years).

Decisions are acts specially addressed to a subject (an EU institution, member states, firms, individuals.)

Question 23

European Environmental Law- Action principles on environmental matters

Answer 23

Precautionary Principle → The lack of absolute scientific certainty should not prevent action if the consequences of inaction are unacceptable.

Preventive action → damages to the environment should be avoided whenever possible, instead of restoring them once produced.

Polluter pays → the agent benefiting from an environmentally damaging activity should be the one to pay for the costs of that damage.

Example: Use of pesticide and the EU says no because they dont know the effects of it: The precautionary principle- it may be dangerous, we dont know, so just in case

Question 24

Two legal instruments for the government to regulate economic impact on the environment:

Answer 24

1) The integrated Environmental Authorization (IEA)
2) The environmental impact declaration (EID)

Question 25

The integrated Environmental Authorization (IEA)

Answer 25

Need it when im carrying out certain activities, refining oil for example
→ a process that includes all the authorizations u need → different authorizations from different authorities → all these will be integrated in the IEA

Question 26

The environmental impact declaration (EID)

Answer 26

Need it when im going to build something, authorization of certain projects

Example: Building a nuclear plant and then operating it- then u need both
Example: Building a railway between Madrid and Barcelona but not using it- only EID

Question 27

Environmental impact declaration = environmental impact assessment

Answer 27

Not the same legally but in our case we can consider it the same

Question 28

The EID can be positive or negative:

Answer 28

Positive: no problem
Negative: does not mean u wont get authorization but it means the superior of the department needs to be the one that gives u the authorization

Example: Railway Madrid-Valencia → the ministry of transport can give u the authorization if the EID is positive, but if it is negative the boss of the ministry of transport, aka the prime minister (the cabinet, the council of ministers), needs to give u the authorization

Question 29

Causes of climate change:

Answer 29

Climate change is caused by an increase in the atmospheric concentration of greenhouse effect gasses. This increase is provoked by different human activities.

The most important greenhouse effect gas is carbon dioxide (CO2), whose main origin is the burning of fossil (in the sense, climate change is a consequence of the disruption of the carbon cycle).

Other gasses contribute to climate change to a lesser extent :
- Methane (CH4) → from agriculture, livestock and landfills.
- Nitrous oxide (N2O) → from industry, fertilizers and waste incineration.
- Other gasses such as ozone-depleting chemicals or carbon monoxide

Question 30

The effect of climate change on human life/activities:

Answer 30

!!! (important) The effects of climate change in humans will also be unequal, as less developed areas are at greater risk → the arctic, africa, the so-called asian mega deltas and small island nations are especially affected by climate change.

• Loss of lives due to severe weather.
• Effects on food security as a consequence of crop failure, due severe weather and a general decrease global yields of major crops
• Spread of infectious diseases that are more easily transmitted in warmer climates.
• The international Organization for migration has forecasted that up to 1 billion people could be displaced due to climate change.
• Migrations will increase as a consequence of flooding of islands and coastal areas and the change of weather patterns, which will expel people from areas with current favorable climate conditions.

Question 31

The main objective of the Paris Agreement:

Answer 31

To keep global average temperature well below 2 degrees above pre-industrial levels.

→ to do so we need to achieve a balance between anthropogenic emissions and removals by sinks in the second part of the 21st century
→ countries decide themselves, doesnt establish precise reduction for each countries

Question 32

The strategies to fight climate change:

Answer 32

1) Mitigation- refers to taking measures to reduce current GHG emissions, in order to delay and reduce the increase in temperatures.

2) Adaptation- refers to the efforts to sustainably reduce the impact of current and future global warming. We know we will have climate change and should adapt to it:

To types of adaption:
1) Reactive adaptation
2) Anticipatory adaption

Question 33

Reactive adaption

Answer 33

Responding to current climate trends. Reactive adaptation is prone to be counterproductive in the long run. E.g. the expansion of irrigation to fight droughts may lead to the depletion and less efficient use of water resources.

Always/normally less efficient than anticipatory adaptation

Question 34

Anticipatory adaption:

Answer 34

To prevent the upcoming effects of climate change- anticipate long-term effects and adapt to them

• Anticipatory adaptation is by far more efficient and prevents bigger use of resources.

→ Problem: Difficult to sell to the people, less political popular support → raise your taxes to something that will happen in 15 years
→ More efficient than reactive adaptation but difficult to implement