L2: Inter-relationship Between The Economy and the Environment Flashcards
The environment provides 4 functions for the economy…
- source of resource inputs
- source of amenity services
- receptacle for wastes
- provides life support services
2 Categories for Natural Resources
Stock Resources and Flow Resources
2 types of Stock Resources
Renewable and Non-renewable
2 types of non-renewable resources
Energy resources
Mineral resources
3 examples of flow resources
solar
wind
wave/Tidal
What is the Macro Production function?
What is the Material Balance Principal?
Q = f (L, K) Output = Land and capital
‘The materials balance principle’ refers to the law of conservation of mass, which states
that matter can neither be created nor destroyed, i.e., that economic activity cannot, in a
material sense, create anything. It transforms material extracted from the environment.
How can this Production Function be re-written to account for extraction?
What about to account for Waste?
Q = f (L, K , R)
Q = f (L, K , M) [M=waste]
Waste is a byproduct of production and is directly related to output, therefore can be an input.
What is the final Output function that accounts for all the prior inconsistencies?
Q = f [L, K, R, M (R), A (Σm)]
emissions linked to resource use
What is the sustainability problem?
How do we alleviate poverty in ways that do not affect the natural environment such that future
economic prospects suffer?
Since the 1950s and 1960s economic growth has been seen as the solution to poverty. But
can the global economic system continue to grow without undermining the natural systems
which are its foundation?
The material demands being made by the average individual have been increasing rapidly, though many are poor
▪ Redistribution is not a solution and the world’s resource base is limited and contains ecosystems which are showing signs of fragility
The environmental impact of economic activity can be looked at in terms of: 2
extractions from the environment
• insertions into the environment.
In either case, the immediate determinants of the total level of impact are:
2
- the size of the human population and
* the per capita impact.
The per capita impact depends on:
2
- how much each individual consumes and
* the technology of production.
What is the I=PAT identity?
What does it show?
I: impact, measured as mass or volume
P: population size
A: per capita affluence, in currency units
T: technology, amount of the resource used, or waste generated per unit production
What is the linear function of output and environmental degregation?
e = ay
What do we suppose a is ?
A linear function:
a = B0 - B1y
what is the function for the environmental kuznets curve?
e =y (B0 - B1y)
e = yB0 - y^2B1
What is required for the inverted U-shape curve?
▪ For B1 sufficiently small in relation to B0, the e/y relationship is an inverted U
What is the EKC hypothesis?
That economic growth, past a certain threshold of income, improves the environment
Evidence for EKC:
▪ Panayotou (1993) investigated the EKC hypothesis for __ ___ ____ and ___
▪ The 3 pollutants are measured in terms of ___ per capita. Deforestation is measured as the mean annual rate of deforestation in the mid-1980s
▪ All the fitted relationships are inverted Us. See Figure 2.10 (Perman et al., 2011, p40) for the SO2 inverted U where the turning point is $3000 per capita
There is extensive literature supporting the EKC for ____ impacts with respect to SO2 but not on a ___ impact for CO2
▪ Stern and Common (2001) present results for SO2 at a ____ level which are not consistent with the EKC hypothesis
Evidence for EKC:
▪ Panayotou (1993) investigated the EKC hypothesis for SO2, NOx, SPM and deforestation
▪ The 3 pollutants are measured in terms of emissions per capita. Deforestation is measured as the mean annual rate of deforestation in the mid-1980s
▪ All the fitted relationships are inverted Us. See Figure 2.10 (Perman et al., 2011, p40) for the SO2 inverted U where the turning point is $3000 per capita
There is extensive literature supporting the EKC for local and regional impacts with respect to SO2 but not on a global impact for CO2
▪ Stern and Common (2001) present results for SO2 at a global level which are not consistent with the EKC hypothesis
