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ENV 536: Environmental Economics and Policy (Lecture 2)


ENV 536: Environmental Economics and Policy (Lecture 2) Assist.Prof. Sasitorn Suwannathep, Ph.d. School of Liberal Arts King Mongkut s University of Technology Thonburi – PowerPoint PPT presentation

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Title: ENV 536: Environmental Economics and Policy (Lecture 2)

ENV 536 Environmental Economics and Policy
(Lecture 2)
  • Assist.Prof. Sasitorn Suwannathep, Ph.d.
  • School of Liberal Arts
  • King Mongkuts University of Technology Thonburi

Link between economic activity and nature
Natural Resource Economics
Environmental Economics
The Economy and the Environment
  • (a) represents raw materials flowing into
    production and consumption the nature plays
    its role as provider
  • (b) shows the impact of economic activity on the
    quality of the natural environment
  • the nature acts as a receiver.

Relationship between economic activity and the
  • Provision of raw materials
  • Receptacle of waste
  • Provision of amenities

Circular Flow Model of Economic Activity

Materials Balance Model The Interdependence of
Economic Activity and Nature
Using Science to understand the Material Balance
  • First law of thermodynamics matter and energy
    can neither be created or destroy.
  • This law can apply to the materials balance model
    in the long run, the flow of materials and
    energy drawn from the nature into consumption and
    production must equal the flow of residuals that
    run from these activities back into the
  • M Rdp R dc

Natural Environment
Recycled (R rp)
Residuals (Rp)
Raw materials (M)
Recycled (R rp)
Using Science to understand the Material Balance
  • Because matter and energy cannot be destroyed,
    then the materials flow can go forever. The
    second law of thermodynamics states that the
    natures capacity to convert matter and energy is
    not unlimited.
  • Even recycling can delay the disposal of
    residuals, but it cannot be perfect, each cycle
    must lose some proportion of the recycled

Environment Management
  • Rdp Rdc M G Rp Rrp Rrc
  • Three ways to reduce M
  • Reduce G (Goods and Services ?)
  • Reduce Rp (Production Residuals ?)
  • Increase (Rrp Rrc) (Recycling ?)

Fundamental Concepts in Environmental Economics
  • Environmental economics is concerned with
    identifying and solving the problem of
    environmental damage, or pollution, associated
    with the flow of residuals.
  • Pollution gtgt The presence of matter or energy
    whose nature, location, or quantity has undesired
    effects on the environment.

Fundamental Concepts in Environmental Economics
  • Environmental damage depends critically on
  • the causes of damage
  • the sources of damage
  • the scope of the damage.

Causes of Environmental Damage
  • Classifying by their origin
  • Natural pollutants
  • Contaminants that come about through
    nonartificial processes in nature.
  • Volcanic eruptions
  • Salt spray from oceans etc.
  • Anthropogenic pollutants
  • Contaminants associated with human activity.
  • Gas from combustion
  • Chemical wastes from production process etc.

Sources of Environmental Damage
  • Sources Grouped by Mobility
  • Stationary Source
  • A fixed-site producer of pollution (coal-burning
    power plants etc).
  • Mobile Source
  • Any nonstationary polluting source (automobiles
  • Sources Grouped by Identifiability
  • Point Source
  • Any single identifiable source from which
    pollutants are released.
  • Nonpoint Source
  • A source that cannot be identified accurately
    and degrades the environment in a diffuse,
    indirect way over a broad area.

Scope of Environmental Damage
  • Environmental pollution is often classified
    according to the relative size of its geographic
    impact as local, regional, or global.
  • Local Pollution
  • Environmental damage that does not extend far
    from the polluting source.
  • Ex. Urban Smog, Solid Waste Pollution

Scope of Environmental Damage
  • Regional Pollution
  • Degradation that extends well beyond the
    polluting source.
  • Ex. Acidic Deposition

source http//science.howstuffworks.com/ acid-rai
n.htm/printable http//maps.grida.no/go/graphic/g
raphicid/ 28536B4F-F03D-4D72-AF56-B6EF7211EB72
Acid Rain in Europe
Scope of Environmental Damage
  • Global Pollution
  • Environmental effects that are widespread with
    global implications.
  • Ex. Global Warming, Ozone Depletion

Scope of Environmental Damage
Source www.met.sjsu.edu/cordero/education/educat
The Earth Summit
  • A more comprehensive environmental agenda was
    addressed at the United Nations Conference on
    Environment and Development (UNCED) held in Rio
    de Janeiro, Brazil, in 1992 and was attended by
    6,000 delegates from more than 170 countries.

From Stockholm to Rio
  • In 1972 Stockholm had drawn attention to the role
    of development in protecting the environment.
  • By 1992 there was a clear recognition of the
    inextricable link between environment and
    development but there was also a strident demand
    for appropriate ethics and principles of behavior
    to be clearly stated. It was rewarding to see,
    twenty years later, that the relevance of the
    spiritual and moral dimension was at last being
    so widely recognized on an international level.

Rio de Janeiro Declaration on Environment and
Source www.env.go.jp/en/wpaper/1993/eae2202190000
Identifying Environmental Objectives
  • The agenda setting is a political process.
  • Today, virtually every environmental decision is
    guided by what have become worldwide objectives
  • environmental quality,
  • sustainable development,
  • and biodiversity.

Identifying Environmental Objectives
  • Environmental Quality
  • A reduction in anthropogenic contamination to a
    level that is acceptable to society.
  • Some pollution is natural and then not
  • The absence of anthropogenic pollutants could be
    achieved only if there were a prohibition on all
    goods and services that characterize modern

Identifying Environmental Objectives
  • Sustainable development
  • Management of the earths resources such that
    their long-term quality and abundance is ensured
    for future generations.
  • Achieving an appropriate balance between economic
    growth the preservation of natural resources is
    the essence of the sustainable development.

Identifying Environmental Objectives
  • Biodiversity
  • The variety of distinct species, their genetic
    variability, and the variety of ecosystems they

Source http//www.brazadv.com/images/biodiversity
Identifying Environmental Objectives
  • The goals of environmental quality, sustainable
    development, and biodiversity set an ambitious
  • All of society must work toward developing
    effective environmental policy initiatives.
    Central to this effort is a planning process in
    which public officials, industry, and private
    citizens participate.
  • This process involves a series of decisions about
    assessing environmental risk and responding to it.

Environmental Policy Planning An Overview
  • Environmental policy planning involves the
    interdependence of many segments of society,
    including government agencies, private industry,
    the scientific community, and environmentalists.
  • Each group of participants, albeit from a
    different vantage point, plays a significant role
    in formulating policy, and each offers expertise
    to outcome.

Environmental Policy Planning An Overview
  • Policy Planning in the United States
  • The Environmental Protection Agency (EPA) acts as
    a sort of liaison between various constituents of
    each sector. EPA established in 1970 by President
  • The National Environmental Policy Act (NEPA)
  • NEPA directs the integration of tasks across
    agencies, executive departments, and branches of
  • Environmental policy planning relies on careful
    research and analysis, which in turn depends on
    individuals with expertise in many disciplines,
    among them biology, chemistry, economics, law,
    and medicine.

Parties Involved in Environmental Policy Planning
  • Private Sector
  • Environmentalist
  • Private Industry
  • Scientists
  • Economists
  • Labour Unions
  • Private Citizens
  • Public Sector
  • Executive Branch
  • Congress
  • Judiciary
  • FDA
  • Occupation Safety
  • And Health Adm.
  • Other Administrative
  • Agencies
  • State and Local Govt

Environmental Protection Agency
Environmental Policy Planning An Overview
  • Policy Planning Process Tool
  • Risk Analysis
  • Risk Assessment
  • Risk Management

Environmental Policy Planning An Overview
  • Risk Analysis
  • Risk Assessment
  • The environmental problems are identified, and
    prioritized, which are done through scientific
    assessment of the relative risk to human health
    and the ecology of a given environmental hazard.
  • The assessment must determine whether or not a
    causal relationship exists between the identified
    hazard and any observed health or ecological
    effects, if yes, then the scientists need to
    quantify how the effects change with the
    increased exposure to the hazard.

Environmental Policy Planning An Overview
  • Risk Analysis
  • Risk Management
  • After risk assessment, the planning process
    enters to risk management.
  • The decision-making process of evaluating and
    choosing from alternative responses to
    environmental risk.
  • The objective of risk management to choose a
    policy instrument that reduces the risk of harm
    to society.
  • Normally, risk responses to various types of
    control instruments.

Environmental Policy Planning An Overview
  • Risk Analysis
  • Risk Management
  • Policy Evaluation Criteria these criteria are
    based on measures of risk, costs, or benefits -
    either singularly or in comparison to one
  • Allocative efficiency
  • Requires that resources be appropriated such
    that the additional benefits to society are equal
    to the additional costs.
  • Cost-effectiveness
  • Requires that the least amount of resources be
    used to achieve an objective.
  • Efficiency and cost-effectiveness are rooted in
    resource allocation.

Environmental Policy Planning An Overview
  • Risk Analysis
  • Risk Management
  • An Environmental equity criteria Environmental
  • Fairness of the environmental risk burden across
    segments of society or geographical regions.

Environmental Policy Planning An Overview
  • Risk Analysis
  • Risk Management
  • Governments Overall Policy Approach
  • Command-and-control approach the Regulatory
  • A policy that directly regulates polluters
    through the use of rules or standards.
  • Market approach An incentive-based policy
  • A policy that encourages conservation
    practices or pollution reduction strategies.
  • A fee on pollutant release or tax levied on
    pollution-generating commodities.
  • the polluter-pays principle, found that
    approximately 270 economic instruments were in
    use across these countries.

Environmental Policy Planning An Overview
  • Risk Analysis
  • Risk Management
  • Setting the Time Horizon
  • Management strategies
  • - This approach is to target policy at more
    immediate or short-term problems.
  • - Methods that address existing environmental
    problems and attempt to reduce the damage from
    the residual flow.
  • Pollution prevention
  • A long-term strategy aimed at reducing the
    amount or toxicity of residuals released to

The End
  • Next lecture will be
  • on Dec 7, 2008 at Room LNG 702
  • School of Liberal Arts Building
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