eco of environment - mid term 2

Question 1

engineering approach

Answer 1

= summing up expected expenditures by firms on pollution-control mechanisms and personnel, and government expenses on regulatory activities

Question 2

opportunity cost

Answer 2

Economists focus on the ‘opportunity cost’, which refers to the value of resources if used in their next best alternative

Question 3

Pro-Productivity Effects of Regulation

Answer 3

1. Improving the short-run efficiency of resource use, saving money for firms
2. Encouraging firms to invest more, or invest “smarter” for the long run
   → Porter Hypothesis: regulation, enhances longrun competitiveness
   → Regulation may play a technology-forcing role.
3. Reducing health-care costs or improving ecosystem services, which frees up capital for long-run investment

Question 4

Anti-Productivity Effects of Regulation

Answer 4

1. Direct Costs to Regulated Firms: Regulations can impose direct costs on companies, possibly reducing their investments in other areas.
2. Higher Prices for Key Inputs: Regulations can cause an increase in the prices of essential resources like energy and waste disposal, which can further discourage investment in sectors not directly impacted by the regulation.
3. Frustration of Entrepreneurial Activity: The “regulatory burden” and associated “red tape” of regulations might stifle business initiatives and investments.

Question 5

employment impacts of environmental protection

Answer 5

1. no economy-wide trade-off: no trade off between environmental protection and job growth
2. green job growth
3. small layoffs
4. few pollution havens: industries w heavy pollution are not fleeing to developing countries with lax regulations in large numbers

Question 6

general equilibrium (GE) effects

Answer 6

effects of regulation that are felt throughout the economy

Question 7

partial equilibrium effects

Answer 7

only felt in the specific regulated sector

Question 8

double-dividend effect

Answer 8

a pollution tax might yield two main beneficial effects on the economy
1. Internalizing the externality: ensuring that firms and consumes account for the external costs of the consumption/production
2. Beneficial use of tax revenus: if the carbon tax revenues are used to reduce payroll taxes, it could spur firms to hire more

Question 9

the safety standard

Answer 9

fairness concerns rather than efficiency
people have the fundamental right to protection from significant, unsolicited harm to their environment

Question 10

gov role in safety standard

Answer 10

reduce pollution to levels causing “minimal harm”

Question 11

US Environmental protection agency (EPA) standards

Answer 11

risk below 1 in 1 million for large population “safe”
risks greater than 1 in 10 000 are “unsafe”
= in between equals informal benefic-cost analysis

Question 12

criticism of the safety standard

Answer 12

1. inefficient from an economics perspective –> allocation of scarce resources
2. not cost-effective
3. Regressive –> greater sacrifice of other goods and services –> income equity

Question 13

sustainability standard

Answer 13

focus on the long-term impacts of pollution-control standards

Question 14

neoclassical sustainability

Answer 14

1. Views natural capital as substitutable.
2. Believes in nature’s resilience.
3. Advocates globalization and market regulation for sustainability.

Question 15

ecological sustainability

Answer 15

1. Stresses the irreplaceability of natural capital.
2. Views global ecosystems as fragile.
3. Calls for government intervention to protect dwindling natural capital.

Question 16

Discounting

Answer 16

determining the value of future money in today’s terms, taking into account the growth potential of money invested today

Question 17

Discounting rate

Answer 17

PDV = $X / (1+r)^T

Question 18

social discount rate

Answer 18

the value that society places on consumption today relative to consumption in the future

Question 19

Ramsey equation

Answer 19

r = δ+ η×g
- r = social discount rate
- δ = pure time preference = rate at which future utility or well-being is discounted solely because it occurs in the future
- η = elasticity of marginal utility with respect to consumption = percentage change in marginal utility resulting from a percentage change in consumption
- g = expected growth rate in per capita consumption

Question 20

precautionary principle

Answer 20

never reduce the stock of natural capital below a level that generates a sustained yield of services unless good substitutes are available for the services generated

Question 21

endangered species act (ESA)

Answer 21

US legislation mandating species preservation, regardless of cost

Question 22

national environmental policy act (NEPA)

Answer 22

requires an environmental impact statement (EIS) for significant actions affecting the environment. the EIS includes potential adverse effects, alternatives, and long-term impacts

Question 23

Malthus assumption 1798

Answer 23

Population growth would surpass food supply leading to human suffering

Question 24

ecosystem services

Answer 24

benefits humans receive from nature

Question 25

environmental impact equation

Answer 25

population * affluence * tech

Question 26

ecological footprint

Answer 26

indicates land and water requirements for a community based on consumption and waste

Question 27

human development index (HDI)

Answer 27

a measure of well-being that includes income, education, and life expectance

Question 28

Simon-Ehrlich Bet

Answer 28

this bet highlighted the contrast between optimistic and pessimistic views of resource usage and its impact. Julian Simon believed human innovation would lead to the abundance of resources, while Paul Ehrlich predicted scarcity due to increasing demand. Simon won the bet

Question 29

four type of ecosystem services

Answer 29

• provision services: products from ecosystems (both renewable and non-renewable)
• regulating services: benefits from ecological processes controlling ecosystem flows
• supporting services: infrastructure that keeps everything functioning
• cultural services: nonmaterial benefits from nature, eg recreation, spiritual inspiration

Question 30

hotelling model

Answer 30

a rise in price of nonrenewable resources as quantity reduces

Question 31

profit-based conservation

Answer 31

keeping resources in the ground can be profitable if the price of the resource rises over time

Question 32

hotelling’s rule

Answer 32

a formula predicting that the percentage rise in the resource price should equal the interest rate