Environmental Flashcards
(18 cards)
Marginal abatement cost
incremental unit of abatement
What is the efficient level of abatement?
where MB (the demand curve) = MC (the supply curve) (the equimarginal rule - they have the same slope)
What is dynamic efficiency?
when benefits and costs vary overtime. Amount available tomorrow depends on todays consumption due to discounting
The market demand curve is the same as the?
marginal willingness to pay
what is consumer surplus
WTP minus total payment
Three failures in the environmental realm?
- negative externalities
- public goods
- tragedy of the commons
What are externalities?
when one persons actions have an unintentional, direct and uncompensated effects on the well being of a third party.
supply = PMC
SMC = PMC + MD (always above supply)
What are public goods?
Shared by all, owned by no-one
non-excludable - my consumption will not diminish anyone elses
non-rival - cannot prevent someone from using the good
Tragedy of the commons
over exploitation of a common resource without any regulation reduces productivity (no-one has an incentive to do anything on their own - free ride)
Open access resources
fisheries
non excludable but rival - diminishing marginal returns
collective action problem
individuals may find themselves in a situation where it would be better if everyone contributed but each individual has their own incentive to free ride
criteria for evaluation environmental policies
efficiency cost-effective fairness incentive to improve technology enforceable moral
efficiency
a policy needs to maximise net social benefits (MB=MC)
difficult to achieve
requires a lot of information
cost-effectiveness
needs to maximise environmental improvement for a given amount of (abatement) costs or it achieves a given amount of environmental improvement at least possible abatement costs
marginal abatement costs must be equalised across polluters
smallest amount of resources
an efficient policy needs to be cost effective but not the other way around
fairness/equity
want a fair distribution
often trade off between distribution and efficiency
how should benefits and costs of environmental improvements be distributed?
incentives for technological improvements
look for ways producers can reduce their impact on the environment
in the long run want to shift down marginal abatement costs
factors to provide incentives for tech improvements
- stringency of regulations
- stability of the policy environment
enforcability
regulations have to be enforced effectively (if they are too high they become impractical)
need to monitor and santion
e.g. didn’t work in the common fisheries policy
moral considerations
which countries pay more to tackle global warming?
need to look at which companies do not impact environment
