environmental economics Flashcards
(15 cards)
define the term “economics” and explain the difference between “microeconomics” and “macroeconomics”
economics is a SOCIAL SCIENCE.
it STUDIES how societies MANAGE and EXPLOIT limited resources (ex: land, labor, capital) to MEET certain needs
it has two different scales
microeconomics: (small) focuses on INDIVIDUALS and FIRMS
while
macroeconomics: (large) examines national -international economics - economics as a WHOLE (ex: inflation, growth)
describe the role of opportunity cost in economic decision-making, using an example
opportunity cost is the VALUE of an alternative choice COMPARED TO the VALUE of what is chosen
(the sacrifice - what you lost by choosing a decision)
it HELPS individuals and organizations to make better choices by considering the alternatives
ex: attending university means sacrificing potential income from working immediately after highschool
outline the key features of a market economy and how supply and demand interact
a market economy is a SYSTEM where ECONOMIC decisions (ex: pricing of goods & services) are DETERMINED by the INTERACTIONS between
CONSUMERS and BUSINESSES (supply and demand)
Supply is how much PRODUCERS are WILLING to SELL
Demand is how much BUYERS WANT
- they INTERACT to set:
(1) prices
(2) quantities
define “environmental economics” and explain how it addresses market failure
environmental economics STUDIES the RELATIONSHIP between the economy and the environment, applying ECONOMIC tools to PROMOTE SUSTAINABILITY (/to address environmental issues).
in terms of environmental economics, market failure occurs when
the FREE MARKET fails to:
(1) efficiently ALLOCATE resources
(2) ADDRESS environmental issues
ex: climate change is one of the greatest market failures
(these can lead to negative exertnalities like pollution)
compare ENVIRONMENTAL economics and ECOLOGICAL economics in terms of values and priorities
environmental economics:
(1) PROMOTES sustainable development by VALUING natural resources and ecosystem services
(2) ANALYSES the costs and benefits of environmental policies
(3) REINFORCES the belief that humans will DEVELOP new science & technology to SOLVE current environmental issues
ecological economics:
(1) EMPHASIZES the importance of wellbeing, sustainability and equity
(2) looks to ACHIEVE a MUTUALLY BENEFICIAL and RESILIENT relationship between humans and the natural environment by exploring INTERDEPENDENCIES between them
explain the concept of positive and negative externalities with environmental examples
positive exertnalities: occur when the production/consumption of a good or service BENEFITS THIRD PARTIES without COMPENSATION.
ex: investing in renewable energy sources like solar pannels can REDUCE greenhouse gas emissions and IMPROVE air quality for EVERYONE in the community, even those who do NOT DIRECTLY USE solar panels.
negative externalities: occur when the production/consumption of a good or service IMPOSES COSTS on THIRD PARTIES that are NOT reflected in the market
ex: industrial pollution from a factory can harm SURROUNDING communities by contaminating air & water sources leading to (1) health issues (2) decreased poverty levels
discuss the concept of greenwashing and its implications for consumer behaviour and policy
greenwashing - the practice of MISLEADING consumers about a company’s environmental RESPONSIBILITY and SUSTAINABILITY of products and practices
implications:
1) UNDERMINES trust
2) DELAYS genuine sustainability efforts
explain the tragedy of the commons and how collective action can help resolve it
tragedy of the commons - an ECONOMIC concept (introduced by Hardin) that describes the EXPLOITATION and DEPLETION of a SHARED RESOURCE through individuals acting based off their own self-interest.
collective management like (1) fish quotas or (2) the establishment of laws for protected areas can help ensure SUSTAINABILITY
describe environmental accounting and the difference between management and sustainability accounting
environmental accounting: QUANTIFIES the environmental impact of businesses
it has two key components:
management accounting: aids in INTERNAL decision-making by identifying and analysing environmental COSTS and BENEFITS (could lead to better resource management)
sustainability accounting: MEASURES and REPORTS organization performance on economic, social and environmental indicators (linked to sustainability), (ex: assessment of GHG emissions as an environmental indicator)
differentiate between use values and non-use value + explain how non-use values can be estimated economically, and describe one valuation method
use values:
(1) direct values - consumed directly (ex: food, medicine)
(2) indirect values - ecological services (ex: flood control, storm protection)
(3) the premium paid for the right to exercise an option, but potentially not exercising it if a more profitable outcome emerges
non-use value refers to:
have no market price and cant be measured accurately (ex: aesthetics, culture)
it can be estimated through SURVEYS on:
(1) how much people are WILLING to PAY for a common good
(2) how much CONPENSATION they would accept in return for the common good’s destruction
outline the concept of economic growth and explain its limitations as a measure of development
economic growth is the CHANGE in the TOTAL MARKET VALUE of goods and services in a COUNTRY over a PERIOD and is usually measured as the ANNUAL PERCENTAGE CHANGE (in GDP)
limitations:
(1) fails to account for INCOME INEQUALITY
(2) does not reflect QUALITY OF LIFE
(3) does not count NON-MARKET related economic activities (ex: volunteering)
(4) portrays difficulty in MEASURING sustainability and environmental impacts (ex: air pollution)
discuss how supply and demand influence economic growth, and how this is reflected in market equilibrium
the HIGHER the DEMAND, the HIGHER the prices, encouraging MORE supply and in turn, influencing economic growth
market equilibrium occurs at:
the point where the quantity DEMANDED = the quantity SUPPLIES
(they intersect in the raph forming an X) - at this point there is NEITHER surplus NOR shortage in the market
evaluate the relationship between economic growth and environmental welfare using the Environmental Kuznets Curve (EKC)
as economies EXPAND, they increasingly INTERACT with natural resources:
positive impacts:
(1) technological advancements
(2) increased living standards
(3) provision of resources for environmental protection
negative
(1) higher consumption of non renewable resources
(2) increased pollution levels
(3) biodiversity loss
Environmental Kuznets Curve (EKC):
In POORER economies, economic growth INITIALLY leads to environmental DEGRADATION
however, as countries become WEALTHIER they tend to INVEST more in environmental PROTECTION, resulting in improves environmental quality
explain eco-economic decoupling and distinguish between relative and absolute decoupling with examples
eco-economic decoupling refers to the process of SEPERATING:
economic growth
from
environmental harm
relative decoupling:
describes a situation where economic growth (ex: GDP) EXCEEDS the growth of an environmental pressure (ex: CO2 emissions) - which means that the two variables are still linked but the relationship is WEAKER than before
limitation: some argue that it does not sufficiently address the need to stay within environmental limits
absolute decoupling:
total REDUCTION in the use of resources, even though the economy continues to GROW. variables become independent, move in opposite directions - STRONGER than relative
describe the “polluter pays principle”
the “polluter pays principle” dictates that those who CAUSE pollution should bear the costs of PREVENTING and CONTROLLING it
