Environmental Economics Lecture 3

Question 1

What is economics?

Answer 1

Social science concerned with the production, distribution and consumption of goods and services

Question 2

What are the goals of economics?

Answer 2

Study how choices are made to allocate resources to satisfy wants and needs

Question 3

How is economics utilitarian?

Answer 3

Goods and services have value that can be converted to currency

Question 4

What is the rational actor model?

Answer 4

Assumes all individuals spend limited resources to maximize individual utilities

Question 5

What is an ideal economy?

Answer 5

Resources are allocated efficiently

Question 6

What is market failure?

Answer 6

Situation where the supply and demand of goods and services are unbalanced

Question 7

What are sources?

Answer 7

Part of the environment from which materials move

Question 8

What are sinks?

Answer 8

part of the environment that receives input of materials

Question 9

What do economies depend on?

Answer 9

Natural capital for sources of raw materials and sinks for waste products

Question 10

What are the primary causes of market failures that lead to environmental problems?

Answer 10

Externalities and inefficiencies

Question 11

What are externalities?

Answer 11

When producer does not pay for full cost of production

Question 12

What are inefficiencies?

Answer 12

Scarce resources are not used well

Question 13

What are human activities doing?

Answer 13

1. Transforming land surfaces
2. Altering biogeochemical cycles
3. Changing hydrology
4. Modifying ecosystems and species
5. Altering climate and biological diversity

Question 14

What are the major sectors of human society driving change?

Answer 14

Manufacturing and mining, agriculture, energy and transportation, forestry, recreation

Question 15

What happens it we identify the optimum amount of pollution?

Answer 15

Lost to society of having less pollution is offset by benefits to society of the activity creating pollution

Question 16

To find optimum, what must we identify and balance?

Answer 16

Marginal Cost of pollution and Marginal Cost of abatement

Question 17

What is marginal Cost of pollution?

Answer 17

Cost of small additional amount of pollution

Question 18

What is Marginal Cost of abatement?

Answer 18

Cost of reducing small amount of pollution

Question 19

What if the cost is high and benefit is low?

Answer 19

Reduce or eliminate cost

Question 20

What if the cost is low and benefit is high?

Answer 20

Approve action

Question 21

What if the cost and benefit are equal?

Answer 21

Depends on societal values, economy, etc

Question 22

When do Cost and benefits occur?

Answer 22

Either immediate benefits and delayed costs or immediate costs and delays benefits

Question 23

What happens in an unregulated market?

Answer 23

Those who pollute only pay a small traction of the total costs of pollution

Question 24

What happens with pollution in an unregulated market?

Answer 24

The cost of pollution faced by the polluter is substantially lower than the cost of pollution to society

Question 25

What does implementing policies do for pollution?

Answer 25

Move polluter costs to left and reduce excess pollution

Question 26

What are some strategies for pollution control?

Answer 26

1. Command and control solutions 2. Incentive-based regulations

Question 27

What are command and control solutions?

Answer 27

Government requires particular equipment installed to lower emissions or pollutants

Question 28

What is the problem with command and control solutions?

Answer 28

Discourages low-cost alternative or creativity

Question 29

What are some incentive-based regulations?

Answer 29

1. Environmental (“green”) taxes 2. Tradeable permits

Question 30

What are environmental (“green”) taxes?

Answer 30

Taxes on pollution

Question 31

What are tradeable permits?

Answer 31

Rely on identifying optimum level of pollution and permit holder can generate pollution or sell permit

Question 32

What does adding a “green” tax do?

Answer 32

Encourages polluter to decrease pollution

Question 33

What is a point source pollution?

Answer 33

Stationary location where pollutants are emitted (identifiable discharge point of pollution)

Question 34

What are non-point source pollutions?

Answer 34

Sources that are diffuse and do not have a point of origin

Question 35

What is the US NPA’S NPDES?

Answer 35

A permit program that controls water pollution by regulating point sources and limiting discharge pollutants

Question 36

What does NPDES stand for?

Answer 36

National Pollutant Discharge Elimination System

Question 37

What is a NPDES permit?

Answer 37

License to discharge specified amount of pollutants into water under certain conditions

Question 38

Who is required to have a NPDES permit?

Answer 38

All facilities that discharge directly into surface waters

Question 39

Who is exempted from having a NPDES permit?

Answer 39

8 total - Non point source agricultural activities

Question 40

What are the criticisms of environmental economics?

Answer 40

Difficult to access true costs of environmental pollution and abatement & utilitarian economics may not be appropriate

Question 41

Why is it difficult to assess true costs of environmental pollution and abatement?

Answer 41

1. impacts of pollution on people and nature is uncertain 2. unknown value of ecosystem services (indirect benefits) 3. impacts of actions on global-scale problems like climate change are hard to predict

Question 42

Why utilitarian economics may not be appropriate?

Answer 42

1. dynamic changes and time are not considered 2. often marginal cost functions are arrived at without empirical evidence or data

Question 43

What are national income accounts?

Answer 43

represents the total income of a nation for a given year (GDP and NDP)

Question 44

What does NDP account for?

Answer 44

capital depreciation over the year\

Question 45

What is GDP and NDP?

Answer 45

1. provides estimates of national economic performance 2. important for policy decisions 3. misleading and incomplete because these metrics do not incorporate environmental factors

Question 46

Why may the environment be exploited?

Answer 46

to yield a higher GDP in developing/emerging economies

Question 47

What is Yale's Environmental Performance index (EPI)?

Answer 47

assesses a country's commitment to environmental and resource management