Lec 30: The Economy-Environment Interface

Question 1

1) What is a conventional approach to putting a value on natural resources and the environment?

Answer 1

Valuation of nature: a price is set for units of a resource through market exchange

Question 2

2) What are the key global commodity exchanges for agricultural products, metals, and energy?

Answer 2

• Agricultural: Chicago Mercantile Exchange, Dalian Commodity Exchange
• Metals: London Metal Exchange
• Energy: New York mercantile exchange

Question 3

3) What are the 2 types of purchases at commodity exchanges? Give an example for each.

Answer 3

• Immediate purchases
  o Any cash trade
• Futures
  o Jet fuel

Question 4

4) What are the broad pros and cons of commodity exchanges (markets)?

Answer 4

• Pro: markets are a highly efficient price setting mechanism, producing an equilibrium price
• Cons: environmental costs are left out

Question 5

5) What are criticisms of the conventional approach to putting a value on nature? (2)

Answer 5

• Non-quantifiable, environmental costs are left out of the equation
• The economy is seen as separate from the natural world (not a systems approach)

Question 6

6) How do we incorporate nature, and what 2 sets of demands does the economy place on nature?

Answer 6

• View the economy as a system of material flows and balances
• Nature as a provider of INPUTS and a receiver of OUTPUTS

Question 7

7) What are the 2 environment-economy interfaces?

Answer 7

• The commodification of nature: using nature for economic purposes
• The commodification of environmental degradation

Question 8

8) The commodification of nature values nature based on which 2 types of value?

Answer 8

• Use values (the direct value you get from using that resource; food, shelter)
• exchange values (how much you can get for exchanging that resources)

Question 9

9) What are the 5 factors that determine history and geography of nature’s commodification?

Answer 9

• Tech & science
• Changes in economic circumstances (e.g. price of oil)
• The location of raw materials
• Post-extraction geographies
• Investment requirements, role of government (e.g. a resource can gain a lot of value because the government initially invested a lot into it)

Question 10

10) What are the 4 models of resource ownership?

Answer 10

• Communal access: no one owns them, but everyone can benefit from them
  o Ex air, fisheries in international waters
• State ownership and state exploitation: assets are publicly owned, and everyone shares benefits
  o Hydroelectricity, water utilities
• State ownership and private exploitation: assets are publicly owned, but private entities pay licensing fees to extract these publicly owned assets
  o Forestry
• Private ownership and private exploitation: private owners reap profits of benefits
  o Bottled water?

Question 11

11) What are the 2 ways in which you can place a value on environmental degradation?

Answer 11

• Markets for trading emission credits
• Certification programs in resources industries

Question 12

12) Name 2 markets for trading emission credits

Answer 12

• The Kyoto Protocol’s global carbon credit trading system via quotas
  o Each countries government allocates ERUs to companies, who can sell or buy them
• The EU’s ETS
  o Cap and trade came about with this system

Question 13

13) Describe the growth of certification programs in resource industries

Answer 13

• Companies get certified in order to demonstrate environmentally-friendly nature of their products and differentiate their products
• Ex: Forest Stewardship Council