Everand Logo

Welcome to Everand!

  • Discover millions of ebooks, audiobooks, and so much more with a free trial

    Only $9.99/month after trial. Cancel anytime.

    Environmental Economics: A Simple Introduction
    Environmental Economics: A Simple Introduction
    Environmental Economics: A Simple Introduction
    Ebook95 pages1 hour

    Environmental Economics: A Simple Introduction

    By K.H. Erickson

    5/5

    ()

    Read preview

    About this ebook

    Environmental Economics: A Simple Introduction offers an accessible guide to the central theories and methods of environmental economics, with examples, equations, and diagrams to support the analysis.

    Understand the problem of environmental degradation, and why environmental externalities and market failure cause pollution to spiral out of control.

    Examine the effectiveness of the polluters pay principle and a range of pollution control instruments, including bargaining, Pigovian taxation, tradable emissions permits, and command and control policy. Compare how each of the methods fare on cost efficiency, dynamic efficiency, equity, and performance under uncertainty.

    Explore efficient environmental management, and see how renewable natural resources can be harvested efficiently, and how a tragedy of the commons scenario can be avoided. Understand the conditions of the Hotelling rule for optimal extraction of non-renewable natural resources.

    Look at the stages of cost-benefit analysis and environmental policy valuation, and how the impacts of projects are valued using stated preference, revealed preference, or production function approaches.

    LanguageEnglish
    PublisherK.H. Erickson
    Release dateJun 1, 2016
    ISBN9781311670182
    Environmental Economics: A Simple Introduction

    Read more from K.H. Erickson

    Related to Environmental Economics

    Related ebooks

    Economics For You

    View More
    View More

    Related podcast episodes

    Related articles

    • Article

      Net Zero Is No Solution To Climate Change. It's A Fantasy For Rich Countries

      Nov 7, 2021

      "It is unequivocal": these are the first three words of the sixth Intergovernmental Panel on Climate Change (IPCC) report. The experts have never been clearer in describing the existential threat facing humanity. In fact, the World Meteorological Org

      8 min read

    • Article

      Climate’s Credit Side

      Mar 4, 2022

      We recently spent some weeks conducting webinar sessions with investors and financial planners sharing our view of how climate change is no longer a risk but is becoming a living reality. Fourteen of the 15 hottest years since record keeping began mo

      2 min read

    • Article

      Grow Your Portfolio And Save The Biosphere

      Nov 12, 2021

      In recent years we have become very familiar with climate change and how it affects our lives and investments. Given the existential threat it poses, we tend to focus on the risks and costs: the risk of rising temperatures, the cost of avoiding disas

      2 min read

    • Article

      Why Growth Can’t Be Green

      Sep 10, 2018

      Why Growth Can’t Be Green
      4 min read

    • Article

      Lowering Energy Demand Is Key For Meeting Climate Goals

      Nov 21, 2024

      We’ve all seen those click-bait headlines, making some bold claim about how one new invention or innovation might “save the world.” But in reality, there isn’t one quick fix to the challenges our climate is facing. Saving the planet requires us to re

      5 min read

    • Article

      Stepping Up to the Challenge: US Can Meet Climate Goals if Policymakers Take Immediate, Concerted Action

      Nov 16, 2023

      UCS study shows massive economic and health benefits from switch to clean energy, electrification and energy efficiency.

      6 min read

    • Article

      Green Financing: Rewarding Those Who Measure

      Apr 12, 2024

      What is green financing? Key policy measures around the globe are being implemented to reach Net Zero, where the amount of carbon emitted is equal to that being sequestrated, so that global warming will slow down. Countries around the world have comm

      4 min read

    • Article

      Ideas For A Sustainable Future

      Apr 16, 2022

      Ideas For A Sustainable Future
      3 min read

    • Article

      Climate Action Today: Where We're Going And How We Reach Results – Despite Current Roadblocks

      Nov 28, 2017

      As we approach the end of President Trump’s first year in office, we’re taking stock of what’s changed and ramping up our efforts.

      3 min read

    • Article

      Valuing Nature

      Jan 30, 2022

      Valuing Nature
      6 min read

    • Article

      Big Oil’s Denial and Delay Is Endangering Our Future

      Mar 16, 2023

      As the United Nations' panel on climate change prepares a new assessment, Lead Scientist L. Delta Merner reflects on how we got here.

      4 min read

    Related categories

    Reviews for Environmental Economics

    5/5

    2 ratings0 reviews

    What did you think?

    Tap to rate

    Review must be at least 10 words

      Book preview

      Environmental Economics - K.H. Erickson

      Environmental Economics: A Simple Introduction

      By K.H. Erickson

      Copyright © 2016 K.H. Erickson

      All rights reserved.

      No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the author.

      Also by K.H. Erickson

      Simple Introductions

      Accounting and Finance Formulas

      Applied Econometrics

      Choice Theory

      Corporate Finance Formulas

      eBay

      Econometrics

      Economics

      Environmental Economics

      Financial Economics

      Financial Risk Management

      Game Theory

      Game Theory for Business

      International Relations

      Investment Appraisal

      Investment Formulas

      Marketing Management Concepts and Tools

      Mathematical Formulas for Economics and Business

      Methods of Microeconomics

      Microeconomics

      Table of Contents

      1 Introduction

      2 Environmental Degradation

      2.1 The Pollution Problem

      2.2 Environmental Externalities and Market Failure

      3 Pollution Control Instruments

      3.1 Bargaining and the Coase Theorem

      3.2 Command and Control Policy

      3.3 Pigovian Taxation

      3.4 Tradable Emissions Permits

      3.5 Pollution Control Analysis

      4 Efficient Environmental Management

      4.1 Renewable Natural Resources

      4.2 Non-Renewable Natural Resources

      5 Policy Valuation and Cost-Benefit Analysis

      1 Introduction

      Environmental economics applies established economic principles of equilibrium, market failure, efficiency, and valuation techniques to environmental issues. In doing so environmental economics can understand the incentives causing pollution and environmental degradation, and highlight the best methods to use to control them. It can reveal the most efficient use of precious natural resources so that they are not overexploited or wasted. And it can enable the advantages and disadvantages of environmental planning proposals to be valued and compared, so that the best choice of action may be calculated and then followed.

      This book is divided into four parts, exploring the main areas which make up environmental economics using established theory, diagrams, equations, and examples. The first area is probably the topic most people think of when imagining environmental issues, and it is the issue of pollution or environmental degradation in a more general sense. The seemingly inevitable link between economic activity and consumption, with pollution and environmental degradation, is put forward and illustrated with a simple example. From there the question of why the market doesn’t automatically resolve the pollution problem is answered, as the idea of environmental externalities and market failure is put forward. The difference between private goods and environmental public goods is explained, and public goods are revealed to allow polluters to avoid taking responsibility for the full costs of their pollution.

      The solution to the pollution problem is to make polluters take responsibility for all of the costs associated with their activity, known as the Polluters Pay Principle, and several sections explore a variety of possible methods to achieve this goal in detail. Bargaining between the polluters and their victims has the potential to bring about an efficient outcome where the costs and benefits of pollution are balanced, but only if the conditions of the Coase Theorem are met. If bargaining isn’t a feasible solution then government intervention may be required, and a Command and Control Policy sees quantitative and qualitative rules being set to limit pollution, yet it is an inefficient method to reduce pollution as it doesn’t follow the equimarginal principle. A Pigovian Tax issued by government does follow this principle, and is therefore cost efficient, but several equity related issues are noted with the instrument. Tradable Emissions Permits are another cost efficient market based pollution control tool, but there may be problems associated with the setting up of such a system. Finally a section on pollution control analysis compares the major emission control instruments, using the criteria of static efficiency, dynamic efficiency, equity and income distribution, and performance under uncertainty.

      Efficient Environmental Management is the third area to be examined, as the challenge to make optimal use of natural resources is analysed. First, renewable natural resources are investigated, as resource growth rates, stock levels, harvest sizes and harvesting effort are assessed to determine the optimal levels. And property rights or the lack of them is found to determine whether profit maximization, or the tragedy of the commons, comes to pass with renewable natural resources. Next, non-renewable natural resources such as fossil fuels are assessed, using the Hotelling rule and the modified Hotelling rule, as the resource price path, the discount rate, and extraction costs come together to create an optimal extraction rate and resource allocation over time.

      The fourth and final area of the book looks into how environmental projects are valued and assessed for economic efficiency. Cost-Benefit Analysis is explained with its six steps looked at in turn, and policy valuation techniques are detailed, including stated preference, revealed preference, and production function approaches.

      2 Environmental Degradation

      2.1 The Pollution Problem

      Every day huge amounts of harmful substances are released into the environment all across the globe. It’s not that people worldwide all enjoy polluting the environment, it’s that they feel they have no other choice. Whether it is the fossil fuel power stations required to generate power releasing harmful gases in developed countries, or the livestock needed for meat and dairy products releasing damaging gases through cow flatulence in rural areas and developing countries, human economic activity goes hand in hand with pollution. And it is not just big industry or farmers who are to blame as every individual consumer also leaves a trail of pollution in their wake. Every time they make a journey in their car harmful pollution is emitted from the car exhaust, and the rubbish, refuse and waste which every consumer generates ends up dumped in a landfill site, causing environmental degradation to land and sea which threatens the complex natural ecosystem.

      A basic trade-off could be said to exist between economic activity and related consumption on one side, and pollution and related environmental degradation on the other side. Greater consumption is linked with greater environmental degradation, and reduced environmental quality. The following diagram shows this idea in visual form, with the dashed line showing a production possibilities frontier (PPF) representing different possible combinations of consumption levels and the resulting environmental quality levels. A move up the vertical y axis, with greater consumption, clearly sees the dashed PPF line move leftwards along the horizontal x axis, to signal reduced environmental quality.

      In this

      Enjoying the preview?
      Page 1 of 1