01 introduction envt ecos

01 introduction envt ecos

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  ENVIRONMENTAL ECONOMICS LESSON 1 INTRODUCTION Prof.Prabha Panth, Osmania University
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  12-Oct-13 2 ENVIRONMENT . ENVIRONMENT:comes from the word ‘environs’ – meaning surroundings  The Environment includes the Biotic and Abiotic systems.  Biotic: Living Systems: include all species from micro- organisms, onwards to all members of the plant and animal kingdom, including Man  Abiotic: Non-living Systems: include the atmosphere, the hydrosphere and the lithosphere within which all living creatures exist. Prabha Panth
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  12-Oct-13 3 ECOLOGY • ECOLOGY:is the study of the relationship between living organisms and their environment. • ECOSYSTEM: describes the particular structure and functions of an interrelated set of Biotic and Abiotic systems. For example: Forest ecosystem, Marine ecosystem, etc Prabha Panth
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  12-Oct-13 4 ENVIRONMENTAL ECONOMICS •Environmental economics studies the inter- relationship between the Economy and the Environment. • It analyses the impact of: – Economic activity on the environment, and – Environmental impact on the economy. – Production and consumption require inputs of natural resources that come from the environment – And wastes and pollution are released back into the environment. Prabha Panth
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  • According toTisdell: “Environmental Economics is concerned with the economic relationships between mankind and the environment”. – It seeks to study how economic principles can be used to better manage the environment and the economy. – It studies the interrelationship between economic activity and the environmental systems, i.e. between the biotic and the abiotic systems. 12-Oct-13 5
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  12-Oct-13 6 ECONOMY-ENVIRONMENT FLOWS Firms Households FactorPayments Factor Inputs Payments for goods Goods ENVIRONMENT Natural Resources Pollution Pollution Prabha Panth
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  12-Oct-13 7 FUNCTIONS OFTHE ENVIRONMENT 1. Supplies Natural Resources (NRs) and Services to the Economy. All raw material comes from Nature: Natural Resources are of three types: a) Renewable Resources: biological resources that can reproduce themselves, forests, fisheries, etc b) Non-Renewable Resources: Minerals, metals, and fossil fuels – that cannot be regenerated. c) Perennial Resources: exist infinitely: Air, water, land, sunshine. Except sunshine, others can be polluted. Prabha Panth
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  Ecosystem services • Naturalcycles: – All matter is constant, matter cannot be created or destroyed. – Nature recycles matter from one system to another. Wastes of one system become inputs into another system. – Natural Balance: to bring about ecological equilibrium. – Heterogeneity: No monoculture. For ecological equilibrium, heterogeneity needed. 12-Oct-13 8
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  12-Oct-13 9 2. Sinkfor Pollution and Wastes: All wastes are released back into the environment. Wastes are of two types: a)Biodegradable wastes: which can be absorbed back into the environment – through the action of bacteria. Can be recycled, e.g. paper b) Non-biodegradable wastes: that cannot be absorbed by the environment – they accumulate and create environmental problems. E.g. Plastics, synthetics. But for both there is a limit beyond which the environment cannot absorb the wastes. Called threshold values. Prabha Panth
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  – Pollution ofair, water, land, and even space. – Pollutants – unwanted substances in undesirable quantities. – Small amounts of pollution can be absorbed and recycled by natural factors. – Very large and growing pollution cannot be recycled or processed by Nature. – Accumulate in the environment and pose hazards to life, ecology, and climate. E.g. carbon dioxide and climate change. 12-Oct-13 10
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  12-Oct-13 11 3. Amenityand Spiritual Value: Gives spiritual and mental support, for relaxation and inspiration for art, music, paintings, poetry , etc. 4. Global Support System: Entire life support of the Earth is supported by the environment. Unique to planet Earth only, so far known. The environment supplies: a) Air – oxygen, carbon dioxide, nitrogen, etc. b) Water c) Land – soil for cultivation Prabha Panth
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  12-Oct-13 12 OPPORTUNITY COSTS •Using the environment for one purpose reduces its ability to supply other services. • Conflicts in resource use. – E.g. Mining in a forested region, leads to deforestation and loss of biodiversity. – River used as dump for effluents, kills fish and affects water consumption. So Environmental resources are also scarce resources with alternative uses (Robbins). Environmental impacts are therefore part of Economics – deals with optimum allocation of scarce resources. Prabha Panth
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  Differences 12-Oct-13 13 Economic Goods/servicesEnvironmental Goods/ services 1. Produced by Labour and capital 1. Provided freely by Nature 2. Has value or price 2. Cannot be priced (e.g. carbon cycle) 3. Ownership rights 3. Common property resources, e.g. oceans, atmosphere 4. Exclusion 4. No exclusion, public goods 5. Private costs and benefits 5. Externalities, social costs and benefits 6. Only present generation considered 6. Future generations considered 7. Assumes infinite inputs 7. Finite inputs (natural resources)
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  Differences 12-Oct-13 14 Economic Goods/servicesEnvironmental Goods/ services 8. Pollution not included in economic theory 8. Pollution serious threat to the environment 9. Micro or Macro approach 9. Global approach 10. Ceteris paribus 10. All systems are interrelated 11. Market is the optimum allocator of resources. Market oriented 11. No market for environmental goods and services. Market failure 12. Technology can over come limits 12. Technology not supreme, but to be directed for environmental protection 13. Growth of economies can be infinite 13. Growth of economies constrained by natural resources stocks.
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  OPPORTUNITY COSTS • Usingthe environment for one purpose reduces its ability to supply other services. • Conflicts in resource use. – E.g. Mining in a forested region, leads to deforestation and loss of biodiversity. – River used as dump for effluents, kills fish and affects water consumption. So Environmental resources are scarce resources with alternative uses (Robbins). Environmental impacts are therefore part of Economics – deals with optimum allocation. 12-Oct-13 15