Relationship Between Economics and Environment PDF

**Relationship between economics and the environment **  Traditional economic system: Companys and households Companys uses resources to produce goods and services Households responsible for providing company's with human resources and consumption   Economic functions of the environment The e...

**Relationship between economics and the environment **  Traditional economic system: Companys and households Companys uses resources to produce goods and services Households responsible for providing company's with human resources and consumption   Economic functions of the environment The environment: 1\. Provides inputs to the production system 2\. Absorbes wastes and transforms them into other products 3\. Is a direct source of utility Economic functions of the environment 1 EXTRACTION BASIC PROCESSING MODIFICATION ACTIVITY FABRICATION CONSUMPTION NON-PRODUCT OUTPUTS RECYCLING ENVIRONMENT AS WASTE RECEPTOR ENVIRONMENTAL DAMAGE (Externalities) 3 = primary material and energy inputs = secondary (recycled) inputs = primary inputs for recycling = residuals requiring disposal --- residuals generated during treatment and/or recycling processes Environmental externalities are costs or benefits arising from economic activities that affect third parties and are not reflected in market prices Pollution (air, water, soil) Deforestation Climate change Noise pollution   Consumption is driven by: - Population - Per capita consumption   Objections Resource productivity is increasing-\> able to produce same using longer amount of input-\> true BUT: New deposits are discovered-\> not strong argument, not sure if are discovered Higher recycle efficiency-\> BUT: The price of natural resources depends on the availability-\> transition costs time, so we need to adjust. The population growth is getting slower-\> still population is increasing **How markets work and why they fail** Fixed = independent on the production volume\ Variable = dependent on the production volume Marginal revenue= additional revenue for selling one more product Marginal cost= additional cost for producing one more product Pollution tax can be implemented. Means companies will produce less otherwise they have to pay this tax. Rather they produce less and still have profit and let customers pay this tax by increasing product prices. **Charecteristics of goods:** - Exclusivity: anyone who is unwilling to pay the market price for the private good in question is excluded from its use - Rivalness in consumption (divisibility): each individual who is willing to pay for it can exclude all other rivals from its benefits When a good has both exclusivity and rivalry, it is classified as a private good. These characteristics ensure that private goods are allocated efficiently in markets because only those willing and able to pay can consume them, and their consumption by one individual excludes others. In contrast, goods that lack one or both of these characteristics---such as public goods like clean air (non-excludable, non-rival)---are managed differently and often involve government intervention. **Renewable and non reneweable resources** Two kinds of resources\ * Renewable resources:*\ They can be regenerated (p\>0)\ They do not finish, if managed carefully (c\ head of state/country-\> eu representatives\> eu parliament/commission   Public policy- focsused on the evaluation of outputs and outcomes resulted from government programmes - Public Policy emphasizes the **evaluation of the results (outputs)** of government actions, such as laws, regulations, or policies, and the **impacts (outcomes)** these actions have on society. -  **Harold Lasswell**, a foundational thinker in the field, proposed that Public Policy should address the **\"fundamental problems of man in society\"** rather than merely focusing on temporary or trending issues. -  This reflects a **problem-centered approach**: instead of reacting to current political debates or headlines, Public Policy should analyze and address deep-seated, systemic problems affecting human well-being. Initially, Public Policy was defined in a government-centric manner, as exemplified by **Dye (1972)**, who described it as \"whatever governments choose to do or not to do.\" This perspective emphasizes the authority of governments to enforce rules and make binding decisions through legitimate coercion. However, modern approaches have expanded the scope of Public Policy to include various **actors**, **institutions**, and the **process** of decision-making. These perspectives acknowledge that policy-making involves not just governments but also businesses, civil society, and other stakeholders who play a role in shaping outcomes.\--\> governments operate within a **turbulent context** where societal actors interact, negotiate, and sometimes conflict-\>\> Public Policy is thus shaped by a dynamic environment influenced by public opinion, interest groups, economic conditions, and international pressures. While the government remains central, the **context matters significantly**, as it affects how decisions are made and implemented. Policy tools are which governments generate, evaluate, and implement policy options. **Policy cycle:** 1. Agenda setting 2. Policy formulation 3. Policy decision making 4. Implementation 5. evaluation Policy instruments include these components: 1\. Substantive = technical solutions that can resolve the problem 2\. procedural= processes and activities needed to coordinate the activities of the actors involved In policy design:\ 1. Aims, objectives, and targets need to be coherent\ 2. Implementation preferences, tools, and adjustments need\ to be consistent Government needs to intervene when: - Market failures - Collective action/ governance failures=situations where public or\ private actors fail to deliver an optimal policy formulation or\ implementation process and outcome from a collective or state-\ wide perspective How do they intervene: - Subsidies/taxes etc. The stick (regulatory instruments), the carrot (economic instruments) and the sermon (information based) approach = classifies instruments upon the degree of coerciveness. sermon= Low degree of coerciveness ex: information\ carrot= based and voluntary, Medium degree of coerciveness\ stick= High degree of coerciveness. ex: high degree of regulatory command and control Governments have an obligation to provide public services **Policy instruments 2** **Integral Policy Approach for CE Transition (Yu et al., 2022)** - Policies must address **push and pull factors** to encourage CE: - **Demand-pull instruments:** Encourage market adoption by creating demand for CE solutions. - **Technology-push instruments:** Support innovation and research to develop CE technologies.  **Push and Pull Factors:**\ Policies need to create both **push factors** (support for innovation and R&D) and **pull factors** (market demand for sustainable products): - **Push Factors:** Government funding for technology development, tax breaks for green R&D, and subsidies for CE startups. - **Pull Factors:** Public procurement policies favoring recycled materials, eco-labeling to encourage consumer demand, and creating financial incentives for businesses adopting CE practices.  **Alignment with Policy Tools:**\ CE policies must align their **aims, objectives, and instruments** to ensure coherence. For example: - **Aims:** Reduce waste, improve resource efficiency, cut carbon emissions. - **Objectives:** Increase recycling rates, extend product lifespans, support repairability. - **Instruments:** Use economic incentives (e.g., subsidies, taxes), regulations (e.g., bans on single-use plastics), and awareness campaigns. To design and implement effective CE policies, specific skills are needed. The **GreenComp conceptual reference model (European Commission)** identifies four key skill areas: 1. **Sustainability Values:** - Understanding and promoting the importance of sustainability and environmental ethics. 2. **Complexity in Sustainability:** - Ability to analyze and address the interconnected challenges of environmental, social, and economic systems. 3. **Envisioning Sustainable Futures:** - Creativity and foresight to imagine and plan for sustainable solutions. 4. **Acting for Sustainability:** - Practical skills to implement policies and drive behavioral or systemic change. **Policy mixes and decision in governqnce transition to circular governance** Government intervenes if market/governance fails-\> does so using hybrid instruments, ideally these are coordinsted across multiple domains Policy instruments are dynamic-\> instruments evolve between their original design and how they are applied in practice: institutional processes are dynamic. -\> aka policy instruments do change between paper and practice.  Excludable is in terms of price, can exclude people, but also if I buy it, someone els cannot have it anymore. Rivalrous is if I buy it, someone else can stil buy it. **Ownership, funding and control** These three aspects show you how they are connected in terms of operating. Eg= defense, public good, is funded by the miniestery and controlled by the parliament. Polyarchic control= governmenta control A list of ownership Description automatically generated with medium confidence Think how an instrument works across the whole supply chain, bigger picture. Rationality interventention assumptions, it assumes: - Goals are known - Values are known-\> preferences are known - Alternatives are known - Information to asses the alternatives are known - Time to perform the analysis Decision making in organizations In public organizations: - Similar to a certain extent to private sector, but, complex environment, differenc actiors-\> multipe modes of governance Key challenges: - Ensure accountbaility and transparency - When to standardize and rationalize DM DM models= - rational models - incremental models= small step first, decion making, small step, goal might change. Mostly used in government. Advantage is creates political support, disadvantage is conservative, and how small is small? but, can rationality be achieved?-\> simon concluded that rationality is bounded due to cognitive, information, and time limits-\> decision makers strive to saticfice, not maximize. **Critique for the rational model:** The critique on the rational model follows three dimensions\ 1. View of human reason= humans cannot always be rational (bias, emotion)\ 2. Understanding of knowledge acquisition= information is often limited, hard to obtain\ 3. Connection between theory and practice= not always as black and white\ Rational model focuses on the relationship between means and\ ends focus on efficiency is focusing on means. ◊ But "What\ happens to the ends?"\ Public organizations must act in observance to democratic\ morality (i.e. public values of fairness, understanding, and\ humanity)