CERP 140 Huddle Module 1 PDF

Module 1: Overview of Important Environmental Economics Concepts CERP 140 Fundamentals of Environmental Economics 1st Semester 2024-2025 Casper Boongaling Agaton  5-min Atten...

Module 1: Overview of Important Environmental Economics Concepts CERP 140 Fundamentals of Environmental Economics 1st Semester 2024-2025 Casper Boongaling Agaton  5-min Attendance QUIZ Student Number: _________ Section: ______ Score: ______ 1. The blue curve represents the ___________. 2. The red curve represents the ___________. P2 3. What do you call the intersection of the red and blue curves (Q*,P*)? 4. [True/False] At point P1, the Qsupply > Qdemand. 5. There is a quantity [surplus/shortage] at P2. P* For 6-8, if (negative) externalities in the production are considered: P1 6. What will happen to supply curve? [shift to the left/right, unaffected] 7. Equilibrium price will [increase/decrease/constant] 8. Equilibrium quantity will [increase/decrease/constant] 9-10. The GDP of an open economy depends on (C,I,G,NX). What are these variables? Q* BONUS (3 pts): In a liberalized market (for open economy), who benefits more from importation of goods: producers or consumers? How?  s t ics e en n d e to o a e t n m of pts etw mic ls tal Pr tio con w b ip ono o To men c du al E rv ie nce h s ec m ic n o e Co on o i ro r t v ti and n nv t Int men : O mic 1 no l a e nt s c o E or E en R e : i r on le du Eco 2: nm tem e 3 s f sm v o u e l iro sy s u que ses l En M ant o d nv M d o ni As o rt M ee e ch p th T Im Learning Objectives: - define and apply economic concepts to environmental issues - Kuznet’s Curve, Pareto efficiency - Property rights, Free Rider, Prisoner’s Dilemma, Tragedy of the Commons - Externalities, Coase theorem, Polluter Pays Principle, Caps and Trades, Carbon Market, Clean Development Mechanism, Opportunity cost World Economy Environmental Kuznet’s Curve hypothesized relationship between economic development and environmental degradation as economies grow, environmental impacts may rise, but eventually they fall What is Pareto Efficiency? an allocation of goods in an economy whereby goods cannot be reallocated without making at least one individual worse off used to evaluate social welfare Pareto efficient equilibrium - as long as everyone is just as "satisfied" it doesn't matter how the goods are allocated any change will result in at least one person becoming less "happy" or "satisfied" with their good(s) Pareto Efficiency in shifting energy generation from coal to renewables What is Property Rights? the exclusive authority to determine how a resource is used, whether that resource is owned by government or by individuals Types of property rights: Private/ exclusive Functional/ status Government/ state Open-access “A stronger right to own property leads to a higher level of economic efficiency” What is Property Rights? Free-rider Problem a type of market failure that occurs when those who benefit from resources, do not pay for them or under-pay Prisoner’s Dilemma a situation where individual decision-makers always have an incentive to choose in a way that creates a less than optimal outcome for the individuals as a group Tragedy of the Commons each consumer acts to maximize their own utility, and thereby relies on others to cut back their own consumption is an economic problem of overconsumption, under investment, and ultimately depletion of a open access resources Identify the Type of Property Rights Market Inefficiencies in shifting energy generation from coal to renewables Free-rider incentive, prisoner’s dilemma, Tragedy of the commons What is Externality? a cost or benefit caused by a producer that is not financially incurred or received by that producer Social Benefit < Private Benefit Social Cost > Private Cost Positive or negative Coase theorem a way to deal with the tragedy of the commons problem surrounding common resources such as the environment if the actions of party A harms party B, then party B can create an incentive for party A to reduce or stop the action creating the harm. Polluter Pays Principle polluters should bear the costs of managing pollution to prevent damage to human health or the environment Externality of Energy Generation from Coal Positive vs negative externality Coase Theorem vs Polluter Pays Principle IV Extension San Jose.pdf Emission Trading System (ETS) also known as cap and trade a market-based approach to controlling pollution by providing economic incentives for achieving reductions in the emissions of pollutants a tradable-permit system for GHG emissions sets a limit (the cap) on the GHG emissions that can be emitted Clean Development Mechanism (CDM) UN-run carbon offset scheme allowing countries to fund GHG emissions-reducing projects in other countries and claim the saved emissions as part of their own efforts to meet international emissions targets one of the three Flexible Mechanisms defined in the Kyoto Protocol: assist non-Annex I countries (predominantly developing nations) achieve sustainable development and reduce their carbon footprints assist Annex I countries (predominantly industrialized nations) achieve compliance with GHG emissions reduction commitments What is Opportunity Cost? the loss of value or benefit that would be incurred by engaging in that activity, relative to engaging in an alternative activity offering a higher return in value or benefit Opportunity Cost = (returns on Forgone Option) - (returns on Chosen Option) Opportunity Cost in Energy Generation from Coal