Lecture 2: Linkage Between Economy and Environment PDF

CHAPTER 2: LINKAGE BETWEEN THE ECONOMY AND THE ENVIRONMENT Question 1. What is the relationship between: Environment and Economy? 2. From a specific firm’s point of view: Should the firm invest in environmental friendly technology for its production? Will it affect their benefit? In which di...

CHAPTER 2: LINKAGE BETWEEN THE ECONOMY AND THE ENVIRONMENT Question 1. What is the relationship between: Environment and Economy? 2. From a specific firm’s point of view: Should the firm invest in environmental friendly technology for its production? Will it affect their benefit? In which direction? 3. For a individual, what is the cost and benefit of taking care of environment in term of economic? I. Fundamental Relationship Economic activity takes place within, and is part of, the natural environment. Economic activities in turn have big impact to the environment. Fundamental Relationship  5 A circular flow relationship for the Environment and the Economy + Rpd: residuals from produc2on + Rcd: residuals from consump2on The first law of Thermodynamics To reduce the mass of residuals disposed in the natural environment, the quantity of raw materials taken into the system must be reduced Raw material (M) = output (G) + Production residuals (Rp) – Recycled amount from producer (R’p) – Recycled amount from consumer (R’c) 3 Ways of Reducing M (Reduce Residuals) M = G + Rp – (rRp + rRc) Reduce G: Reduce quantity of Goods and Service Reduce Rp: Reduce residuals per unit of output produced => Reduce Residuals intensity production (Pollution prevention)/Shift to the composition of output. Increase recycling in both production and consumption. Instead of discharge waste into environment, try to recycle them.  8 Interdependent relationship The environment provides both a direct value as well as raw material intended for economic activity, thus making the environment and the economy interdependent. The way in which the economy is managed has an impact on the environment which, in turn, affects both welfare and the performance of the economy. II. Environment’s functions to the economy Four functions of the environment to the economy 1. Source of resource inputs 2. Provides life support services 3. Source of amenity services 4. Receptacle for residuals  1. Source of resource inputs Classification of natural resources Natural resources Stock resources Flow resources Solar radiation, wave and wind power Renewable Non-renewable resources resources Energy Mineral resources resources Productive resource services Natural resources used in production are of several types. One characteristic: does the resource exist as a stock or a flow. The difference lies in whether the level of current use affects future availability. ▫ Flow resources: no link between current use and future availability. ▫ Stock resources: level of current use does affect future availability. Stock resources Renewable resources are biotic populations – flora and fauna: have potential to grow by natural reproduction. Non-renewable resources are minerals, including the fossil fuels: no natural reproduction, except on geological timescales. 2. Basic life-support functions The biosphere currently provides the basic life- support functions for humans. The environment provides life-support services such as maintenance of genetic diversity and stabilization of the ecosystem 3. Amenity Services Amenity services flow directly from the environment to individuals. The biosphere provides humans with recreational facilities and other sources of pleasure and stimulation. 4. Residual disposed into environment Solid waste Waste water Air pollutants Noise Types of pollutants ØResidual is material that is left over after something has been produced ØPollutant is a substance, energy form, or action that, when introduced into the natural environment, results in a lowering of the ambient quality level Classification 1 Accumulative vs. Non-accumulative Pollutants Accumulative pollutants: accumulate over time, stay in the environment in nearly the same amounts as they are emitted Non-Accumulative pollutants: dissipate soon after being emitted. Q: Give some examples about these two types of pollutants? Classification 2 Local vs. Regional and Global Pollutant Local Pollutants: pollutants that have an impact only in restricted, localized regions: Regional Pollutants: pollutants that have wider impacts over large region Global pollutants: pollutants that have impacts globally. Classification 3 Point Source vs. Nonpoint Source Pollutants Point Source Pollutant: Actual point of discharge can be identified Nonpoint source pollutant: There are no well defined points of discharge Classification 4 Continuous vs. Episodic Emission Continuous emissions: Emissions are continuos, damage are also continuous. Episodic Emission: pollutants are emitted on an episodic basis. Classification 5 Environmental Damages Not Related to Emissions There are many important instances of deteriorating environmental quality that are not traceable to residuals discharges. E.g: -The conversion of land to housing and commercial areas destroys the environmental value of that land -Other land uses, such as logging or strip mining, can also have important impacts. Types of Pollutants Accumulative Radioactive waste, plastics, many chemicals Non-accumulative Noise Local Noise, visual Regional SO2 Global CO2, CFCs Smoke stacks, waste treatment plants Point Source Non-Point Source Agricultural runoff Stationary Source Factories Mobile Source Cars, planes, boats Continuous Power plants, factories, waste treatment plants Emissions Oil and chemical spills Episodic Emissions III. Economic growth and the environment? What are essential factors to economic growth? Factors Essential to Economic Growth? ²Human resources ²Natural resources ²Physical capital ²Absorptive Capacity of the environment The drivers of environmental impact The environmental impact of economic activity can be looked at in terms of: extractions from the environment insertions into the environment The immediate determinants of the total level of impact are: In either case, the size of the human population and the per capita impact. The per capita impact depends on: how much each individual consumes, and the technology of production. The IPAT identity A simple but useful way to start thinking about what drives the sizes of the economy’s impacts on the environment. It can be formalized as the IPAT identity: I = P´A´T I: impact, measured as mass or volume P: population size A: per capita affluence, in currency units T: technology, amount of the resource used or waste generated per unit production  The IPAT identity Measure impact in terms of mass Use GDP for national income. Then T is resource or waste per unit GDP. Then for the resource extraction case, we have: GDP Resource Use I º P´ ´ P GDP A T  https://www.youtube.com/watch?v=KOaS2vTL eeA&t=204s