REM 321 Study Guide - Midterm Guide: Ecosystem Services, Social Discount Rate, Genuine Progress Indicator

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Unit 1: Introduction to Ecological Economics
Economics: Understanding the processes that govern production, distribution, consumption of
goods and services in an open market
Microeconomics: Individual and business decisions
Macroeconomics: Country and govern ment decisions
Lenses of Economics:
- Classical Economics: Historical, and early theories
- Neoclassical Economics: Conventional, supply and demand, descriptive not
- Welfare Economics: Normative (says what ought to be done), extension of
neoclassical. Concerned with well being and distribution
- Behavioural Economics: Let data describe human behaviour (not theory)
Circular Flow Diagram: Relationship flow of products, labour and money in economics.
Relationship between households and firms. Households provide labour, which brings in
income and results in the production of goods. GDP represented by the magnitude of the
circular flow. Missing the environment
Economy in Environment Model: Includes economic system within the global system.
Production and consumption are the central processes in the economy. Resources are inputs to
production. Production and consumption always result in some waste. Some material waste
can be recycled (from consumption back to production). This system takes place in a finite
global ecosystem, with sources and sinks. Amenities things consumed directly from nature.
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Environmental Economics: Measured the impacts of waste from production/consumption and
how it impacts wellbeing
Natural Resource Economics: Natural resources as inputs to production- depletion and optimal
use of renewable resources.
Characteristics of Ecological Economics:
- Strong Sustainability: Human capital cant be substituted for natural capital
- Limits to Growth: Laws of thermodynamics limit growth. Development over growth
- Human Behaviour: Not just rational actors or selfish optimizers. Derive happiness
from a variety of sources.
- Equity: Consider the distributions of impacts in present and future generations
- Interdisciplinary: Complex problems require insights from multiple disciplines
Unit 2: Sustainability and Growth
Classifying Environmental Problems:
- Increase of land used intensively by humans
- Human activity impacts all spheres, especially the biosphere
- Increase in water use, atmospheric Co2, species extinctions
- Exceeded safe operating space for climate change, biodiversity loss, nitrogen
Threats to Environmental Sustainability
- Resource Depletion: Use of non-renewable resources and over use of renewable
- Waste Impacts and Accumulation: GHGs, Air pollution, Ozone depletion, water
pollution, POPs
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- Loss of Ecosystem Resilience (Biodiversity): Species Extinction, mono-culture
Classifying Pollutants:
- Absorptive Capacity: Cumulative (Stock) or Non cumulative (flow)
- Spatial Scale of Impacts: Local or Global
- Origin: Point or Non Point source
- Occurrence: Continual or episodic
- Example: Pure Flow Pollutant: Noise
o Pure Stock Pollutant: Radioactive Waves
Gross Domestic Product (GDP): Value of output produced by factors of production located in
the domestic economy. Equal to the sum of all the factor incomes arising in the domestic
Gross National Product (GNP): Value of output produced by domestically owned facors of
production, irrespective of where production occurs.
Why is rising GSP supposed to be good?
- Provides more goods and services, more consumption, income increase, job
creation, reduces poverty, increases literacy
Environmental Kuznets Curve (EKC): Empirical observation that at higher levels of per capita
income, environmental quality improves Creating an inverted U shape for environmental
degradation. Environmental degradation vs Per Capita Income
- Explanations for the EKC shape
o Emissions/ impacts increase as a country starts to industrialize
o Turning point- at higher incomes consumers/businesses can afford more
efficient technology, pro-env values
GDP does not fully account for:
- Resource depletion
- Env Degradation
- Equity or distribution
- Social problems
- Non-Market services
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