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ECON 3220 (3)
Ali Kamar (3)
Chapter 1

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ECON 3220
Ali Kamar

Chapter 1 What is environmental economics?  Study of environmental problems using economic tools o Scarcity, choice, opportunity cost, PPF o Positive (objective), normative (subjective) statements o Marginal benefits, marginal costs (demand curve) o Consumer, producer (economic or social) surplus o Benefit cost analysis and non-market evaluation  Focus s how our economic activities affect our environment  How can we reduce environmental impacts  Is zero pollution possible? No o The issue is to find the optimal level of impact. Economic approach  How do incentive affect our decisions that cause environmental degradation?  How can we modify or restructure incentives to reduce environmental impacts?  Is profit maximizing an incentive to pollute the environment? o For firms o For individuals o Government agencies Ownership of Environment  Recognize environment as an asset that we own  An asset has current and future values  Owner has incentive to maintain it so that future values are not drastically reduced  In natural resource economics, ownership of a resource is referred to pas property rights  3 conditions o Exclusivity: all benefits and costs accured to the owner o Transferability: rights are transferrable o Enforceability: rights cannot be encroached Externality and Property rights  If condition is number one, exclusivity is violated, then we have external effect or externality o Some benefits and costs spill over to society  Example o Smog and vehicles  Effects of exhaust smoke is affecting everyone, even those who do not drive  Costs of driving are not Bourne to drivers  How can drivers; incentives be restructured so that less emissions are produced  Total emissions= emission x distance x number  Taxes. Standards impart property rights to the government  Subsidies impart property rights to polluters Growth and Sustainability  What is sustainable development? o Development that meets the needs of the
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