Chapter 11 Slide 1Copyright © 2003 Pearson Education, Inc.

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The Environment and Development

Chapter 11

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Economics and the Environment

Environmental issues affect, and are affected by, economic development

Poverty and ignorance may lead to non-sustainable use of environmental resources

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Environment and Development: The Basic Issues

Sustainable development and environmental accounting

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Environment and Development: The Basic Issues

nm DDGNPNNP *

Sustainable net national product is:

WhereGNP is Gross National ProductDm is the depreciation of manufactured

capital assetsDn is the depreciation of environmental

capital

Chapter 11 Slide 6Copyright © 2003 Pearson Education, Inc.

Environment and Development: The Basic Issues

ARDDGNPNNP nm *Alternatively, sustainable net national product is:

WhereGNP is Gross National ProductDm is the depreciation of manufactured

capital assetsDn is the depreciation of environmental

capitalR is expenditure needed to restore

environmental capitalA is expenditure required to avert

destruction of environmental capital

Chapter 11 Slide 7Copyright © 2003 Pearson Education, Inc.

Environment and Development: The Basic Issues

Sustainable development and environmental accounting

Population, resources, and the environment

Poverty and the environment Growth versus the environment Rural development and the environment

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Environment and Development: The Basic Issues, cont’d

Urban development and the environment

The global environment

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The Scope of Environmental Degradation: A Brief Statistical Review Environmental problems have

consequences both for health and productivity

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Rural Development and the Environment: A Tale of Two Villages

Representative African village Representative South American village

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Traditional Economic Models of the Environment Privately owned resources

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Figure 11.1 Static Efficiency in Resource Allocation

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Figure 11.2 Optimal Resource Allocation over Time

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Traditional Economic Models of the Environment Privately owned resources Common property resources

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Figure 11.3 Common Property Resources and Misallocation

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Traditional Economic Models of the Environment Privately owned resources Common property resources Public goods and bads: regional

environmental degradation and the free-rider problem

Limitations of the public goods framework

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Figure 11.4 Public Goods, Normal Goods, and Free-Rider Problem

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Urban Development and the Environment The ecology of urban slums Industrialization and urban air pollution

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Figure 11.5 Pollution Externalities: Private versus Social Costs and the Role of Taxation

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Figure 11.6 Increasing Pollution Externalities with Economic Growth

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Urban Development and the Environment The ecology of urban slums Industrialization and urban air pollution Problems of congestion and the

availability of clean water and sanitation

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The Need for Policy Reform

The recognition that action to reduce environmental hazards has been insufficient is now widespread

However, budgets are limited Better pricing policies would improve

matters Inclusion of women in the design of

environmental policy is important

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The Global Environment: Rain Forest Destruction and Greenhouse Gases

Many scientists are alarmed by recent evidence regarding ozone depletion and global warming

Economists also are concerned with the costs of global climate change

The solutions seem to involve both LDCs and industrialized countries

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Policy Options in Developing and Developed Countries What LDCs can do

– proper resource pricing– community involvement– clearer property rights and resource

ownership– improved economic alternatives for the poor– improved economic status of women– industrial emissions abatement policies

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Policy Options in Developing and Developed Countries, cont’d How developed countries can help LDCs

– trade policies– debt relief– development assistance

What developed countries can do– emissions controls– R&D– import restrictions

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Concepts for Review

Absorptive capacity Biomass fuels Clean technologies Common property

resource Consumer surplus Debt-for-nature swap Deforestation

Desertification Environmental

accounting Environmental capital Externality Free-rider problem Global warming Greenhouse gases

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Concepts for Review, cont’d Internalization Marginal cost Marginal net benefit Ozone depletion Pollution tax Present value Private costs Producer surplus Property rights

Public bad Public good Scarcity rent Social costs Soil erosion Sustainable

development Sustainable national

income Total net benefit