Chapter 2 Notes

Economics and the Environment

What is Economics?• The study of how resources

are used and distributed

• Markets tend to move toward equilibrium, where demand for a product matches supply.

• Cost-benefit analysis is a decision-making tool that compares an activity’s gains and costs.

Can you determine the value of nature and the environment?

Support from the Environment • Natural resources are the various substances and

forces that people need to survive.• We can think of these things as “goods” produced

by nature. • Goods: Sunlight, fresh water, timber, and fossil fuels

• Ecological systems also provide services to us and to the planet.

• Services: Nutrient cycling and purification of air and water

Economy Impacting Environment• Economic activity can deplete natural

resources.

• Economic activity can create pollution, and in turn, ecological systems could be harmed.

1. What is a negative affect of the economy on the environment?

2. When the environment is negatively affected, how can the environment be negatively affected too?

Environmental Economics• Applies the principles of Earth’s

systems to economics

• Argues that economies cannot be sustainable unless environmental issues are addressed

• Assigns market values to ecosystem services

• Suggests that market failure will occur unless market values reflect environmental costs and benefits

Clear views and natural beauty have aesthetic value, which is a type of non-market value.

Assigning Value• Services and goods provided by the Earth have

value…but not necessarily monetary value. • Despite that, people have tried to put a

monetary value on certain things…like a beautiful view, the ability of a park to teach children about nature, etc.

• Today, more organizations and more companies are trying to assign value to the Earth, the environment, and the services they provide.

Consumer and Corporate Response• Changing consumer values can drive

corporations to pursue sustainability.• Consumers are demanding more information about

the products they purchase, how they are produced, and their impact upon the environment.

• Ecolabeling is an example of a corporate response to the call for sustainable goods and services.•Many corporations are responding to

consumer demand by becoming more energy efficient, reducing the use of harmful substances, and reducing air pollution.

Did You Know? Organic farming is one of the fastest-

growing segments of U.S. agriculture. Land devoted to

growing organic has expanded by about 15% each

year since 2002.

Review Questions…1. Give 2 examples of goods provided by the

Earth that are critical to our economy. 2. Give 2 examples of services provided by the

Earth that are critical to our economy and well-being.

3. Explain how a healthy environment and a healthy economy are related.

Once Upon A Time…• The natural resources in the United

States seemed endless. • Settlers forged into the west

without any concern regarding how long the resources there would last.

• People were encouraged to develop, grow, and use resources to do so.

• What has changed?

Two Centuries Later…• The United States is a much different

place today. • Industrialization has made life easier and

more convenient. It has also led to the use and over use of resources, pollution, and environmental degradation.

• As a result, environmental policy has evolved over time to protect and/or repair damage made to the environment by our industrial expansion.

Environmental Policy• The United States has provided a good model for policy

making worldwide. • All three branches of government become involved.

1. Legislative Branch Law is proposed, passed by Congress, then onto the Executive

Branch.

2. Executive Branch Legislation can be approved or vetoed. Approved things are

passed onto an executive agency that carries out the legislation. Ie: EPA

3. Judicial Branch The Judicial Branch interprets laws. Society changes over time,

and therefore broad laws are written that could apply over time. Environmental advocates and organization use lawsuits as tools to ensure that folks comply with laws.

What is Environmental Policy?• It makes use of environmental science, ethics,

economics, and the political process used to solve environmental problems.

• It consists of general plans and principles that address the interactions between humans and the environment.

• Modern day environmental policy aims to protect environmental quality, protect natural resources, and ensure that resources are shared fairly.

• In the U.S., all three branches of government (legislative, executive, and judicial) are involved in federal environmental policy.

State and Local Policy

• State and local environmental policies cannot violate the U.S. Constitution.

• The strength of environmental policy differs from state to state.

• States that experience environmental disasters tend to have stronger environmental laws.

• States such as California, New York, and Massachusetts have strong environmental laws and well-funded environmental agencies.

History of Environmental Policy• Throughout history, the Unites

States government has reinvented its approach to the relationship between the nation’s goals and the environment.

• The history of environmental policy can be divided into three major time periods.

• During each period, different priorities and goals changed our policies and ideas.

History of Environmental PolicyThe First Wave: 1780s – late

1800s• Laws enacted at this time dealt

with management of public lands and the westward expansion.

• People felt that resources were endless, so developed and used resources.

• Cities became less crowed. • Native peoples were displaced.

Long Lake in the Rocky Mountains, near Ward, CO

History of Environmental PolicySecond Wave – Late 1800’s to mid 1900’s• Policies sought to reduce environmental

problems associated with westward expansion in previous years.

• Individuals started to understand the value of natural resources and the government invested in conservation.

• Key figures during this time period included Theodore Roosevelt, Gifford Pinchot, and John Muir.

• This time period saw the beginning of the National Park System, the Forest Reserve Act, and included the creation of millions of acres of national parks and federally protected lands.

History of Environmental PolicyThe Third Wave – mid 1900’s to late 1900’s• Dense populations led to increasing

resource consumption and pollution.• Silent Spring and fires on the Cuyahoga

River raised environmental awareness.• Policy began to reflect the connection

between human and environmental health.• Americans were better off economically,

but dirty air, water, and land was everywhere. • This wave peaked in the early 1970s with

the creation of several laws, The Clean Water Act, the Clean Air Act, and with the creation of the Environmental Protection Agency.

Modern U.S. Environmental Policy• Today, because of environmental

policies enacted during the late 20th Century, we do have cleaner air, water, and better environmental regulations.

• Two major federal actions marked the modern era of environmental policy:

National Environmental Policy Act: Requires government agencies and contractors to evaluate the environmental impact of a project; led to the formation of the EPA

Environmental Protection Agency (EPA): Responsible for monitoring, enforcing, and researching environmental quality

Where Are We Today?• Unfortunately, in the 1980s, there was a

backlash from business against environmental policy.

• Many felt that laws presented too much of a financial burden and that they could harm business.

• During the 1980s, 1990s, and 2000, many efforts were made to weaken environmental policy.

• It is the intention of many scientists and environmental advocates to move forward and re-invigorate and bolster environmental policy once again.

International Policies• Environmental issues often involve more than one nation.• International organizations promote cooperation between

nations:• The United Nations • The European Union• The World Trade Organization• The World Bank

• Non-governmental organizations (NGOs), such as Greenpeace, influence international policies and contribute to research and funding.

Approaches to Environmental Policy

• Command-and-control

• Tax breaks and subsidies

• Green taxes

• Cap-and-trade

• Local incentives

No dumping signs are an example of command-and-control.

Did You Know? The cap-and-trade approach in the U.S. has helped reduce pollution that cause acid rain by 35%.

Environmental Policy Process