environmental economics: issues, instruments and institutions econ*4930, lecture 1 prof. mckitrick
TRANSCRIPT
Environmental Economics:
Issues, Instruments and Institutions
ECON*4930, Lecture 1
Prof. McKitrick
Issues: Air Pollution
Ground Level Ozone (O3) Nitrogen Oxides (NOx) Particulate Matter (PM, TSP) Sulphur Oxides (SOx) Volatile Organic Compounds (VOCs) Carbon Monoxide (CO)
Ozone: 11 AM, Bay&Wellesley
0
10
20
30
40
50
60
70
800
1/0
1/1
99
8
01
/03
/19
98
01
/05
/19
98
01
/07
/19
98
01
/09
/19
98
01
/11
/19
98
01
/01
/19
99
01
/03
/19
99
01
/05
/19
99
01
/07
/19
99
01
/09
/19
99
01
/11
/19
99
01
/01
/20
00
01
/03
/20
00
01
/05
/20
00
01
/07
/20
00
01
/09
/20
00
01
/11
/20
00
Ozone: Monthly Averages
NOx: 11 AM Bay&Wellesley
0
50
100
150
200
250
300
3500
1/0
1/1
99
8
01
/03
/19
98
01
/05
/19
98
01
/07
/19
98
01
/09
/19
98
01
/11
/19
98
01
/01
/19
99
01
/03
/19
99
01
/05
/19
99
01
/07
/19
99
01
/09
/19
99
01
/11
/19
99
01
/01
/20
00
01
/03
/20
00
01
/05
/20
00
01
/07
/20
00
01
/09
/20
00
01
/11
/20
00
pp
b
NO2: Monthly Averages
TSP: Bay&Wellesley
0
50
100
150
200
250
300
1962 1966 1970 1974 1978 1982 1986 1990 1994
TSP: Monthly Averages
SO2: Bay&Wellesley
0
20
40
60
80
100
120
140
1965 1970 1975 1980 1985 1990 1995
SO2: Monthly Averages
Air Pollution vs Income
Is it like this?
Pollution
0
40
80
120
160
0 500 1000 1500 2000 2500 3000 3500
Gross Domestic Product
Air Pollution vs Income
Total Suspended Particulates
0
50
100
150
200
250
300
350
400
450
$0 $5,000 $10,000 $15,000 $20,000
Income per capita (1992$)
TS
P C
on
ce
ntr
ati
on
(u
g/m
3)
Air Pollution vs Income
Nitrogen Dioxide
0
50
100
150
200
250
300
$0 $5,000 $10,000 $15,000 $20,000
Income (GDP/capita)
ug
/m3
Air Pollution vs Income
Sulfur Dioxide
0
50
100
150
200
250
$0 $5,000 $10,000 $15,000 $20,000
Income (GDP/Cap)
ug
/m3
Air Pollution Since 1940: USA
0
50
100
150
200
250
300
1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995
NOx
VOC
CO
SO2
PM10
Air Pollution vs Income: USA
0
3,000
6,000
9,000
12,000
15,000
18,000
21,000
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000
US Real GDP per Capita (1996$)
To
tal
Par
ticu
late
Em
iss
ion
s (
'00
0 t
on
s)
Air Pollution vs Income: USA
60,000
70,000
80,000
90,000
100,000
110,000
120,000
130,000
140,000
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000
US Real GDP per Capita (1996$)
To
tal
Ca
rbo
n M
on
ox
ide
Em
iss
ion
s (
'00
0 t
on
s)
Water Pollution (Kg/worker/day) vs Income
0
0.005
0.01
0.015
0.02
0.025
0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000
Income (1985 US$)
Kg
/da
y p
er
wo
rke
r
Water Pollution: Great Lakes
Contaminant Levels in Herring Gull Eggs, Lake Ontario
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996
Year
Ind
ex (
1974
=10
0) DDE
Dieldrin
Mirex
HCB
PCBs
Water Pollution: Great Lakes
Contaminant Levels in Herring Gull Eggs, Lake Erie
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998
Year
Ind
ex (
1974
=10
0) DDE
Dieldrin
Mirex
HCB
PCBs
Global Issues: Ozone Layer
Global Issues: Ozone Layer
Instruments
Standards Emission Standards Technology Standards
Emission Charges (Taxes) Tradable Emission Permits Tort Law
Standards
E.g. US motor vehicle emission standards
Tradable Emission Permits
E.g. US EPA SO2 Allowance Market
Tradable Emission Permits
Number of trades
Institutions
Canada Federal Government
Inland waterways, CCME, International Treaties, Environmental Assessment, Motor vehicles, Endangered Species, Toxic Substances
Provincial Government Air and water contaminant regulation, Energy,
Municipal oversight (e.g. solid waste management) Courts
Tort law, property rights
Models of Economic Growth and the Environment
Substitution Effect: Growth uses up natural assets
Income Effect: Expands resources for environmental protection
Models of Economic Growth and the Environment
Output constraints FIGURE 3.
Consumption Goods C
Environmental Amenities E
EM
Models of Economic Growth and the Environment
Preferences
C
E
Models of Economic Growth and the Environment
Combining:
Environmental Kuznets Curve
Low income: pollution rises as income rises High income: pollution falls as income rises
Beltratti Model
Utility Function
Production Function
Environmental Quality
Capital Stock
1)(
1
1cEU
Ky
)()( KyvERE
cyK
Beltratti Model
Environment deteriorates according to
KeKK
GKv 1)(
0K )(Kv )(Kv
K 0)( Kv 0)( Kv
Beltratti Model
Simple structure, yet: Has no steady state Can generate any relationship between pollution
and income U, ∩, ~, etc.
Bottom line: growth theory unlikely to make one single prediction about pollution v growth, but might help explain different histories