Environmental

Management and
Economics
The ‘greening’ of economics

• Economics is essentially the stewardship of resources

• Economics offers a framework within which to analyse the problems which we
face in making choices about the environment in which we live
• Economics is concerned with the allocation, distribution and use of
environmental resources
• One of the first to publish on resource and conservation economics was Ciracy-
Wantrup (1952).
• Fourteen years later Boulding (1966) inspired many with his writings on the
economics of Spaceship Earth which acknowledged that the world was finite
and vulnerable.
• Further impetus to ‘greening’ was given by the publications of Meadows et al.
(1972) and Schumacher (1973).
• By the late 1970s a little greening of economics was apparent.
• Green economics is essentially concerned with the consequences of the
drive to amass wealth.
Today, two widely stated goals of environmental economics are:
(1)to cut extravagant resource exploitation;
(2)to seek sustainable development.

Some economists argue that environmental care should stimulate

economic growth by improving the health of the workforce, making it
more productive and creating employment in the green sector
(pollution control and environmental remediation, etc.).
Environmental economics
• By the 1980s ‘new economics’ had appeared and environmental
economics was expanding.
• A recent UK press advert called for an ‘environmental economist’ to
explore how economic factors should be taken into account when
drafting and applying environmental regulations; to establish the value
of economic instruments within a mixed regime of regulations; to
establish economic measures of trends in the employing nation’s
environmental capital.
• There have been attempts to incorporate economic evaluation into
environmental impact assessment.
• Valuation of the environment must be improved for developing and
developed countries.
Global environmental problems and economics
• Those exploring policies to cope with climate change,
transboundary pollution and other global environmental problems
need to know the likely costs, approaches which may be useful,
and economic controls.
• The economics of global climate change is attracting
considerable attention to try to resolve disagreement between
various countries and institutions over the apportionment of
blame, estimation of costs, and development of controls.
• Another area of interest is technology change: in the early 1970s
Farvar and Milton (1972) suggested that careless application of
technology caused socioeconomic problems.
• Nowadays economists try to forecast the impacts of proposed
innovations.
Environmental accounts
• Environmental auditing has been applied to: eco-audits, stock-taking, eco-review, eco-survey,
etc. State-of-the-environment accounts, environmental quality evaluations and environmental
accounts systems collect data on the environment and resources to try and show the state of
an area (or sea like the Baltic or Aegean).
• Most of these accounting procedures treat the environment as natural capital and try to
measure its depletion or enhancement. (Valuing environmental features in monetary terms
can be difficult.)
• These accounting systems seek to set out a region’s environmental, social and economic
assets, and can be used to assess whether economic development is consistent with
sustainable development, or help ensure optimal use of natural resources and environment
• For example, a natural resource accounting system can help a manager establish what
percentage of, say, mineral exploitation profits to invest in long-term sustainable development
so that a region or country does not suffer boom and decline.
• In practice, being able to make such investments depends on the type of government,
people’s attitudes and the persuasiveness of environmental management.
• Natural resource accounts can show the linkages between the environment and the
economy, may be useful for forecasting, and can establish which habitats, etc., are of
importance.
Evaluating the environment and natural
resources
• Resource inputs have been divided by assessors
into: renewable (regardless of management, also
called ‘stock resources’); potentially renewable
(dependent on management); and non-renewable.
• Some renewable resources can be converted to
non-renewable through poor management or
natural disaster.
• Certain resources cannot be remade if damaged
or exhausted (e.g. biodiversity).
• The absorptive capacity of the environment (its
ability to absorb and neutralize damaging
compounds or activities) is a resource which
should be assessed by economists.
• There may be opportunities to substitute for a
given resource, using labour, capital or
alternative materials.
Cost—benefit analysis
• Cost-benefit analysis (CBA) seeks to identify the impact of development on each
person affected at various points in time, and so estimate the aggregate value
which each person gains or loses.
• There is a huge literature on CBA, its shortcomings, modifications and alternatives.
• Widespread dissatisfaction with CBA’s effectiveness in valuing environmental
issues has led to many suggested improvements or alternatives, some favouring
quantitative approaches, and others qualitative.
• One focus has been to try to improve its consideration of environmental issues, but
this is still far from adequately solved.
• A development since the early 1990s is the concept of best available techniques
not involving excessive economic costs (BATNEEC).
• This places the onus on developers to adopt the best techniques available, with
only ‘excessive cost’ as a viable excuse for not doing so.
Shadow prices
• The difficulty of establishing the value of ‘externalities’,
including environmental factors, in monetary units has been
addressed in several ways: one is to use shadow prices. A
shadow price is a value that reflects the true opportunity cost
of a resource or service. The real value of something reflects
the most desirable alternative for it, e.g. (in production) the
opportunity cost of producing an extra unit of manufactured
goods is the lost output of childcare, food production, etc.,
forgone as a result of transferring resources to manufacturing
activities. In consumption, opportunity cost is the amount of
one commodity that must be forgone in order to consume
more of another.
Green taxes
• The use of taxation is an important tool for seeking environmental management
goals.
• Pearce urged environmental management to seek a balance between using
economic command and control (largely through taxes) and incentives.
• Capra suggested that one of the most effective ways of countering environmental
damage and supporting sustainable development would be to shift the tax burden
from income to ‘eco-taxes’. These could be added to products, energy, services
and materials, to reflect true costs. This means the consumer pays. While there
have been national measures for some time, interest in green taxation on an
international scale is recent (and still mainly theoretical), triggered by increasing
transboundary pollution, competition for internationally shared resources, and the
threat of global environmental change.
• The function of green taxes is not to raise revenue for government but rather to
provide participants in the marketplace with accurate information about true costs.
For example, a tax on CFCs reflects their impact on ozone. What else?
• Green taxes counter the pursuit of lower prices by externalizing the true costs,
ensuring that the purchaser is aware of the costs of environmental impacts.
• It is important that attempts to integrate external costs of production into prices does
not burden the poor or ‘punish’ the middle classes.
• The aim is to give people and companies incentives to invent, innovate and respond
to environmental challenges.
• Green taxation should encourage manufacturers to seek to reduce waste and other
environmental damage to keep down their costs and thus prices to the purchaser—
i.e. there is incentive to improve environmental practice.
• Taxation is also becoming an important tool in the quest for sustainable development.
• One problem associated with attempts to agree international green taxation is that it
may come into conflict with sovereignty.
• There are a number of taxation approaches that have potential for controlling global
climate change: tradeable emission quotas; carbon (emissions) tax; energy use tax;
taxation associated with technology transfers; reduced taxation for providing carbon
sinks.
• Examples: Pigouvian taxes, Carbon emissions taxes, Tradeable emissions quotas
and energy use taxes.
Green funding
• Funding and aid agencies are increasingly focusing on
environmental management and sustainable development, and
they also check for risks, such as contaminated land, before
supporting developments.
• Aid and the environment

Debt, structural adjustment and environment

• Debt and environment
• Structural adjustment and the environment
Paying for conservation:

Criticisms levelled at debt-for-nature swaps are that:

• they offer limited potential to pay off existing debts (i.e. are tiny compared with typical
national indebtedness);
• they may be used to ‘smear’ indigenous environmental groups efforts, i.e. opponents
of environmental protection spread rumours of foreign interference to divert attention
from other issues;
• there may be difficulties in adopting them in some countries because of different
accounting and regulatory systems;
• there is no guarantee of ongoing protection or care;
• they may be seen as an erosion of a developing country’s sovereignty;
• if operated through NGOs, swaps may not assist or train local agencies;
• they do little to change commercial forces that damage the environment;
• they have so far been applied to a limited range of activities, mainly park and reserve
establishment and maintenance;
• the main beneficiaries, it has been argued, were the debt-seller banks.
Trade and environmental management
Trade impacts upon environment for example, it affects:
•  rates of deforestation;
•  demand for animal and plant products, and may be a major reason why a
species is endangered;
•  global carbon dioxide levels;
•  extraction of mineral resources, production of food and commodity crops;
•  levels of pollution in developed countries;
•  pollution controls in developing countries.

• Trade and the environment

TOPNOTCHERS in SCI 213
PRELIM EXAM:

Roselyn Acpac
Cristine Joy Palmes
Hessa Bandera
Jojie Lamoste
Chen Cabungcag
TOPNOTCHERS in SCI 214
PRELIM EXAM:

Nietchie Fernandez
Cristine Joy Palmes
Hessa Bandera
Mary Joy Maumbas
Keziah Grace Reputana 17