Resources(and(Environmental(Economics( …bu.edu.eg/portal/uploads/Commerce/Economy/3898/crs...Resources(and(Environmental(Economics((First(Term(2019/2020 (((PowerPoint Slides prepared

Resources  and  Environmental  Economics    First  Term  2019/2020  

   PowerPoint Slides

prepared by

Dr. Walaa W. Diab FCOM-BU

Dr.  Walaa  Wageh  Diab  

Resources  and  Environmental  Economics    First  Term  2019/2020  

Lecture 4

PowerPoint Slides prepared by

Dr. Walaa W. Diab FCOM-BU

Dr.  Walaa  Wageh  Diab  

Resources  and  Environmental  Economics    

First  Term  2019/2020  COURSE  SYLLABUS  

PowerPoint Slides prepared by

Dr. Walaa W. Diab FCOM-BU

1-­‐  Instructor  Contact  Info.    Name:  Dr.  Walaa  Wageh  Diab  

Office  Hours:  from  8:30  am  to  9  am  each  Wednesday  Online  Office  Hours:  Each  Friday  at  1pm  to  3  pm  

Class  meets  Wednesday    Email:  Walaa.dyab@fcom.bu.edu.eg  

Course  website:    Lecture  slides  and  exercises  accessible  through  My  official  page:  

hVp://bu.edu.eg/staff/walaadyab4    

Dr.  Walaa  Wageh  Diab  

Resources  and  Environmental  Economics    

First  Term  2019/2020  COURSE  SYLLABUS  

Dr.  Walaa  Wageh  Diab  

Resources  and  Environmental  Economics    

First  Term  2019/2020  COURSE  SYLLABUS  

Dr.  Walaa  Wageh  Diab  

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What  is  Economics?  

•  Economics – the study of how to make trade-offs; the science of the allocation of scarce resources.

•  Environmental Economics: the study of trade-offs between economic activities and natural environment, it focus on a goal of helping society reduce its degradation of the environment. It is also defined as the application of the principles of economics to the study of how environmental resources are managed.

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q As the scale of economic activity has proceeded steadily upward, the scope of environmental problems triggered by that activity has transcended geographic and generational boundaries.

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q The nation-state used to be a sufficient form of political organization for resolving environmental problems Whereas each generation used to have the luxury of being able to satisfy its own needs without worrying about the needs of generations to come, intergenerational effects are now more prominent. Solving problems such as poverty, climate change

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q Solving problems such as poverty, climate change change, ozone depletion, and the loss of biodiversity requires international cooperation.

q Because future generations cannot speak for

themselves, the current generation must speak for them. Current policies must incorporate our obligation to future generations, however difficult or imperfect that incorporation might prove to be.

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Trade-­‐offs  occur  at  every  geographic  scale  

We  are  experiencing  losses  of  habitat  and  the  destruc@on  of  many  renewable  resources  including:  – Many  of  our  most  important  global  fisheries.  – Massive  losses  of  tropical  forests.  –  Rapid  die-­‐off  of  coral  reefs.  –  Extensive  losses  of  wetlands.  –  Conversion  of  grasslands  and  other  ecosystems  to  desert  at  a  fast  rate.  

Ø What  inhibits  economic  systems  from  using  its  resources  wisely  and  efficiently  to  protect  the  

sustainability  of  the  planet  and  people’s  livelihoods  over  @me?  

Dr.  Walaa  Wageh  Diab  

q An outcome is economically efficient if all resources are put to their

highest valued use, or alternatively if a desired outcome is reached

using the fewest resources.

q  Environmental economics uses efficiency as a central criterion for

evaluating outcomes and policies. An attempt is made to find

policies that that provides a maximum amount of protection for the

environment at a minimum cost of resources

q  Equity is also an important consideration in the evaluation of

outcomes and policies, because it is important for policies to be both

fair and efficient.

Dr.  Walaa  Wageh  Diab  

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Why  Study  Resources  and  Environmental  Economics?  

•  Study of natural sciences is not sufficient to completely analyze problem

because these sciences do not include human behavior.

•  The Economics of the Environment has a number of special features that are

not typical of many economic problems:

–  Optimal allocation of environmental resources has implications for future choice.

–  Many decisions regarding environmental resources are irreversible.

–  Market failure is an important characteristic of many environmental issues.

–  Optimal allocation requires understanding the whole ecological system and how it responds

to changes in both ecological and economic systems.

The environment and economy are linked

• Economies receive inputs from the environment.

– Process them for use

– Discharge the wastes back into the environment

• Traditional economists ignore the environment.

– Environmental economists accept that human economies exist within, and depend on, the environment.

The environment and economy are linked (canceled)

Natural Resources the Environment Provides

•  Renewable resources: – Perpetually available: sunlight, wind, wave

energy – Renew themselves over short periods of

time • These can be destroyed

•  Non-renewable resources: can be depleted

Renewable

Natural Resources the Environment Provides

Nonrenewable

Minerals Fossil Fuels

Forest Water Fruit/Nuts Fish

•  Economic growth and environmental Balance

•  Conservation recourses

•  Pollution control and environment

Scope of Environmental Economics

Ozone depletion

Atmospheric Pollution

Acid Rain

Global warming

•  What is the fundamental nature of the environmental problem?

•  Should the government “intervene” at all?

•  How clean should the environment be?

•  How can we achieve the desired environmental quality?

Policy Questions

•  “Free” markets will generate excessive pollut ion and overuse environmental services, hence, collective or public intervention is necessary

Economic Perspective on Environmental Management

models are useful abstractions, but the conclusions they yield depend on the structure of the model. Change the model and you are likely to change the conclusions. As a result, models should always be viewed with some skepticism.

Examining human behavior in a non-laboratory setting, however, poses special challenges because it is nearly impossible to control completely for all the various factors that influence an outcome beyond those of primary interest. The search for more control over the circumstances that provide the data we use to understand human behavior has given rise to the use of another analytical approach— experimental economics

Together, econometrics and experimental economics can provide different lenses to help us understand human behavior and its impact on the world around us.

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A positive feedback loop is a situation where two events are mutually reinforcing. With this situation a small change in one input can cause a bigger final increase in both the initial input and the secondary effect.

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The process of capital accumulation illustrates one positive feedback loop. ex. New investment generates greater output, which when sold, generates profits. These profits can be used to fund additional new investments. Notice that with positive feedback loops the process is self-reinforcing.

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Positive feedback loops are also involved in climate change. Scientists believe, for example, that the relationship between emissions of methane and climate change may be described as a positive feedback loop. Because methane is a greenhouse gas, increases in methane emissions contribute to climate change. The rise of the planetary temperature, however, could trigger the release of extremely large quantities of additional methane currently trapped in the permafrost layer of the earth; the resulting larger methane emissions would further increase temperature, resulting in the release of more methane, and so on.

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