In this presentation, I have stated some important topics and concepts of "Environmental economic". which can help an individual to enhance his skills in Environmental economics.
2. Environmental economics is a branch of
economics which deals with environmental
issues. Environmental economics is different
from Ecological economics in that it lays
stress on the economy as a subsystem of the
ecosystem with its concentration on
preserving natural capital.
In a survey, German economists established
that ecological and environmental economics
are separate schools of economic thought,
with ecological economists stressing upon
“strong” sustainability and rejecting the
thought that natural capital can be
substituted by human-made capital.
3. Market failure is one of the core concepts of environmental economics.
Market failure implies that markets fail to allot resources well. As Hanley,
Shogren, and White (2007) have stated in their textbook
Environmental Economics
A market failure occurs when the market does not allocate scarce
resources to generate the greatest social welfare. A wedge exists between
what a private person does given market prices and what society might
want him or her to do to protect the environment..
4. Such a wedge implies
wastefulness or economic
inefficiency; resources can be
reallocated to make at least one
person better off without
making anyone else worse off.
Market failures may take
various forms, which commonly
include most
externalities,
non-excludability
non-rivalry
5. Externality:
the fundamental idea is that an externality
exists when a person makes a choice that
affects other people that are not accounted for
in the market price.
For example
A firm emitting pollution will generally not take
note of the costs that its pollution imposes on
others, resultant may be, pollution in excess of
the ‘socially efficient’ level may occur.
A classic definition influenced by Kenneth
Arrow and James Meade is given by Heller and
Starrett (1976), who define an externality as
“a situation in which the private economy lacks
sufficient incentives to create a potential market in
some good and the nonexistence of this market
results in losses of Pareto efficiency.”
6. In terms of economics, externalities are instances of market failures, in
which the free market does not lead to an efficient outcome.
When it is extremely costly to prevent people from right to use to an
environmental resource for which there is rivalry, market distribution is likely
to be inefficient.
The challenges linked with common property and non-exclusion has been
recognized for a long period now. “Commons” refers to the environmental
asset itself, “common property resource” or “common pool resource”
Common property and
non-exclusion:
7. refers to a property right regime that makes allowance for some collective
body to work out schemes to exclude others, thereby permitting the
capture of future benefit streams; and “open-access” means, no ownership
in the sense that property everyone owns nobody owns.
The elementary problem is that if people do not pay heed to the scarcity
value of the commons, they can end up expending too much effort, over
harvesting a resource (e.g., a fishery).
Hardin gives a theory that in the absence of restrictions, users of an open-
access resource will exploit it more than if they had paid for it and had
exclusive rights, resulting in environmental degradation.
8. For instance
fortification from the risks of climate change is a public good since its
provision is both non-rival and non-excludable. Non-rival implies
climate protection given to one country does not diminish the
level of protection to another country
non-excludable implies that it would be too costly to exclude anyone
from receiving climate protection.
A country’s inducement to invest in carbon abatement is reduced
because it can “free ride” off the hard work of other countries.
Public goods and non-rivalry:
Public goods are another form of market failure,
in which the market price does not capture the social benefits of its provision.
9. For more information about
Environmental economics
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