Environmental Economics

Shunsuke Managi, Koichi Kuriyama

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781315467313
• Edition: 1
• Topic: Economía
• Subtopic: Economía medioambiental

This book aids those concerned about environmental issues to firmly grasp relevant analytical methods and to comprehend the thought process behind environmental economics. It does so by drawing from specific environmental issues and at the same time providing commentary that facilitates understanding. This text contains in-depth explanations necessary for a thorough understanding of the fundamental aspects and importance of environmental economics.

Environmental Economics seeks to elucidate the mechanisms that give rise to environmental problems by approaching environmental issues from an economic perspective. At the same time, it is a study aiming to indicate specific countermeasures that could resolve present environmental issues. This text has been put together in way that allows readers without specialized economics knowledge to easily understand the situation, issues and challenges of environmental economics.

C H A P T E R 1

Our lifestyles and the environment

Chapter overview

This chapter depicts how our lifestyles are interconnected with the environment. From waste disposal and other matters directly linked to our personal lives, to such phenomena as climate change that exert influence to all people across the planet, our lifestyles are closely connected to many environmental issues. Citing these sorts of precedent-setting examples, this chapter will explain the economic systems that underlie said environmental problems.

The first aim is to reflect on the relationship between economic growth and environmental issues. The greater the economic growth, the more natural resources are used, and subsequently, the more severe environmental pollution becomes. Such trends also point to the danger of surpassing the planetary boundaries that are quintessential to life (through such phenomena as ocean acidification, ozone depletion, etc.). Before arriving at these conditions (which would also place checks on further development), it is important to consider what is needed to make the transition to a sustainable society.

The second aim of this chapter is to consider various initiatives for coping with waste disposal issues. Since there is limited landfill space, were waste output to continually rise, disposal space would eventually be depleted. To that regard, promoting waste reduction and recycling schemes is imperative to achieving sustainable society.

Finally, the third aim of this chapter is to closely assess the climate change predicament. Although climate change is largely caused by fossil fuel and energy consumption in the present, the majority of its dire effects will only be realized some hundreds of years in the future. To avoid these long-term consequences, members throughout the international community must cooperate in adopting efficient policies.

This chapter also includes a simplified economic experiment, providing a first-hand glimpse at the severity of waste issues.

Chapter content

Section 1.1—With economic development, greater amounts of natural resources are used. Additionally, as pollution becomes more severe, humankind runs the risk of surpassing the planetary boundaries that are essential for life. It is possible to achieve both economic growth and environmental conservation if government action or market mechanisms can generate effective environmental regulations. However, it is important to consider the long-term ramifications of economic growth in the present, as many of the harmful side effects of current economic activities (e.g. climate change) will not surface until many years into the future.

Section 1.2—As mass consumption societies generate profuse quantities of waste, diminishing landfill space is an increasingly critical issue. To date, governments around the world have enacted various recycling and waste related laws to address these concerns. With that said, recycling comes with considerable costs, and if recycled goods fail to sell, then the company overseeing the recycling operations cannot accrue profits. Cutting waste disposal costs to the greatest extent possible, a critical step in the transition to sustainable society, is achievable through adherence to the tenets of economic efficiency.

Section 1.3—Greater fossil fuel energy consumption, spurred on by consistent economic growth, leads to greater climate-change-related risks. Fossil fuel energy consumption is based on the balance between fossil fuel supply and demand. Yet these market mechanisms fail at coping with climate change since they traditionally do not take the effects of climate change into account. To overcome this, developed countries have traditionally joined together to design emissions reduction goals and adopt multilateral protocols for tackling climate change. Even still, global policies that incorporate developing countries remain at the core of climate change prevention policy discourse.

Section 1.1: Economic development and environmental issues

Economic development and mass consumption society

The global economy is expanding rapidly (see Figure 1.1.1). In the 50 years between 1950 and 2000, it scaled up by a multiple of 7. Recent years are marked by considerable growth in Asian markets in particular. In the most basic sense, economic development leads to increased prosperity, and people living in countries that have succeeded at bolstering their economies to certain levels can expect high or even affluent living standards. Thus, many developing countries seeking this sort of prosperity hold economic growth to the highest level of priority.

FIGURE 1.1.1 Economic development trends

Source: Development Centre Studies of The World Economy Volume 2: Historical Statistics, OECD, 2006

However, rapid economic growth gives rise to mass consumption societies, characterized by high production, consumption, and waste levels. Without a doubt, mass production has made it possible to supply industrial goods at cheaper prices than ever before. This has in turn contributed to higher standards of living throughout society. Take the proliferation of the automobile as a prime example of this trend. In early 1900s America, the automobile was a luxury commodity, affordable only by more affluent classes who made up a mere fraction of society. But upon the introduction of the mass production technologies that were integral to the Ford Motor Company assembly line, production costs fell sharply, rendering automobiles affordable to the general public. From then on, automobiles quickly became commonplace, intrinsic to the everyday lives of the American people.

Notwithstanding, widespread diffusion of the automobile has also led to increased traffic congestion and a number of serious health risks. Moreover, automobile carbon dioxide (CO₂) emissions act as climate change catalysts, and as such, increasing automobile numbers coincide with the elevating climate change risks. From this example, mass consumption societies have their benefits as well as their drawbacks. For, while they do yield the boons of economic and industrial output, they also have a considerable negative impact on the environment.

Figure 1.1.2 illustrates the connections between the environment and the economy. The economy consists of the production and consumption of goods and services. In order to achieve this, oil, minerals, and other resources must first be extracted from the Earth. Yet crude oil and many important mineral resources are finite and cannot easily be replenished. Thus, humankind would be confronted with quite a precarious economic situation should the buried reserves of these materials be used to exhaustion.

FIGURE 1.1.2 Links between the environment and the economy

Beyond the consideration of resource reserves, the air and water pollution emitted by factories when goods are produced are also aspects of the economy that should not be overlooked. When production levels are low, pollution emissions are also low, so naturally occurring environmental cleansing cycles remain capable of processing pollutants and preserving the purity of the natural environment. Conversely, when production levels surge hand in hand with economic development, factory pollution emissions also rise. In such cases, air and water contamination levels outstrip the capacity of natural purification cycles to deal with them, leading to adverse pollution effects.

At the same time, consumers and the environment are intimately connected with one another. The high-volume consumption that is inherent in mass consumption societies yields a great deal of trash and other waste. Limited landfill space fuels debates concerning where waste ought to be buried and processed. Japan, as a country with minimal national territory, lacks the land space necessary for waste disposal processing. Thus, its current mass consumption, mass waste production trends have exacerbated an already serious waste disposal conundrum.

From what was said above, mass consumption societies, though forged in the fire of high economic attainment, can be viewed as the harbingers of resource depletion, severe air and water contamination, and grand-scale waste disposal challenges.

The Limits to Growth

FIGURE 1.1.3 Ecological footprint

Source: Living Planet Report, WWF, 2006

If economic growth trends continue as they are, and countries throughout the world realize economic standards comparable to developed nations, the Earth’s planetary boundaries will likely be exceeded. Outlines known as ecological footprints are used to indicate the effects that economic activity has on the ecosystem. According to the Living Earth Report: 2006 Edition published by the World Wildlife Foundation, the land space that would be necessary to maintain current economic standards of the entire globe amount to 2.2 hectares per capita. Comparatively, people in the U.S. alone would require 9.6 hectares per capita. Thus, if the entire world aimed to develop to U.S. standards, four Earths would be necessary (see Figure 1.1.3). This clearly surpasses the tolerable limits of the Earth, rendering it impossible.

Supposing, however, economic development were to ...