🌱Intro to Environmental Systems Unit 11 – Environmental Economics & Social Justice

Key Concepts and Definitions

• Environmental economics studies how economic activity and policy affect the environment and applies economic principles to environmental issues
• Social justice in an environmental context refers to the fair treatment and meaningful involvement of all people in environmental decision-making and policy
• Externalities are costs or benefits that affect a third party who did not choose to incur those costs or benefits (pollution, habitat destruction)
• Market failure occurs when the market does not efficiently allocate resources, often due to externalities or public goods
• Sustainability balances economic, social, and environmental needs to meet the needs of the present without compromising future generations
• Environmental justice seeks to address the disproportionate environmental burdens faced by marginalized communities (low-income, communities of color)
• Discount rate is the rate used to determine the present value of future costs and benefits in economic analysis
• Willingness to pay (WTP) measures the maximum amount an individual is willing to pay for a good or service

Environmental Economics Basics

• Environmental economics applies economic principles and tools to analyze environmental issues and inform policy decisions
• Market-based instruments use price signals and economic incentives to influence behavior and reduce environmental harm (taxes, subsidies, cap-and-trade)
  • Pigouvian taxes are levied on activities that generate negative externalities to internalize the external costs (carbon tax)
  • Subsidies provide financial support to encourage environmentally beneficial activities or technologies (renewable energy subsidies)
• Cost-benefit analysis compares the total expected costs and benefits of a project or policy to determine its economic efficiency
• Valuation techniques estimate the economic value of non-market environmental goods and services (contingent valuation, hedonic pricing)
  • Contingent valuation uses surveys to elicit individuals' willingness to pay for environmental goods or services
  • Hedonic pricing estimates the value of environmental attributes by examining property values or wage differentials
• The Coase Theorem suggests that in the absence of transaction costs, private parties can negotiate efficient solutions to externality problems
• Tragedy of the commons occurs when individuals acting in their own self-interest deplete or degrade a shared resource (overfishing, deforestation)

Social Justice in Environmental Context

• Environmental justice addresses the disproportionate environmental burdens and health impacts faced by marginalized communities
• Procedural justice ensures fair and inclusive decision-making processes that involve affected communities in environmental policy and planning
• Distributive justice focuses on the equitable distribution of environmental benefits and burdens across different groups and communities
• Climate justice recognizes the unequal impacts of climate change on vulnerable populations and the need for equitable mitigation and adaptation strategies
• Energy justice seeks to ensure fair access to affordable, reliable, and sustainable energy services for all communities
• Food justice addresses inequities in the food system and promotes access to healthy, affordable, and culturally appropriate food
• Transportation justice aims to provide equitable access to safe, affordable, and sustainable transportation options for all communities
• Indigenous environmental justice recognizes the unique relationship between Indigenous peoples and their traditional lands and resources

Economic Tools for Environmental Analysis

• Cost-effectiveness analysis identifies the least-cost option for achieving a specific environmental goal or standard
• Marginal abatement cost (MAC) curves show the incremental cost of reducing pollution by one additional unit for various abatement options
• Environmental impact assessment (EIA) systematically evaluates the potential environmental consequences of a proposed project or policy
• Life cycle assessment (LCA) examines the environmental impacts of a product or service throughout its entire life cycle, from raw material extraction to disposal
• Ecosystem services valuation estimates the economic value of the benefits provided by ecosystems (carbon sequestration, water filtration, recreation)
  • Provisioning services include goods directly obtained from ecosystems (food, timber, fresh water)
  • Regulating services are benefits obtained from the regulation of ecosystem processes (climate regulation, water purification)
• Green accounting adjusts traditional economic measures (GDP) to account for environmental costs and benefits
• Natural capital refers to the stock of natural resources and ecosystems that provide valuable goods and services

Environmental Policy and Regulation

• Command-and-control regulations set specific standards or limits on environmental pollutants or activities (emissions standards, technology requirements)
• Market-based instruments use economic incentives to encourage environmentally friendly behavior (emissions trading, environmental taxes)
  • Emissions trading (cap-and-trade) sets a limit on total emissions and allows firms to trade emission permits, creating a market for pollution rights
  • Environmental taxes internalize the external costs of polluting activities by placing a price on emissions or resource use (carbon tax, landfill tax)
• Voluntary agreements are non-binding commitments by firms or industries to improve environmental performance beyond legal requirements
• Information disclosure programs require firms to publicly report their environmental performance (Toxics Release Inventory)
• Environmental justice policies aim to address the disproportionate environmental burdens faced by marginalized communities (community engagement, targeted investments)
• International environmental agreements coordinate global efforts to address transboundary environmental issues (Montreal Protocol, Paris Agreement)
• Precautionary principle states that when an activity raises threats of harm to human health or the environment, precautionary measures should be taken even if cause-and-effect relationships are not fully established

Case Studies: Economics and Justice in Action

• Acid Rain Program (ARP) in the United States used a cap-and-trade system to successfully reduce sulfur dioxide emissions from power plants
• REDD+ (Reducing Emissions from Deforestation and Forest Degradation) provides financial incentives to developing countries to reduce deforestation and promote sustainable forest management
• Flint water crisis in Michigan highlighted environmental injustice, as a predominantly low-income, African American community was exposed to lead-contaminated drinking water
• Chevron-Texaco oil pollution in Ecuador resulted in long-term environmental damage and health impacts on Indigenous communities, leading to a lengthy legal battle for compensation
• Plastic bag taxes or bans have been implemented in many countries to reduce plastic waste and encourage the use of reusable bags (Ireland, Kenya)
• Renewable energy feed-in tariffs provide guaranteed prices for electricity generated from renewable sources to stimulate investment and deployment (Germany, Spain)
• Environmental impact assessment of the Dakota Access Pipeline sparked protests and legal challenges over its potential impacts on Indigenous lands and water resources
• Payments for ecosystem services (PES) programs compensate landowners for maintaining or restoring ecosystems that provide valuable services (Costa Rica's PES program)

Challenges and Debates

• Discounting the future raises ethical questions about how to value the costs and benefits that will be experienced by future generations
• Valuing non-market goods and services is challenging, as environmental amenities often lack observable prices or markets
• Distributional impacts of environmental policies can be regressive, disproportionately affecting low-income households (carbon taxes, renewable energy subsidies)
• Trade-offs between economic growth and environmental protection can create tensions and political challenges in policy design and implementation
• Uncertainty and irreversibility of environmental impacts complicate decision-making and raise questions about the appropriate level of precaution
• Transboundary environmental problems require international cooperation and coordination, which can be difficult to achieve due to divergent national interests and priorities
• Balancing local and global environmental concerns can create conflicts between the needs and priorities of different communities and stakeholders
• Incorporating environmental and social justice considerations into cost-benefit analysis remains a challenge, as these factors are often difficult to quantify and monetize

Future Directions and Emerging Trends

• Green growth strategies aim to decouple economic growth from environmental degradation through innovation, resource efficiency, and sustainable practices
• Circular economy approaches seek to minimize waste and maximize resource efficiency by designing products and systems for reuse, recycling, and regeneration
• Natural capital accounting and ecosystem services valuation are gaining traction as tools for integrating environmental considerations into economic decision-making
• Climate finance mechanisms, such as green bonds and climate adaptation funds, are emerging to mobilize investment in low-carbon and climate-resilient development
• Environmental, social, and governance (ESG) investing is growing, as investors increasingly consider sustainability factors in their investment decisions
• Just transition policies aim to support workers and communities affected by the shift away from fossil fuels and toward a low-carbon economy
• Participatory and community-based approaches to environmental decision-making are becoming more prevalent, emphasizing local knowledge and stakeholder engagement
• Nature-based solutions, such as ecosystem restoration and green infrastructure, are gaining recognition as cost-effective approaches to addressing environmental challenges while providing co-benefits for communities