9781119693505

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Now in its ninth edition, Economics and the Environment offers an accessible approach to the latest debates, concerns, standards, and legislation related to contemporary environmental issues. Featuring new and updated content throughout, this student-friendly textbook organizes its discussion around four specific questions — How much pollution is too much? Is the government up to the job? How can we do better? How can we resolve global issues? — to provide an inclusive and highly-engaging examination of environmental economics.

Following a unique four-question format, the text provides an integrated pedagogy that is simpler and more useful than a “topics” approach to the subject. Students are encouraged to discuss the government’s role in environmental policy, the benefits and costs of environmental protection, methods for promoting clean technology and sustainability, global pollution and resource issues, environmental justice and ethics, and more. Throughout the text, illustrative examples and real-world case studies are complemented by end-of-chapter problems and exercises that both strengthen student comprehension and increase retention.

Preface ix

Introduction 1

1 Four Economic Questions About Climate Change 2

1.1 Introduction 2

1.2 Four Questions 3

1.3 How Much Pollution is Too Much? 6

1.4 Is Government Up to the Job? 11

1.5 How Can We Do Better? 11

1.6 Can We Resolve Global Issues? 14

1.7 Summary 15

Part I How Much Pollution is Too Much?

2 Ethics and Economics 21

2.1 Introduction 21

2.2 Utility and Utilitarianism 22

2.3 Social Welfare 24

2.4 Summary 26

3 Pollution and Resource Degradation as Externalities 29

3.1 Introduction 29

3.2 The Open-Access Problem 31

3.3 The Public Goods Problem 34

3.4 Is Sustainable Business a Solution? 37

3.5 Summary 38

4 The Efficiency Standard 42

4.1 Introduction 42

4.2 Efficiency Defined 42

4.3 Efficient Pollution Levels 45

4.4 Marginals and Totals 48

4.5 The Coase Theorem Introduced 49

4.6 Air Pollution Control in Baltimore: Calculating the Efficient Standard 50

4.7 The Ethical Basis of the Efficiency Standard 52

4.8 Real-World Benefit–Cost Analysis 53

4.9 Summary 56

5 Measuring the Benefits of Environmental Protection 64

5.1 Introduction 64

5.2 Use, Option, and Existence Value: Types of Nonmarket Benefits 65

5.3 Consumer Surplus, WTP, and WTA: Measuring Benefits 65

5.4 Risk: Assessment and Perception 68

5.5 Measuring Benefits I: Contingent Valuation 71

5.6 Measuring Benefits II: Travel Cost 74

5.7 Measuring Benefits III: Hedonic Regression 76

5.8 The Value of Human Life 76

5.9 Summary 79

Appendix 5A: WTA and WTP Redux 83

5A.1: An Indifference Curve Analysis 83

5A.2: The Endowment Effect or Substitutability? 85

6 Measuring the Costs of Environmental Protection 87

6.1 Introduction 87

6.2 Engineering Costs 88

6.3 Productivity Impacts of Regulation 90

6.4 Employment Impacts of Regulation 92

6.5 General Equilibrium Effects and the Double Dividend 97

6.6 A Final Look at Benefit–Cost Analysis 98

6.7 Summary 101

7 The Safety Standard 105

7.1 Introduction 105

7.2 Defining the Right to Safety 105

7.3 The Safety Standard: Inefficient 108

7.4 The Safety Standard: Not Cost-Effective 109

7.5 The Safety Standard: Environmental Justice or Regressive Impact? 110

7.6 Siting Hazardous Waste Facilities: Safety versus Efficiency 112

7.7 Summary 115

8 The Sustainability Standard 119

8.1 Introduction 119

8.2 Sustainability: Neoclassical and Ecological Approaches 120

8.3 Future Benefits, Costs, and Discounting 123

8.4 An Example of Discounting: Light Bulbs 125

8.5 Savings, Investment, and Market Interest Rates 126

8.6 The Social Discount Rate and Dynamic Efficiency 127

8.7 Discounting Climate Change 130

8.8 Ecological Economics, Strong Sustainability, and the Precautionary Principle 131

8.9 Strong Sustainability in Practice: Endangered Species, EIS, and Reach 133

8.10 Summary 135

9 Measuring Sustainability 139

9.1 Introduction 139

9.2 Malthus and Ecological Economics 140

9.3 Modern Debates: Limits to Growth and Planetary Boundaries 142

9.4 Measuring Strong Sustainability: Impacts and Footprints 144

9.5 Measuring Weak Sustainability: Net National Welfare and Inclusive Wealth 148

9.6 Natural Capital Depreciation 152

9.7 Are We Achieving Sustainability? 154

9.8 Discounting, Sustainability, and Investing for the Future 159

9.9 The Ecological–Neoclassical Debate in Context 160

9.10 Summary 161

10 Natural Resources and Ecosystem Services 167

10.1 Introduction 167

10.2 Nonrenewable Resources and the Hotelling Model 168

10.3 Testing the Nonrenewable Resource Model 174

10.4 The Roller Coaster Ride of Oil Prices 175

10.5 Peak Oil? 176

10.6 Renewable Resources 178

10.7 Renewable Resource Policy: Fisheries and Endangered Species 182

10.8 Ecosystem Services and Natural Capital 185

10.9 Summary 188

11 Is More Really Better? Consumption, Welfare, and Behavior 193

11.1 Introduction 193

11.2 Money and Happiness 194

11.3 Social Norms and the Rat Race 195

11.4 Positional Goods and Consumption Externalities 198

11.5 Welfare with Social Consumption 199

11.6 Overconsumption Policy Solutions 201

11.7 Behavioral Economics and Behavior Change 204

11.8 Summary 205

Part II Is Government Up to the Job?

12 The Political Economy of Environmental Regulation 211

12.1 Introduction 211

12.2 The Process of Environmental Regulation 212

12.3 Regulation under Imperfect Information 214

12.4 Bureaucratic Discretion and Political Influence 215

12.5 The Influence Game: Pre-2016 217

12.6 The End of the Bipartisan Concensus 220

12.7 Better Information, More Democracy 225

12.8 Summary 227

13 An Overview of Environmental Legislation 231

13.1 Introduction 231

13.2 Cleaning the Air 232

13.3 The Clean Air Act and Climate Change 235

13.4 Fishable and Swimmable Waters 237

13.5 Hazardous Waste Disposal on Land 239

13.6 Chemicals and Pesticides 242

13.7 Endangered Species Protection 245

13.8 Summary 247

14 The Regulatory Record: Achievements and Obstacles 250

14.1 Introduction 250

14.2 Accomplishments of Environmental Regulation 250

14.3 Monitoring and Enforcement: Political Constraints 254

14.4 The Appeal of Incentive-Based Regulation 257

14.5 Beyond Regulation? Promoting Clean Technology 258

14.6 Summary 260

Part III How Can We Do Better?

15 Incentive-Based Regulation: Theory 267

15.1 Introduction 267

15.2 The Cost-Effectiveness Rule 268

15.3 IB Regulation and Cost-Effectiveness 271

15.4 IB Regulation and Technological Progress 274

15.5 Potential Problems with IB Regulation 275

15.6 Summary 281

Appendix 15A: Imperfect Regulation in an Uncertain World 284

15A.1: Minimizing the Costs of Being Wrong 285

15A.2: An Application to Greenhouse Gas Emissions 287

15A.3: Summary 288

Appendix 15B: Incentive-Compatible Regulation 289

15B.1: Incentives to Lie 289

15B.2: Incentives to Tell the Truth 291

15B.3: Summary 293

16 Incentive-Based Regulation: Practice 294

16.1 Introduction 294

16.2 Lead and Chlorofluorocarbons 295

16.3 Trading Urban Air Pollutants 295

16.4 Marketable Permits and Acid Rain 299

16.5 Carbon Trading in the Northeast and California 302

16.6 Two Failed U.S. Efforts: Mercury and Carbon 305

16.7 The European Emissions Trading System 307

16.8 Pollution Taxes and Their Relatives 309

16.9 Summary 313

17 Promoting Clean Technology: Theory 317

17.1 Introduction 317

17.2 Path Dependence and Clean Technology 318

17.3 Clean Technology Defined 319

17.4 If You’re So Smart, Why Aren’t You Rich? 322

17.5 Picking the Winning Path 325

17.6 Promoting Early-Stage Clean Technologies 327

17.7 Promoting Late-Stage Clean Technologies 329

17.8 Clean Technology: Two Case Studies 332

17.9 Summary 337

18 Energy Policy and the Future 342

18.1 Introduction 342

18.2 Technology Options: Electricity and Heat 342

18.3 Policy Options: Electricity and Heat 351

18.4 Technology Options: Transport 355

18.5 Policy Options: Transport 360

18.6 Summary 364

Part IV How Can We Solve Global Challenges?

19 Poverty, Population, and the Environment 369

19.1 Introduction 369

19.2 Poverty and the Environment 371

19.3 The Population Picture in Perspective 373

19.4 An Economic Approach to Family Size 376

19.5 Controlling Population Growth 377

19.6 Consumption and the Global Environment 381

19.7 Envisioning a Sustainable Future 383

19.8 Summary 385

20 Environmental Policy in Low-Income Countries 388

20.1 Introduction 388

20.2 The Political Economy of Sustainable Development 388

20.3 Ending Environmentally Damaging Subsidies 391

20.4 Establishing and Enforcing Property Rights 392

20.5 Regulatory Approaches 395

20.6 Sustainable Technology: Development and Transfer 399

20.7 Resource Conservation and Debt Relief 401

20.8 Trade and the Environment 406

20.9 Summary 410

21 The Economics of Global Agreements 414

21.1 Introduction 414

21.2 Agreements as Public Goods 415

21.3 Monitoring and Enforcement 416

21.4 The Ozone Layer and Biodiversity 417

21.5 Stopping Global Warming: Theory 421

21.6 Stopping Global Warming: Reality 423

21.7 Summary 425

Selected Websites for Environmental and Natural Resource Economists 429

Author Index I-1

Subject Index I-5

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Economics and the Environment

Economics and the Environment

1119693500

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