environmental and natural resource economics ms. mangal gogte

Environmental and Natural Resource Economics

Ms. Mangal Gogte

Visions of the FutureVisions of the Future

In what seems like nature’s brutal irony, the In what seems like nature’s brutal irony, the gases that make life on Earth possible now gases that make life on Earth possible now threaten our very existence.threaten our very existence.

Future is unknownFuture is unknownConstant changeConstant change

What is going to happen? to us?What is going to happen? to us?

Old diseases – cure – new - H1N1 – Pandemic?Old diseases – cure – new - H1N1 – Pandemic?

Do societies sow the seeds of their destruction?Do societies sow the seeds of their destruction?

Are we destroying ourselves?Are we destroying ourselves?

Thomas Malthus: 1798: Thomas Malthus: 1798: ““An essay on the Principle of Population”An essay on the Principle of Population”

examples:examples:

1.1. Mayan CivilizationMayan Civilization

2.2. Easter IslandEaster Island

3.3. Mohenjodaro – Indus Valley civilizationMohenjodaro – Indus Valley civilization

4.4. Cliff palace – pueblo peopleCliff palace – pueblo people

Easter Island 1992Easter Island 1992

Mohenjo Daro, or "Mound of the Dead" is an ancient Mohenjo Daro, or "Mound of the Dead" is an ancient Indus Valley Civilization city that flourished between Indus Valley Civilization city that flourished between 2600 and 1900 BCE. It was one of the first world 2600 and 1900 BCE. It was one of the first world and ancient Indian cities. The site was discovered in and ancient Indian cities. The site was discovered in the 1920s and lies in Pakistan's Sindh province.the 1920s and lies in Pakistan's Sindh province.

Cliff Palace: Mesa Verde Cliff Palace: Mesa Verde National Park, Colorado, USANational Park, Colorado, USA

Ref: Span, March/April 2009

Contact: editorspan@state.gov

Mayan CivilizationMayan Civilization

Central America- CopCentral America- Copààn: n: a major settlementa major settlement

Population increasing in 5Population increasing in 5thth century century One crop: maizeOne crop: maize Extensive cultivation - Diminishing returnsExtensive cultivation - Diminishing returns Demand > productionDemand > production To get more land – deforestation To get more land – deforestation erosion erosion

- low productivity - marginal land used - - low productivity - marginal land used - malnutrition – high mortalitymalnutrition – high mortality

Easter IslandEaster Island

2000 miles off the coast of Chile2000 miles off the coast of Chile Volcanic rocks & little vegetationVolcanic rocks & little vegetation Favourable climate, imposing statues, long Favourable climate, imposing statues, long

roads ………What happened later?roads ………What happened later? Increasing population & heavy reliance on Increasing population & heavy reliance on

wood – housing, canoes, transport etcwood – housing, canoes, transport etc Reducing forests Reducing forests soil erosion soil erosion low low

productivity productivity less food less food war or may be war or may be cannibalismcannibalism

Future Environmental ChallengesFuture Environmental Challenges

Scarcity of resourcesScarcity of resources

– – water accessibilitywater accessibility andand

Climate changeClimate change

– – mainly Pollution mainly Pollution

Climate ChangeClimate Change Atmospheric ‘greenhouse gases’ trap Sun’s Atmospheric ‘greenhouse gases’ trap Sun’s

energy that is good for earthlings or life is energy that is good for earthlings or life is impossibleimpossible

Too much good not goodToo much good not good Industrial revolution Industrial revolution Greenhouse Gases Greenhouse Gases

increased increased Excessive heatExcessive heat – – No white Christmas for long time, No white Christmas for long time,

India: Diwali warmer than beforeIndia: Diwali warmer than before

Committee on Science of Climate Change Committee on Science of Climate Change (2001): increase in temperature by 1 degree (2001): increase in temperature by 1 degree Fahrenheit in last centuryFahrenheit in last century

The Greenhouse EffectThe Greenhouse Effect

Greenhouse gases (like water vapour, Greenhouse gases (like water vapour, carbon dioxide, methane, and nitrous oxide)carbon dioxide, methane, and nitrous oxide) heat up our planet. They are part of Earth's heat up our planet. They are part of Earth's atmosphere and trap warmth emitted by the atmosphere and trap warmth emitted by the sun, thus heating Earth. It is this process – sun, thus heating Earth. It is this process – the greenhouse effect – that makes life on the greenhouse effect – that makes life on the planet possible.the planet possible.

Projected Projected changes in changes in the Arctic the Arctic climate by climate by 2090 2090

Arctic WarmingArctic Warming

Artic warming - occurred at nearly Artic warming - occurred at nearly twice the global average ratetwice the global average rate

The artic - ice free in summersThe artic - ice free in summers by by the end of this centurythe end of this century

Western Siberia - recently begun to Western Siberia - recently begun to meltmelt

Mercury is RisingMercury is Rising!!!!

2005 the hottest –– 14.77 degrees C – 2005 the hottest –– 14.77 degrees C – Nasa scientists: 1934Nasa scientists: 1934

Six hottest years in the last 8 yearsSix hottest years in the last 8 years 1998 – 2nd warmest – 14.71 degrees C1998 – 2nd warmest – 14.71 degrees C past century temperatures rose to 0.8 past century temperatures rose to 0.8

degrees Cdegrees C

“ “ World energy outlook 2006” International Energy Agency (IEA)World energy outlook 2006” International Energy Agency (IEA)

Mercury is Rising!!Mercury is Rising!!

Northern hemisphere warmer now than any time Northern hemisphere warmer now than any time in the past 1200 yearsin the past 1200 years

Atmospheric levels of CO2 and Methane are Atmospheric levels of CO2 and Methane are higher today than at any time in the last 650,000 higher today than at any time in the last 650,000 years.years.

Rise in global temperature - rise in health risks Rise in global temperature - rise in health risks from heat weaves, failing crops, infectious from heat weaves, failing crops, infectious diseases,. . . . . .diseases,. . . . . .

Effects of climate changeEffects of climate change

• SmogSmog

• Respiratory problemsRespiratory problems

• Rising sea levelRising sea level

• StormsStorms• Flooding coastal areas - Flooding coastal areas - tsunamitsunami

• Low agricultural ProductionLow agricultural Production

Protecting Ozone LayerProtecting Ozone Layer 1970s1970s:: evidence showing evidence showing that that CFCsCFCs w were ere

damaging the ozone layer damaging the ozone layer 19721972:: UN UN - - first global conference first global conference -- to address to address

environmental issues. environmental issues. 11987987:: Montreal Protocol on Substances that Montreal Protocol on Substances that

Deplete the Ozone Layer Deplete the Ozone Layer 2005 Feb: Kyoto Protocol2005 Feb: Kyoto Protocol 2002005 July:5 July:Asia-Pacific Partnership onAsia-Pacific Partnership on Clean Clean

DevelopmentDevelopment Bali Meet 2007Bali Meet 2007

Right to Pollute!Right to Pollute! Climate change has a moral dimension Climate change has a moral dimension Developing countries contribute the least - Developing countries contribute the least -

hardest to hit as adaptation is not quickhardest to hit as adaptation is not quick futurefuture climate change agreements climate change agreements - - equal equal

rightsrights size of the human population size of the human population – a – a critical critical

variable. variable. as population growsas population grows - - each individual'seach individual's right right

to pollute shrinksto pollute shrinks

CO2 per capita per year per country: April 2006CO2 per capita per year per country: April 2006

Each country’s share of CO2 emissionsEach country’s share of CO2 emissions

CO2 levelsCO2 levelsProjectionProjection

PerPer CapitaCapita Emission – 2002 -2006Emission – 2002 -2006

global average global average - - 3.9 metric 3.9 metric tonstons US - US - 19.7 metric tons – 20.419.7 metric tons – 20.4 Germany Germany - 10.2- 10.2 metric tons - 9.79 metric tons - 9.79 JapanJapan - - 9.5 metric tons – 9.84 9.5 metric tons – 9.84 EU-15EU-15 - - 8.4 8.4 metric metric tonnes tonnes - - averageaverage IndiaIndia - - 1.0 metric ton – 1.21.0 metric ton – 1.2

Share of gas emissionsShare of gas emissions

countries with most rapidly growing countries with most rapidly growing population - very low p c greenhouse gas population - very low p c greenhouse gas emissions emissions

ChinaChina:: 1980 1980 toto 2002 2002 – –

emission of carbon emission of carbon --1.5 to 2.6 m t p c 1.5 to 2.6 m t p c population population - - 984 m to 1.3 b 984 m to 1.3 b 20022002:: 13.5 13.5 %% of the world's total emission of the world's total emission

What are we going to doWhat are we going to do??

temperature increase depends on what we temperature increase depends on what we do from now on to curb emissions do from now on to curb emissions

shift to shift to :: renewable energy sources and renewable energy sources and mmoreore energyenergy -- efficient technologies.efficient technologies.

What will happen?What will happen?

By 2050, populationBy 2050, population - - from from 2.8 b to 8.9 b2.8 b to 8.9 b rate of future increase rate of future increase - - influence earth’s climate influence earth’s climate

for centuries to comefor centuries to come people affected by climate changepeople affected by climate change - increase - increase redistribution of disease-carrying insects-H1N1redistribution of disease-carrying insects-H1N1 shifts in many species’ habitatsshifts in many species’ habitats - - in search of in search of

cooler temperatures.cooler temperatures. about half of all wild species in the USabout half of all wild species in the US have have

already been affectedalready been affected

Water accessibilityWater accessibility

Vital to life – increasing demand but finite supplyVital to life – increasing demand but finite supply

World’s 40% population lives in the areas with moderate World’s 40% population lives in the areas with moderate to high water stressto high water stress

Moderate stressModerate stress: Where human consumption is of more : Where human consumption is of more than 20% of all accessible renewable freshwater than 20% of all accessible renewable freshwater resourcesresources

Severe stressSevere stress: consumption more than 40% of all : consumption more than 40% of all accessible renewable freshwater resourcesaccessible renewable freshwater resources

– – stress not uniform everywherestress not uniform everywhere

US , China, India: consumption of water faster than it US , China, India: consumption of water faster than it is replenished - groundwater levels steadily⇩is replenished - groundwater levels steadily⇩

Many rivers dry soon after monsoon in India Many rivers dry soon after monsoon in India

Asian and African economies: lack of water supply Asian and African economies: lack of water supply

and sanitation for 75% of Asians & 50% of Africa’s and sanitation for 75% of Asians & 50% of Africa’s urban residents urban residents

Contamination of water is common problemContamination of water is common problem

Ganges - no more ‘Holy’ – sewage pipes leakages, Ganges - no more ‘Holy’ – sewage pipes leakages, pipe bursting, waste without treatment pipe bursting, waste without treatment

Meeting the ChallengesMeeting the Challenges

Our ancestors – no sustainable choiceOur ancestors – no sustainable choice WWe have fewer optionse have fewer options UUse our creativity to find solutionsse our creativity to find solutions Economic activity increasingEconomic activity increasing Problems of lack of bio-diversity, poverty, climate Problems of lack of bio-diversity, poverty, climate

change, ozone depletionchange, ozone depletion Need international action – being togetherNeed international action – being together Problems affect different countriesProblems affect different countries in differentin different

waysways

If one country becomes conscious of the environment – may run the risk of making their business vulnerable to competition from less conscious countries – US & Europe scared of ‘China price’ – lead in toys – banning US cars

IndiaIndia

SEZs in India – not following ILO standards – US SEZs in India – not following ILO standards – US & Europe’s declining market share – falling & Europe’s declining market share – falling employment (recession) – Asia: a bigger and employment (recession) – Asia: a bigger and growing market growing market

Not all want to follow stringent policies & want to Not all want to follow stringent policies & want to maintain status quo – even if it means maintain status quo – even if it means environment degradation e g. fishermen – trollers, environment degradation e g. fishermen – trollers, farmers - pesticidesfarmers - pesticides

How will we respond?How will we respond? We need to understand feedback loopWe need to understand feedback loop

Positive feedback loopsPositive feedback loops: where secondary effects reinforce : where secondary effects reinforce the basic trendthe basic trend

Growth process self-reinforcing Growth process self-reinforcing Climate changeClimate change environment problems intensifiedenvironment problems intensified

Negative feedback loops: self limiting Theory by English scientist: James Lovelock - Gaia

Hypothesis: Mother Earth – a living organism with complex feedback system – optimal environment – any deviation – nature restores the balance

Role of EconomicsRole of EconomicsScarcity is the main concern and how mankind behaves, individually & collectively, will decide society’s response.

We need to identify-• Circumstances that degrade the environment• How & why these circumstances support degradation

Ecological & Environmental Economics provides basis for identifying these.

Understanding of the circumstances will help us Understanding of the circumstances will help us design new incentives that will harmonize the design new incentives that will harmonize the relationship between the economy & the relationship between the economy & the environment.environment.

Ignoring those will mean that we live with the Ignoring those will mean that we live with the consequences that may be are very expensive consequences that may be are very expensive to correct or may be are irreversible.to correct or may be are irreversible.

Ecological economics

More methodologicallypluralist – uses a variety of methods including neoclassical economics depending on the purpose of investigation

Environmental economics

Based on standard paradigm of neoclassical economics – emphasizes maximizing welfare & using incentives to modify destructive human behaviour

Competitive / complementary approaches

to find / understand complex relationships between the economy & the environment

– models may yield conclusions that are dead wrong.

– useful abstractions that should be viewed with some skepticism as the details that are omitted may turn out to be crucial in understanding particular situation.

Models to be used

Bjorn Lomborg, Director Environmental assessment Bjorn Lomborg, Director Environmental assessment Institute, Denmark – “The Skeptical Institute, Denmark – “The Skeptical Environmentalist” : the mankind is intelligent Environmentalist” : the mankind is intelligent

∴ ∴ can face any challenges – history supports can face any challenges – history supports progress continuesprogress continues

Worldwatch Institute’s researchers: resources Worldwatch Institute’s researchers: resources are shrinking – strain on environment – are shrinking – strain on environment – current development paths unsustainable – current development paths unsustainable – meaning of Development? Adam & Eve richer meaning of Development? Adam & Eve richer than us? alternatives available but are we than us? alternatives available but are we using those?using those?

What is the future?What is the future?

↑ scarcity behavioural response decides the pressure on environment - If it intensifies pessimism and if it reduces optimism

Environmental & natural resource economics is helping us to understand human source of the problems & in crafting solutions to them.

Market forces: extremely powerful in search of solutions – attempts to solve the problems shouldn’t ignore these forces. Or else possibility of failure. Instead use these forces to channel in right direction - protect the environment.

Environmental & natural resource economics provides a

specific set of directions as how that can be accomplished.

Are societies on self destruction path?Are societies on self destruction path?

Basic IssuesBasic Issues

Earth's carrying capacityEarth's carrying capacity Our response to scarcitiesOur response to scarcities Role of political system – Government’s Role of political system – Government’s

intervention – other systemsintervention – other systems Our response to uncertaintyOur response to uncertainty Eradication of poverty – obligation to Eradication of poverty – obligation to

future generationsfuture generations