Environmental Economics BA Semester 5 Notes 2023-24 Lucknow University

Environmental Economics BA Semester 5 Notes 2023-24

Introduction to Environmental Economics

Environmental economics is a branch of economics that focuses on the relationship between the economy and the environment. It seeks to understand how economic activities impact the environment and how environmental policies can be designed to promote sustainability. Here are some basic concepts and an introduction to environmental economics:

 

 1. Scarcity and Allocation:

   - Scarcity: Resources are limited, and there is competition for their use. Environmental economics recognizes the scarcity of natural resources and the need to allocate them efficiently.

   - Allocation: This involves deciding how resources should be distributed among various uses, including environmental conservation and economic development.

 

 2. Externalities:

   - Definition: Externalities are unintended side effects of economic activities that affect third parties who are not directly involved in the activity.

   - Positive Externalities: Benefits experienced by others, e.g., a beekeeper benefits from a neighbor's flourishing garden.

   - Negative Externalities: Harms experienced by others, e.g., pollution from a factory affecting nearby residents.

 

 3. Market Failures:

   - Definition: When markets do not efficiently allocate resources, resulting in overuse or depletion of environmental resources.

   - Causes: Externalities, public goods (non-excludable and non-rivalrous), imperfect information, and property rights issues contribute to market failures.

 

 4. Property Rights:

   - Definition: The legal rights to use, control, and derive income from a resource.

   - Importance: Well-defined property rights encourage responsible resource management and reduce the tragedy of the commons, where resources are overused due to the lack of ownership.

 

 5. Valuation of Environmental Goods and Services:

   - Market Price: Some environmental resources have market prices (timber, fish), making valuation straightforward.

   - Non-Market Valuation: For goods and services without market prices, methods like contingent valuation and hedonic pricing are used to estimate their economic value.

 

 6. Discounting:

   - Definition: The process of assigning a lower weight to future benefits and costs compared to present ones.

   - Importance: Future environmental benefits (like clean air) are often discounted in economic decision-making, impacting the perceived value of environmental conservation.

 

 7. Sustainable Development:

   - Definition: Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

   - Challenges: Balancing economic growth with environmental conservation to ensure long-term well-being.

 

 8. Policy Instruments:

   - Regulation: Government-imposed rules to limit or encourage certain behaviors.

   - Market-Based Instruments: Taxes (Pigovian taxes) and tradable permits to internalize externalities and encourage environmentally friendly practices.

 

 9. Cost-Benefit Analysis:

   - Definition: A method to compare the costs and benefits of a project or policy.

   - Challenge: Assigning monetary values to environmental goods and services, which can be subjective and contentious.

 

 10. Environmental Justice:

   - Definition: The fair treatment and involvement of all people, regardless of race, class, or income, in environmental decision-making.

   - Importance: Recognizing and addressing the disproportionate environmental burdens faced by marginalized communities.

 

Understanding these basic concepts is crucial for developing effective policies that balance economic development with environmental sustainability in the face of global environmental challenges.