Environmental Economics Final
94. What is the main advantage of a cap-and-trade system over a carbon tax?
main: emissions are known with certainty because the government its t he number of available permits. since policy goal is ultimately to reduce. carbon emissions, this approach does this directly (carbon tax does it indirectly and might require multiple adjustments)
35. About what is the range of discount rates currently used by economists?
Average response in survey of economists was 4.0%, with median response of 3%. publics discount rate is somewhat less than 1%. Stern uses discount of 1.4 percent since he puts more value on future (pure rate of time preference low)
114. What is behavioral economics, and how does it differ from traditional economics?
Behavioral economics: application of psychological, social, and emotional factors to understanding economic decision‐making. - differs because it argues that demand is often not natural or based on known preferences, but subject to significant manipulation
31. What is the formula for the present value of a future cost or benefit?
PV(Xn)= Xn/(1+r)^n n= number of years in the future the benefit or cost occurs r= discount rate
70. Are wind and solar currently cost competitive with fossil fuels?
The cheapest energy sources are currently wind and solar power, even without subsidies. see phone pic
119. What is the problem of moral licensing?
The moral licensing effect is a non conscious effect that operates by providing a moral boost in the self-concept, which increases the preference for a relative immoral action subsequently by dampening the negative self attributions associated with such behavior.
9. What is total economic value?
Total economic value of a resource considering both use (the value that people place on the tangible and physical benefits of a good and service) and nonuse values (values that people obtain without actually using a resource, psychological benefits). see page 130
29. Should we necessarily proceed with a project/policy if the benefit-cost ratio is greater than 1?
benefit cost ratio- total benefits divided by total costs (ratio of less than one indicates that the costs are greater than benefits) Not necessarily should use policy if greater than 1: - could be better alternative that yields higher benefits - need to look at equity of the policy to make sure that the benefits and costs do not unfairly fall on one group even when yielding a positive net benefits.
104. What is decoupling?
breaking the correlation between increased econ activity and similar increases in enviro impact
90. How would a carbon tax affect the price of different fossil fuels?
carbon tax- a per-unit tax on goods and services based on the quantity of carbon dioxide emitted during the production or consumption process, internalizes external costs such a tax will raise the price of carbon-based energy overall and shift their demand to alternative forms of energy that produce lower carbon emissions see page 340 for how it would specifically affect coal, oil and natural gas - would have greatest impact on coal ($50 tax increases coal prices by 262%), then effects on gasoline and natural gas would be roughly equal see picture page 342 and on phone
5. How does changing the discount rate change the allocation of a nonrenewable resource across time periods?
changing the discount rate makes it so that more of the good is used in the present than in discounted future. - marginal net benefits in the period that is discounted is reduced by factor of (1+r)^n
57. How is future energy demand expected to change in the coming decades in developing and developed countries?
developed countries have historically been responsible for most of global energy demand, but this is changing. developing countries have recently surpassed developed countries in total energy consumption. almost all future growth in global energy demand is expected to occur in developing countries. HOWEVER, even with such rapid growth in energy consumption in developing countries, energy use per capita will still be only about one-third of the levels in developed countries so global inequity in energy access will continue for foreseeable future. from 1965 to 2015, 3x more energy being used and about half of this can be attributed to a higher population.
51. What are some of the advantages and disadvantages of using a system of tradable permits to regulate pollution?
econ efficient, creates incentive for innovation to lower permit price, can generate public revenues if the permits are auctioned, allows for direct control over pollution levels, individuals and organizations can buy and retire permits.
69. Have the costs of wind and solar energy been declining faster or slower than generally expected?
faster
68. What can we say about the expected future costs of renewable energy (wind and solar)?
given the declining costs of renewables, it is possible that fossil fuels will lose their price advantage over renewables in the future - solar will emerge as the least-cost generation technology in most countries by 2030 - same report forces wind and solar accounting for 64% of new generating capacity to be installed over the next 25 years.
4. How can the efficient allocation of a nonrenewable resource be determined in a two time-period model (both by using a graph and by solving numerically)?
graph- mirror image with horizontal axis being total available. Intersection is efficient allocation. numerically- use sum of quantities to total available as one equation and then mnb1=pv[mnb2]
115. What is "libertarian paternalism"? What is a "nudge"?
libertarian paternalism- using behavioral econ to influence choices, while preserving freedom and the choice set nudge- using triggers to influence consumer behavior
83. What are some of the projected impacts of global climate change, as average temperatures increase?
most damaging aspects of climate change are areas involving sea-level rise, hurricane intensification, ocean acidification and loss of biodiversity -loss of land area, including beaches and wetlands, because of rising sea-level -loss of species and forest area -disruption of water supplies to cities and agriculture - increase in wildfires - ocean acidification- increasing acidity of ocean waters as a result of dissolved carbon from co2 emitted into the atmosphere -In 2018 the WHO estimated that "between 2030 and 2050, climate change is expected to cause approximately 250,000 additional deaths per year, from malnutrition, malaria, diarrhea and heat stress."
89. Is the Green Climate Fund being funded as promised by the developed countries?
no, The United States has indicated it will provide no new GCF funds. In response, 13 countries have at least doubled their pledges, including Germany, Norway, France, and the UK.
61. Are we (the world) likely to run out of oil any time in the foreseeable future?
no, U.S. or world is not likely to run out of oil anytime soon, especially when we take into account unconventional sources. but the sources like tart sands and shale oil tend to ave significantly higher environmental impacts than conventional oil.
101. How do the projected cost of compliance with environmental regulations compare with actual costs once regulations are enacted?
predicted costs of enviro compliance tend to be simnifically over-estimated
95. What are some of the other advantages of carbon taxes? Of cap-and-trade?
tax: - considered simpler and more transparent, does not require new bureaucratic institutions - with tech advances that lowers the cost of carbon reduction, a carbon tax will automatically further reduce carbon emissions (w/ cap and trade tech advances reduce price so firms can then emit more) - could be implemented quicker cap-and-trade: - avoids negative connotation of "tax" so generally faces less political opposition than a carbon tax. - some businesses favor bc they believe that they can successfully lobby govy for free permits, rather than having to purchase at auction. distributing free permits can male it more politically acceptable to businesses
30. What is a discount rate?
the annual rate at which future benefits of costs are discounted relative to current benefits or costs. (high discount rate- favor the present over future low discount rate- give more weight to future costs or benefits, generally supports a higher degree of environmental protection)
15. What are the three "revealed preference" valuation methods?
travel cost models, hedonic pricing, and the defensive expenditures approach
126. What is the evidence regarding whether PES programs are effective at reducing poverty?
weak evidence (see picture)
13. What is the difference between willingness to pay and willingness to accept?
wtp- the maximum amount of money people are willing to pay for a good or service that increases their well-being wta- minimum amont of money people would accept as compensation for an. action that reduces their well being (used in situations where a policy would decrease enviro benefits)
22. Could the defensive expenditures approach produce an estimate of value that is too high?
yes, if the consumer is not purchasing defensive measurers solely because of pollution - for example, consumers may buy bottled water for taste or convenience and not just because of water quality.
58. Are renewables expected to surpass energy consumption by any of the fossil fuels by 2050?
yes, see pic on phone
118. What are some of the concerns with corporate environmental responsibility?
Most large companies publish reports on their environmental impacts and responsibilities, but no evidence that reporting leads to improved results. - problem of green-washing with increase in "green" advertising
112. What are some of the expected impacts of the Green Economy, according to the UNEP model?
increases resource productivity, internationally competitive enviro goods and services sector, employment in the renewable energy sector triples, increased resiliency with financial crises
99. If all countries meet their NDCs, what are the implications for the global average temperature?
nationally determined contribution (NDC)- a voluntary planned reduction is CO2 emissions, relative to baseline emissions, submitted by participating countries at the Paris Conference of the parties (COP-21) in 2015 the current total of country pledges is not sufficient to secure the global goal of warming under 2 degrees, would lead to a median warming of 2.7 degrees (2.6-3.2)
98. Is the 2015 Paris climate agreement a binding treaty?
no, compliance with the targets is voluntary, but it remains a force
64. Are we (the world) likely to run out of coal any time soon?
no, we have global reserves sufficient for 114 years
44. What are some of the disadvantages of using a technology-based approach to regulate pollution?
not likely to be cost-effective because they do not provide. firms with the flexibility to pursue a wide range of options, costs of implementation will vary for different firms so it is unlikely that the given level of pollution reduction will be achieved at t eh lowest costs
56. About what percent of the world's energy comes from fossil fuels?
over 80% - 29% coal, 21% natural gas, 31% oil
55. How will technological improvements affect a system of tradable permits?
page 195-196- permit price will fall to the level where the original quantity intersects the new mcr curve. so, the permit system may have a seemingly perverse effect because if control costs fall drastically for some firms, the permit price will fall, allowing plants with older tech to purchase more permits and actually increase emissions. this could be avoided if number of firms is reduced
47. How can we use a graph to show how two firms will react with a system of tradable permits?
pages 185-187- review bc graph is helpful and there might be question like this 1. set up horizontal axis with the goal for total reduction (so that the sum of the reductions must equal that at any point on the graph)- horizontal axes for firms go in opposite directions on same axis 2. draw mcr curves for each- so from what they would pollute unregulated to the maximum reduction- mcr curves will be in opposite directions can find control costs as area under mcr curve
49. How can we graphically show that tradable permits will reduce the costs of reducing pollution (as compared to a standard where each firm reduces pollution by the same amount)?
pages 185-187- review bc graph is helpful and there might be question like this -see the pages but the triangle between original pollution reduction and the efficient allocation is the amount reduced.
59. What energy sources have the highest and lowest net energy ratios?
see pic on phone and page 273 highest is hydropower, then coal, then oil, then wind. - if net energy is expressed in a ratio, a higher value means that we can obtain a significant amount of available energy without using much energy to obtain it.
120. What is the difference between shallow and deep green consumerism?
shallow- replacing standard products with green substitutes (Tesla instead of suv) but overall level of consumption stays relatively constant deep- buying less overall (public transport instead of a car)
127. How does exported pollution harm people in developing countries?
shifting the impacts of pollution to other countries by importing goods whose production involves large enviro impacts see pic
131. Does the SSE imply a limitation to economic growth?
finish
132. According to Daly, what is the primary factor necessary for a transition to a SSE?
finish
65. What is fracking? What are the main concerns about fracking?
hydraulic fracturing- the process of injecting liquid at high pressure into subterranean rocks, boreholes, etc. so as to force open existing fissures and extract oil or gas, involved with obtaining natural gas. - analysts have suggested that leakages of methane (green-house gas) can make fracked gas worse that coal in terms of greenhouse gas emissions
125. What is the evidence regarding whether PES programs are good for the environment?
if conditions for successful pes program not met, it can lead to enviro being worse off - women could lose jobs - weak evidence that pes has good economic effects (see pic) main problems are that the poorest do not have ownership off natural resources, and even if they do, they often lack knowledge about how to apply for payments.
73. Why is a focus on energy efficiency even more important than a transition to renewable energy?
improving energy efficiency in our homes, businesses, schools, governments, and industries- which consumer more than 70% of the natural gas and electricity used in the country- is one of the most constructive, cost-effective ways to address the challenges of high energy prices, energy security and independence, our pollution, and global climate change. - includes technological changes to improve efficiency and shifting behavior - has been predicted that energy demand will increase by 44%, but increasing efficiency can make this demand much less (energy demand could decrease in developed and increase less in developing) - investments in energy efficiency are generally much cheaper than meeting demand growth through developing new energy supplies (costs on avg half)
8. How do economists define "economic value"?
in traditional enviro Econ, value is from how humans value something- species do not have a right to exist, their value comes from the importance people put on it in eco econ- "rights-based" notion of value so value of nonhuman species goes beyond human-centered worldview.
77. What is the historical trend comparing global emissions of carbon dioxide to the global average temperature?
increases in the two have been linked since pre-industrial times, scientists expect that the climate will see temperature increases of between 1.5 and 4.8 degrees Celsius by 2100 relative to pre-industrial levels
88. What discount rate do most economists suggest using for analyses of climate change?
Mean response was around 3%; median response was around 2%.
93. What is the main advantage of a carbon tax over a cap-and-trade system?
- main: better price predictability (w/ cap and trade permit prices could vary greatly)
34. What are the two components of the social rate of time preference?
(1) the natural human tendency to prefer the present over the future, this is known as the pure rate of time preference. (2) assuming real econ growth continues, the peoople in the future will be rich than the people now ($100 in damages/benefits less damaging/valuable for future people), utility is assumed to be diminishing marginal function of consumption.
16. What is the main problem with replacement cost methods of economic valuation?
- an approach to measuring environmental damages that. estimates the cost necessary to restore or replace the resource, such as applying fertilizer. to restore soil fertility (figuring out how much it would cost to pollinate with machines with loss of bees) - main problem is that even if we know how much it would cost to restore services, people may not be willing to pay this price- can be used as a lower bound if we know that people would pay.
113. What are the traditional assumptions about consumer behavior in economics?
- consumers are rational- they seek to max own utility - consumers know their preferences- which option increases utility most - consumers have perfect info - consumers are consistent with their choices
116. What are some examples of green nudges?
- presenting "green" electricity as the default choice. -Colored lights showing real‐time electricity usage. - More prominent fuel efficiency information - presenting consumers with comparisons regarding their electricity consumption -commitments- explicit goals, pledges and promises to change behavior -defaults- automatic settings or baseline reference points -messenger- who conveys behavior change info -norms - priming -salience (reminders and messages framing that capture attention) -education -financial
108. Do the benefits of environmental protection in the U.S. appear to outweigh the costs?
-EPA regulations provide a B/C ratio of 3.2 to 13.1. EPA regulations provide about 70% of the net benefits of all federal regulations. - EPA does best job with returns on money spent so even tho EPA gets a lot
17. Why do economists tend to prefer revealed preference valuation methods over other valuation methods?
-methods of economic valuation. based on market behaviors, including travel cost models, hedonic pricing, and the defensive expenditures approach. - these valuations are based off of actual market decisions
42. What are some of the disadvantages of using standards to regulate pollution?
-not cost effective- cheaper for firms that can reduce pollution at a low marginal cost to reduce pollution more than firms that have a high marginal reduction cost. So requiring all firms to reduce pollution by the same amount to meet the same standards is not the cheapest way to achieve a given level of pollution reduction. -also, once the firm meets standard, they have little incentive to reduce pollution further
40. What are the four basic approaches to pollution policy?
1. Pigovian (or pollution) taxes- a per-unit tax set equal t the external damage caused by an activity such as a tax per rotten of pollution emitted equal to the external damage of a ton of pollution. 2. Transferable (tradable) pollution permits- these allow firms tot emit only the level of pollution for which they have permits. Tradeability implies that firms can buy and sell these permits, with low-emitting firms able to sell extra permits and high-emitting firms able to purchase additional permits. 3. Pollution (or emission) standards- standards require all firms to pollute below maximum allowable levels o reduce pollution to a certain percentage below a baseline level. These standards can also specify a given level of efficiency for products such as appliances and motor vehicles. 4. Technology-based regulations- these include requirements that all firms use a certain type of technology or install specific equipment.
124. What are some of the requirements for a successful PES program?
1. conditionality (payments conditional upon a resource owner implementing changes that actually improve enviro outcomes) 2. additionality (enviro benefit must be in addition to what already would have occurred without payments) 3. permanence (program must persist for long-term) 4. no leakage
74. What are some examples of policies that can encourage a transition to renewable energy?
1. energy research and development 2. feed-in tariffs (selling back excess energy from panels) 3. subsidies for renewable sources, including favorable tax provisions and loan terms or direct payments 4. renewable energy targets (regulations that set targets for the percentage of energy obtained from renewable energy sources), mandated purchases so that govts 5. efficiency improvements and standards energy demand-side management- an energy policy that seeks to reduce energy consumption through policies such as information campaigns or higher energy prices. economic efficiency standards- an environmental regulation approach that sets minimum standards for efficiency, such as electricity or fuel consumption. (fuel- standards having to improve) efficiency labeling- labels on goods that indicate energy efficiency, such as a label on a refrigerator indicating annual energy use pigovian tax can be used to internalize costs- correct tax should account for the negative externalities
12. What are the three types of non-use values?
1. option value- the value that people place on the maintenance of future options for resource use (pay to protect Arctic National Wildlife Refuge in Alaska because they might want to visit in future, or like preservation of Amazon because cure for a disease might someday be found there. 2. bequest value- value that people place on the knowledge that a resource will be available for future generations (protecting refuge so that the. children can one day visit) 3. existence value- the value that people place on a resource that they do not intend to ever u sue, such as the benefit from knowing an area of rain forest is preserved even though he or she will never visit it.
32. What are the main approaches for determining the discount rate?
1. set discount rate equal to the rate of return on low-risk investments such as government bonds (rationale behind this is that funds used for a beneficial public project could otherwise be invested with interest to provide society with greater resources in the future, oof the market rate of return represents the opportunity cost of spending money now) 2. social discount rate- a discount rate that attempts to reflect the appropriate social valuation of the future. (SRTP=p+(e*c)) --> p=pure rate of time preference, c= annual growth rate of consumption, e= is the elasticity of the marginal utility of consumption.
78. How strong is the scientific consensus that humans are causing climate change?
97% or more of actively publishing climate scientists. agree that climate-warming trends over the past century are extremely likely to be duet to human activities.
130. What is meant by a steady-state economy?
A steady state economy is an economy of stable or mildly fluctuating size. The term typically refers to a national economy, but it can also be applied to a local, regional, or global economy. An economy can reach a steady state after a period of growth or after a period of downsizing or degrowth.
79. What do the most recent global data (for 2014-2018) on carbon emissions indicate?
After not increasing 2014-2016, global carbon emissions rose 1.6% in 2017 and 2.7% in 2018.
107. How does spending in the U.S. on environmental protection compare to other industrial countries?
Country- % of GDP Netherlands- 2.1 Austria- 2.0 Italy- 1.9 Korea- 1.8 United States- 1.6 Germany- 1.6 France- 1.3 Canada- 1.2 Finland- 1.0 Australia- 0.5 so in the middle of the pack
106. About what percentage of GDP in the U.S. is spent on environmental protection?
Environmental protection accounts for about 2% of total GDP, but creates about 4% of all jobs.
110. How does environmental spending compare to other government spending as far as job creation?
Environmental spending creates significantly more jobs than tax cuts.
1. How can equilibrium price and quantity be solved for given equations for supply and demand?
Equations set equal to each other
96. What is the Earth Atmospheric Trust?
Global GHG cap with all permits auctioned and proceeds go into the Earth Atmospheric Trust. - Global carbon emissions = 45 gigatons CO2 - Permit auction price of $30-$100/ton yields $1.4 to $4.5 trillion/year. - Climate change adaptation/mitigation cost is 1% of GWP, about $900 billion (gross world product = $85 trillion). - Remainder is distributed on a global per capita basis, $0.5 to $3.5 trillion per year. - With 7.7 billion people, annual dividend = $65 to - $455 per person.
3. How can a future marginal net benefit curve be discounted (both by using a graph and by presenting it numerically)?
Graph- the slope of the net benefit curve is reduced by (1+r)^n numerically- PV[MND2]= MNB/(1+r)^n n=number of years between periods r= annual discount rate
60. What is a Hubbert Curve? Have its predictions proven true for the U.S. and the world?
Hubbert curve is a bell-shaped curve showing the production quantity of a nonrenewable energy resource over time. For oil, it said that oil production over time will represent bell curve because the discovery and production expand which will lead to falling prices and rising consumption. then prroduction will become more accessible as the most-accessible resources are depleted. new discoveries decline and production beaks and prices rise. - No, tube hubbert curve was reasonably accurate for conventional u.s. crude oil production but the text notes that: so while the hubbertt curve may continue to be representative of conventional U.S. crude oil consumption, the availability of unconventional oil sources may prevent further declines in U.S. total oil production. - hasn't proved correct for global either
128. What are some of the ways that climate change will disproportionately harm people in developing countries?
In 2018 the WHO estimated that "between 2030 and 2050, climate change is expected to cause approximately 250,000 additional deaths per year, from malnutrition, malaria, diarrhea and heat stress. doest have funds to combat the changes in environment and more dependent on agriculture.
11. What are indirect use values? Can you give an example?
Indirect-use value is ecosystem benefits that are not valued in markets, such as flood prevention and pollution absorption, pollination by bees, mitigation of soil erosion - ecosystem services- beneficial services provided freely by nature such as flood protection, water purification, and soil formation.
2. How can one obtain a marginal net benefit curve given a supply and demand curve (both by using a graph and by solving numerically)?
MNB is the net benefit of the consumption or production of an additional unit of a resource. Marginal net benefits are equal to marginal benefits minus marginal costs. (sum of producer and consumer surplus) - Graphically, mnb can be found by summing the vertical difference between price on the supply curve and price of demand curve (becomes negative to right of equilibrium) - Numerically, (price of demand)-(price of supply)
52. What developed country collects the lowest amount of environmental taxes, as a percent of GDP?
United States (doesn't necessarily mean we are most relaxed with enviro bc there are other policy instruments)
121. What is voluntary simplicity?
a choice to live with less stuff in order to pursue a life that is more meaningful
21. What is the defensive expenditures approach? In principle, why does it provide only a lower-bound estimate of economic value?
a pollution valuation methodology based on the expenditures households take to avoid or mitigate their exposure to a pollutant - limitation is that it only provides lower bound because a household may be willing to pay much more than it actually does.
27. What is contingent ranking? Why do some economists prefer it to contingent valuation?
a survey method in which respondents are asked to rank a list of alternatives (Britain study with like ranking how to change water quality and pair this with how it would affect taxes). respondents may be more comfortable since they dont need to give explicit value, protects against biases like protest bids and strategic behavior,
28. What is cost-benefit analysis?
a tool for policy analysis that attempts to monetize all the costs and benefits of a proposed action to determine the net benefit. in principle, using a common metric makes it easier too assess tradeoffs objectively. Basic steps: 1. list all costs and benefits one can think of in relation to a proposed action. 2. for costs and benefits ordinary measurers, obtain reliable measures. 3. for costs and benefits not ordinarily measurer in monetary units (human health or ecosystem impacts) use nonmarket valuation techniques to obtain estimates. 4. if actual nonmarket values cannot be estimated due to budgetary or other constraints, consider transferred values of expert opinions. 5. add up all the costs and all the benefits, preferably under range of plausible assumptions or scenarios. 6. compare total costs to total benefits to obtain a recommendation.
91. How does a cap-and-trade system operate?
a tradable permit system for pollution emissions (pg 344), if want to reduce by x amount of tons of carbon emissions, issue original amounts minus x number of permits. - reduce permits overtime - issue as upstream as possible (largest carbon emitters or oil producers and importers, coal mines and natural gas drillers) - could be issued for free on basis of past emissions or auctioned to the highest bidders - firms able to trade permits among themselves, permit price determined from supply and demand -in international system, countries and firms could also receive credit for financing carbon reduction efforts in other countries - Overall costs would the same as a carbon tax.
46. How can we determine the amount of tax revenue from a pollution tax (both graphically and solving numerically)?
amount of tax revenue= (quantity of pollution they still produce)(tax) see page 184- with horz axis being the pollution reduces, then the tax is just the area under upward sloping from quant they produce at to the max that could be reduced
38. What is sensitivity analysis?
an analytical tool that studies how the outputs of a model change as the assumptions of the model change. - a good cba will include this - example would be changing the discount rate, or considering the effect of risk aversion to the possibility of dam failure if different sensitivity analyses do not result in changes to our policy recommendations, we can feel relatively confident in proceeding with that recommendation.
14. What is the cost-of-illness method? Why do we say that it only provides a lower-bound to economic value?
an approach for valuing the negative impacts of pollution by estimating the cost of treating illnesses caused by the pollutant (direct costs would be lie medical costs and loss of wages and indirect costs would decreases in human capital like if a student misses a significant number of school days to an illness and falls behind) - lower-bound because could exclude indirect costs so it might not fully capture wtp
23. What is contingent valuation?
an economic tool that uses surveys tp question people regarding their willingness to pay for a good, such as the preservation of hiking opportunities or air quality. (has the advantage of being able to be applied to any situation to determine the wta or wtp for a hypothetical scenario.
81. About what is the current atmospheric concentration of carbon dioxide?
around 400 ppm, see graph with red bars
109. About what percentage of U.S. plant closings and layoffs are a result of environmental regulation?
as of 2001, 0.1% of layoffs and 0.1% of plant closings were a result of enviro regulation
63. What is the most environmentally damaging fossil fuel? What is the cleanest?
coal is most environmentally damaging fossil fuel- estimated particulate matter pollution from coal plants leads to deaths of more than 13,000 people in US yearly, emits more carbon dioxide natural gas is generally viewed as the cleanest fossil fuel- producing relatively low amounts of air pollutants and greenhouse gases.
37. What is benefit transfer? Is it normally considered valid?
assigning or estimating the value of a resource. based on prior analysis of one or more similar resources. - the values obtained from benefit transfers can lead to significant. errors, can have average error of 172% but this was influenced by a few extremely incorrect ones, think of the EPA using bronchitis data for bladder cancer - one should consider past study that most closely reflects their given study, quality of original study, how presences, incomes and demographics have changed since original study; best to collect evidence from multiple studies to explore benefit values vary in different situations, should develop clear outlines for using the transfers
75. What are the main barriers to a world that receives all of its energy from renewable sources?
authors conclude that t"barriers to the plan are primarily social and political, not technological or economic. the energy cost in a wind, water, and sunlight world should be similar to that today." - intermittency- a characteristic of energy sources such as wind and solar, which are available in different amounts at different times (contrasting with fossil fuels that can be turned on and off depending on demand)- power storage and energy diversity can combat this but this would require very large power grids which means a lot of policy land requirements total about 2% of global land area, with most of this space between wind turbines that could be used for agriculture, grazing land, or one space.
92. What are some the ways in which carbon taxes and cap-and-trade are the same?
both can, in theory, achieve a given level of pollution reduction at the least overall cost, both will result in the same level of price increases to final consumers, both create strong incentive for tech improvement, both can generate government revenue (assuming permits auctioned), can be implement upstream in production.
19. How can a travel cost model produce estimates of consumer surplus?
can get lower bound for wtp because look at variation in what consumers will pay to get to the sight, the cost to travel to a park varies for different visitors primarily based on their distance from it. The variation allows you to make a demand curve from different travel costs that can be used to find consumer surplus.
41. What is the main advantage of using standards to regulate pollution?
can specify a definite desired result (particularly important in the case of substances that pose a clear hazard to public health) - bc its a uniform rule, can be surer that no factory or product will hazardous levels of pollutants, can completely ban very dangerous substances
76. What is the major anthropogenic greenhouse gas?
carbon dioxide anthropogenic greenhouse gas- man-made effect component of green-house gases from activities like burning of fossil fuels, deforestation, land use changes, livestock production, fertilization, waste management, and industrial processes.
117. What types of green nudges seem to be the most effective?
commitments, changing defaults, changing norms
71. Are more investments globally currently going toward renewables or fossil fuels?
currently more are going to fossil fuel ($100 billion globally), $30 billion annually to renewable forms of electricity but are going faster than others subsidies.
122. How are people in developing countries more dependent upon natural resources?
developing countries disprop dependent on natural resources, very dependent on agriculture
50. What are some of the advantages and disadvantages of using taxes to regulate pollution?
econ efficient, creates incentive for innovation, generates public revenues which can be used to lower other taxes
43. What is the main advantage of using a technology-based approach to regulate pollution?
enforcement and monitoring costs are relatively low- only required to check the equipment is installed and suctioning properly. another small advantage is that if a lot of firms have to adopt certain technology then the production process for this technology may become cheaper.
85. How long will it take for sea level rise to stabilize if carbon emissions are reduced to near zero?
even if co2 emissions decline over a period of the next few hundred centuries, sea-level rising will continue for the next few centuries and millennia.
48. How can we determine which firm will sell permits, and which firm will buy permits?
pages 185-187- review bc graph is helpful and there might be question like this leads to econ efficient outcome -trading will occur until the marginal cost curves are equal because up to this point it is where firm 1 is still receiving a price for permits greater than their reduction costs and firm 2 is continuing to purchase permits as long as it can buy them for less than reduction costs. can then find new reduction costs and add in what they receive or pay in taxes to get total to see that better off.
62. What are the projections for future oil prices? Are they considered reliable?
prices could rise if governments do not implement policy about more efficient use of oil and the development of alternatives because demand will continue to increrase and supply costs will rise. - the possibilities show rise but kind of all over the place so not reliable. oil prices have greatly varied
123. What are payment for ecosystem services (PES) programs?
providers/ stewards or ecosystem services are paid by the beneficiaries of those services, leading to sustainable management. can reduce mkt failures, increasing econ efficiency can offer one possibility for reducing poverty and improving enviro
105. What is the difference between relative and absolute decoupling?
relative- the growth rate of the environmental bad is positive but less than the economic growth rate (we would say that since the lats 1970s carbon emissions and econ growth have become rel decoupled) absolute- level of environmental bad is either stable or decreasing at the same time the economy is growing, thus this breaks the linkage between econ growth and enviro degradation see picture
54. How will technological improvements affect pollution levels with a pollution tax?
see graph page 195- firms will reduce their pollution levels to a new quantity where the tax level intersects the new mcr curve that results form new tech that is under original. they firm will then save from quantity they are reducing being less
80. About how do per-capita carbon dioxide emissions vary in different countries?
see graph page 312 - United States (17.05 metric tons of co2 per capita), Russia (10.34), then other developed countries are in th range of 4 to 10 metric tons per capita. Most developing countries have low rates per capita, typically less than 4 tons of CO2 per person, except China, whose per capital emissions have grown to 6.6 tons per person.
7. How can we solve for the appropriate resource depletion tax, graphically and algebraically?
see page 116 for graph and numerical process
84. Why is a 5 degrees Celsius global average temperature increase considered so dangerous?
see page 320 - 5 degrees is when things start being really bad- when there starts to be high risk of irreversible changes, see picture
97. What are the implications of the global carbon abatement curve?
simplified global cost curve illustrates the estimated size and cost of feasible approaches to abatement by 2030. At the low end of the curve are, for the most part, measures that improve energy efficiency. These measures, such as better insulation in new buildings, thus reduce emissions by lowering demand for power. see picture texted to self implications: we could actually be making money by doing things better for the environment and we could use the money that we make to do the things that are slightly more expensive.
53. What are the policy implications of regulating a stock pollutant?
stock pollutant- a pollutant that does not dissipate or degrade significantly over time and can accumulate in the environment, such as carbon dioxide and chlorofluorocarbons. - making policy is more difficult because will stick in environment for a while, requires urgent action and stringent policy measurers see page 192 for the graph!!! phases- increasing emissions, emissions freeze, emissions reduction, zero emissions - rate of increase in the concentration starts to slow only when emissions are reduced steadily to 0.
24. What are some of the biases associated with contingent valuation?
strategic biases- the tendency for people to state their preference or values inaccurately in order to influence policy decisions (saying yes to an amount you wouldn't actually pay to protect endangered species because you basically support protection of endangered species) yea-saying- responding "yes" to a contingent valuation wtp question even though one's true valuation of the scenario is less, for reasons such as perceiving "yes" to be a correct answer, leads to an upward bias in answers. range bias- potential bias with payment card or multiple-bounded valuation questions whereby the responses are influenced by the range of. values presented to the respondent, respondents influenced to middle of the range of values. protest bids- responses to contingent valuation questions based on the respondents opposition to the question for the payment vehicle, rather than the underlying valuation of the resource, can be identified with follow-up questions and lead to underestimate non-response bias- bias as a result of survey respondents not being representative of survey non-respondents there can also be biases with how the CV survey is administered
111. What is the Green Economy, according to UNEP?
the green economy is one that results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities. In its simplest expression, a green economy can be thought of as one which is low carbon, resource efficient and socially inclusive. can be driven by investments to reduce enviro impacts policy recommendations to meet this (pg 395) - use taxes and other market-based instruments. to internalize negative externalities - decrease govt spending that depletes natural capital - efficiency and tech standards can sometimes be more cost-effective and easier to administer than market-based instruments. - temporary support measures are needed to ensure an employment transition for affected workers - international enviro governance needs to be strengthened
87. What does the Stern Review have to say about the costs and benefits of actions to reduce climate change?
the overall conclusion was that: the benefits of strong and early action far outweigh the economic costs of not acting - using the results from formal economic models, the Review estimates that if we do not act, the overall costs and risks of climate change will be equivalent to losing at least 5% of global GDP each year, now and forever. IF a wider range of risks and impacts are taken into consideration, the estimates could rise to 20% of GDP. In contrast, the costs of action against climate change could be limited to 1% of GDP --> so this benefit/cost ratio of at least 5:1 implies a strong economic case for immediate and major policy action as opposed to a slower ramping up.
39. What is meant by the "optimal" level of pollution? How can we show this on a graph?
the pollution level that maximizes net social benefits - some may believe that is should be zero, but economists would argue that the only way to have zero pollution would be to have zero production. so if we. want to produce anything, pollution will occur. showing on graph (pg 178)- with polllution level on the horizontal axis and marginal cost/damage on the vertical axis - to get marginal cost of pollution reduction, go right to left from Qmax (which is the unregulated pollution level) and then the curve will raise as u go to the left because it gets more expensive to reduce as u reduce more (as pollution levels are reduced closer to zero, the cost of additional pollution reduction will rise) - Marginal damages (but can also be thought of marginal benefits of reduction) can be found by a rising curve left to right, rises this way because the additional levels of damage result in more and more serious damages (think how auto exhaust might not cause problems in small doses but starts to become dangerous as the quantity of it increases). Also, if thinking of as the marginal benefits of reduction, look at graph right to left and see how there are very great benefits from the first few units of pollution reduces and then the marginal benefits decline. On graph, use equimarginal principle and the optimal point is where the MD and MCR curves cross
33. What is the problem of using the rate of return on financial investments as the discount rate?
the rates of returns of government bonds vary over time so some economists wonder whether we should base the valuation of long-term effects upon an interest rate that is subject to the whims of financial market conditions.
66. What has been happening to the cost and global supply of solar energy in recent years?
the recents trend in solar prices has been declining and there have been huge increases in the cumulative solar power capacity worldwide.
20. What is hedonic pricing? Briefly describe how it can be used to obtain estimates of environmental quality?
the use of statistical analysis to explain the price of a good or service as a function of a home as a function of the number of rooms, the caliber of local schools, and the surround air quality. - statistical model looks at if there is a significant relationship between the environmental quality variables and the selling price.
10. What are direct use values? Can you give an example?
the value one obtains by directly having a natural resource, such as harvesting a tree or visiting a national park- can be for experiencing it
36. What is the value of a statistical life? How is wage-risk analysis used to obtain a VSL?
the willingness of a society to pay to avoid one death based on valuations of changes in risk of death. - contingent valuation is one way to find is to ask people or households how much they would be willing to pay for small increments then multiply responses by number of households that would be paying. Wage-risk analysis is a method used to estimate the vsl based on the required compensation needed to entice people to high risk jobs. Ask people how much extra wage would be necessary for them to undertake a riskier job. (can vary greatly)
102. What is the environmental Kuznets curve (EKC)?
theory that a country''s environmental impacts increase in the early stages of economic development but eventually decrease above a certain level of income. - proposes that the relationship between income and environmental impacts are an inverted-u shape
100. What is the Porter hypothesis?
theory that enviro regulations motivate firms to identify cost-saving innovations that otherwise would not have been implemented,idea that environmental regulations can spur firms to identify cost-saving innovations - enviro restrictions required for companies to push forward and can sometimes be better than free - by no means does this always happen
67. What has been happening to the cost and global supply of wind energy in recent years?
there has been rise in global cumulative wind energy power and the price has declined
82. What do data on the global carbon budget indicate about what we should do with our current global fossil fuel reserves?
we should leave a large portion of it in the ground. (2427 gt) because we need to only use 473 to meet Paris climate agreement goal.
26. What did the NOAA panel conclude regarding the validity of contingent valuation? What were some of its recommendations?
they concluded that cv studies are reliable enough to be starting point for judicial process of damage assessment but they should look at other information as well, may produce valid estimates of non-use values. recommendations for them to be considered acceptable: in-person surveys, wtp preferred over wta to avoid unrealistically high answers, wtp should be phrased yes/no with price, sensitivity of wtp to the scope of damages should be assessed (number of birds), follow-up questions should be asked to see if respondents understood hypothetical situation, respondents should be reminded of their income constraints. they notes that wtp usually produces too high of results.
45. How will firms respond to a pollution tax (both by using a graph and by solving numerically)?
they will find it profitable to reduce pollution so long as the marginal costs are less than the tax. important to not that firms will react diff to tax depending on their MCR curves. see graph page 183!!!- there will probs be question like this -the firms will reduce their pollution from Qmax to wherever the tax level intersects their marginal cost of reduction curve.- this will cost them the area under the mcr curve, but they will not lose the part above that would have been paid in taxes. This is for when the horizontal axis is pollution - when the horizontal axis is pollution reducedMCRR curve upward sloping- see page 184!!
86. What is the primary difference between economic analyses that support significant action to reduce climate change and those that do not?
to determine the value of future costs and benefits (benefits and costs the are expected to occur in the future usually compared to present costs through discounting), economists must use a discount rate (annual rate at which future benefits or costs are discounted relative to current benefits or costs). The problems and implicit value judgements associated with discounting add to the uncertainties that we have already noted in valuing costs and benefits. stern vs. nordhaus - stern uses a low discount rate of 1.4%, so more weight is giver to long-term ecological and economic effects, thus even though costs of aggressive action appears higher than benefits for several decades, in long-term worth it another difference is the precautionary principle (the view that policies should account for uncertainty by taking steps to avoid low-probability but catastrophic events)- stern gives heavier weighting to uncertain but potentially catastrophic impacts a third difference is the assessment of econ costs of action to mitigate climate change depending on a range of assumptions including: - the efficiency or inefficient of econ responses to energy price signals - the availability of non carbon "backstop" energy technologies (technologies such as solar and wind that can replace current energy sources, especially fossil fuels) -whether countries can trade least-cost options for carbon reduction using tradable permits scheme - whether revenues from taxes on carbon-based fuels are used to lower other taxes -whether external benefits of carbon reduction, including reduction in ground-level air pollution, are taken into account. these assumptions affect model 325
25. Would we generally expect contingent valuation to produce valuations that are too high or too low?
too high for wta because people have motive to overstate since they thing they might get the compensation. (endowment effect- the concept that people tend to place high value on something after they already possess it, relative to its value before they possess it.
6. What are user costs and why can they be considered a type of externality?
user costs- opportunity costs associated with the loss of future potential uses of a resource resulting from consumption of the resource in the present. (can be seen as the future time periods mnb curve rising- more costs leads to more use) - can be considered a type of externality in time because costs to the future generation rise with use - can be added to the original supply curve to get social cost curve like we did with externalities
18. What is the travel cost method? How does one estimate a travel cost model?
uses. statistical analysis to d determine peoples' wtp to visit a natural resources such as a national park or river; a demand curve for the resource is obtained by analyzing the relationship between visitation choices and travel costs. can get lower bound for wtp because look at variation in what consumers will pay to get to the sight, the cost to travel to a park varies for different visitors primarily based on their distance from it.
72. How do externality costs vary for renewable and nonrenewable energy sources?
various studies of energy externalities suggest that if the price of all energy sources included externality costs, a transition toward renewables would already be much further along. - the externality costs assoc with renewable energy sources much lower - especially high for coal, oil still pretty high and nuclear prowler generates relatively low externalities with air pollution and greenhouse gases, but have potential for catastrophe. our discussion suggest that the biggest factor currently preventing a transition to renewable energy is the failure to account for externalities (pg 292)
103. What is the evidence regarding the EKC?
while the ekc seems to apply to so2, further analysis indicates it does not apply to all enviro impacts- namely does not apply to carbon dioxide emissions (or solid municipal waste) - best shape is more of a n- so any delinking of enviro quality is temporal, so cant follow policy of polluting first then cleaning later like ekc was thought to imply.
