Environmental Economics: Concepts, Methods and Policies

by Dodo J. Thampapillai, Matthias Ruth

Overview

Environmental Economics explores the ways in which economic theory and its applications, as practised and taught today, must be modified to explicitly accommodate the goal of sustainability and the vital role played by environmental capital.

Pivoting around the first and second laws of thermodynamics, as well as the principles of ecological resilience, this book is divided into five key parts, which includes extensive coverage of environmental microeconomics and macroeconomics. It drills down into issues and challenges including consumer demand; production and supply; market organisation; renewable and non-renewable resources; environmental valuation; macroeconomic stabilisation, and international trade and globalisation. Drawing on case studies from forestry, water, soil, air quality, and mining, this book will equip readers with skills that enable the analyses of environmental and economic policy issues with a specific focus on the sustainability of the economy. This new edition has been updated throughout and provides further coverage on topics such as energy transition, market organisation and the role of environmental economics in regulatory decision-making including critiques of contemporary policy directives like tradable pollution permits and net zero emissions. Challenges to achieving stabilisation and emission reduction have been expanded to include wars and conflicts such as those in the Middle East and the Russian invasion of Ukraine. The book further reinforces the premise that there are clear limits to growth and that modesty and moderation are superior alternatives.

Rich in pedagogical features, including key concepts boxes and review questions at the end of each chapter, this book will be a vital resource for upper level undergraduate and postgraduate students studying not only environmental economics/ecological economics but also economics in general.

Product Details

ISBN-13:	9781040226513
Publisher:	Taylor & Francis
Publication date:	12/31/2024
Sold by:	Barnes & Noble
Format:	eBook
Pages:	344

About the Author

Dodo J. Thampapillai is an Honorary Professor in the School of Natural Sciences at Macquarie University where he previously held a Personal Chair in Environmental Economics. He is currently a Senior Fellow in Executive Education at the Lee Kuan Yew School of Public Policy, National University of Singapore, where he was previously a professor. He also held previous Visiting Professorships/Fellowships at Simon Fraser University, Swedish University of Agricultural Sciences, Christian Albrechts University of Keil and the Australian National University. Dodo Thampapillai has been teaching Economics and Environmental Economics for over 50 years leading him towards a serious rethink of how economics is taught and practiced.

Matthias Ruth is Pro-Vice-Chancellor for Research at the University of York, York, United Kingdom. He previously served as Vice-President for Research and Innovation at the University of Alberta and in various other leadership positions in the USA and with academic appointments in numerous fields, including Economics, Engineering, Geography, Public Policy and Urban Affairs. His research focuses on dynamic modeling of natural resource use, industrial and infrastructure systems analysis, and environmental economics and policy. His theoretical work heavily draws on concepts from engineering, economics and ecology, while his applied research utilizes methods of non-linear dynamic modeling as well as adaptive and anticipatory management. Applications of his work cover the full spectrum from local to regional, to national and global environmental challenges, as well as the investment and policy opportunities these challenges present.

Table of Contents

Preface

Acknowledgements

List of Figure

List of Tables

PART-I. NATURE-CAPITAL (KN) AND THE ECONOMY

1. KN AND ECONOMICS

Environmental Economics and Economics

KN and Limits to Growth

KN issues of contemporary times

Climate change – The issue of this century

The organisation of this text

REFERENCES

2. THE ECONOMIC SYSTEM REVSED

The Economic System: Standard Version

The Economic System and Materials Balance

The Economy and the Entropy Law

Further Adaptations of the Economic System

Equilibrium in the Adapted System

Concluding Remarks

REVIEW QUESTIONS

REFERENCES

PART-II. MICROECONOMICS AND KN

3. THE MARKET MODEL AND ITS FAILURE

The Functions of the Market

Market demand

Market supply

The market

KN Goods and Market Failure

Price Mechanism and Property Rights

Some Further Issues

REVIEW QUESTIONS

REFERENCES

4. PUBLIC GOODS AND EXTERNALITIES

Public Goods

Externalities

Public Goods and Externalities

Residual Externalities

REVIEW QUESTIONS

REFERENCES

5. ECONOMICS OF RENEWABLE AND NON-RENEWABLE RESOURCES

Objectives of Resource Management

Conflicts between EG and KN-Q Objectives

The framework based on the market model

The framework for conflicts between groups

Conflicts Due to Intergenerational Concern

A framework for non-renewable resources

A framework for renewable resources

Some Resource Management Policies

Renewable resources

Non-renewable resources

REVIEW QUESTIONS

REFERENCES

6. ECONOMICS OF NON-RENEWABLE RESOURCES WITH RENEWABLE SERVICES

A Simple Framework for Pollution Control

Standards

Taxes and charges

Emissions Trading

Net Zero Emissions

Other Incentives and Disincentives

REVIEW QUESTIONS

REFERENCES

7. CONSUMER DEMAND AND THE KN

Utility Functions, Indifference Curves and Demand

The standard theory

Adapting the Standard Theory for Effects pertaining to KN

Pertinent assumptions

The elicitation of demand curves

The Market Demand Curve and KN Effects

Elasticity of Demand and KN

Concluding Remarks

REVIEW QUESTIONS

REFERENCES

8. PRODUCTION, COSTS, SUPPLY AND KN

The Production Function and KN

Production and Assimilative Capacity

Desired output and the generation of entropy

Transfer of entropy and time

Isoquants, Substitution, and Input mixes

Analysis of Costs

Implications

REVIEW QUESTIONS

REFERENCES

9. MARKET ORGANISATION AND THE KN

Perfect Competition and Sustainability

PC versus PCS and Preference Relations

Monopoly

Oligopoly

Monopolistic Competition

Perfect Information and Full Employment of KN

Concluding Remarks

REVIEW QUESTIONS

REFERENCES

PART-III. MACROECONOMICS AND KN

10. SOME IMPORTANT CONCEPTS IN MACROECONOMICS

National Product

Real Values and Price Level Indexes

Final Expenditures

Economic Performance and Goals of Macroeconomics

Measurement of NP

The Relationship between NP and Inflation

QNP measured as the sum of real final expenditures

QNP measured as the sum of real incomes

AD–AS Framework

Concluding Remarks

REVIEW QUESTIONS

REFERENCES

11. KN: INVESTMENT AND DEPRECIATION

KN and the Economy

Distinguishing KN Investments from Depreciation of KN

KN investments

Depreciation of KN

Sustainable Income

A Conceptual Framework for DKN(t)

Some Empirical Evidence

Concluding Remarks

REVIEW QUESTIONS

REFERENCES

12. ENVIRONMENTAL MACROECONOMICS: SHORT-RUN ANALYSIS-I

Equilibrium Income without DKN

Equilibrium Income with DKN: Linear Framework

Equilibrium Income with DKN: Non-linear Framework

Income Determination and Policy Analyses

United States

China Indonesia and Vietnam

Mongolia

Further Thoughts on DKN and KN Investments

Concluding Remarks

REVIEW QUESTIONS

REFERENCES

13. ENVIRONMENTAL MACROECONOMICS: SHORT-RUN ANALYSIS-II

The Standard Framework

Production function (factor utilisation)

Aggregate supply (AS)

Aggregate demand (AD)

Display of the standard framework

The Environmental Macroeconomic Framework

Reformulated production function (factor utilisation)

Reformulated AD–AS framework

Display of the environmental macroeconomic framework

Concluding Remarks

REVIEW QUESTIONS

REFERENCES

14. ENVIRONMENTAL MACROECONOMICS: LONG-RUN ANALYSIS

Introduction

The Steady State

The Harrod-Domar (H-D) Growth Model

The standard version of the H-D growth model

The H-D model revised with KN

The Swan-Solow Model

The standard version of the Swan-Solow model

The revised version of the Swan-Solow model

Endogenous Growth Models

The Romer Model

The Generalized Endogenous Growth Model

An Illustration – The South Korean Economy

Conclusions

REVIEW QUESTIONS

REFERENCES

15. INTERNATIONAL TRADE AND GLOBALISATION

Comparative Advantage and Specialisation

The Factor Endowment and Trade Framework

The standard framework

The revised framework

Trade Framework based on the Market Model

The Market for Foreign Exchange

Global Issues and the Need for a Global Paradigm

Concluding Comments

REVIEW QUESTIONS

REFERENCES

PART-IV. VALUATION

16. VALUATION OF KN: MICROECONOMIC BASIS

The Basis for Valuation

Methods Based on Demand: KN as a Consumption Good

Contingent valuation method (CVM)

Choice modelling (CM)

Travel-cost method (TCM)

Game theory methods

Methods Based on Demand: KN as an Input in Production

Hedonic prices

Dose-response methods

Dose-response methods

Direct estimation of OCs

Replacement costs

Cost savings

Threshold values

Concluding remarks

REVIEW QUESTIONS

REFERENCES

17. VALUATION OF KN: MACROECONOMIC BASIS – I

Use Value of KN in Macroeconomics

Illustration of the Use Values of KN and the Scarcity of KN

The Relative Scarcity of KN

The efficiency of utilisation with respect to KN

Concluding remarks

REVIEW QUESTIONS

REFERENCES

18. VALUATION OF KN: MACROECONOMIC BASIS – II

Stocks and Flows of KN

The Perpetual Inventory Method (PIM)

Adapting the PIM for KN

Empirical illustration

Conclusion

REVIEW QUESTIONS

REFERENCES

PART-V. POLICY

19. POLICIES FOR SUSTAINABLE DEVELOPMENT

Policies Aimed at Reducing Damages

Taxes and subsidies

Regulation and tradable permits

Commodity prices, interest rates and wages

Product differentiation

Education attitudes and lifestyles

Population pressures

Property rights and land reform

Improving the productivity of KN

Policies Aimed at Minimizing KN Damages towards Zero and Restoring KN

Closed-loop production systems

Bio-mimicry

Changing the fundamental nature of the business model

Restore and expand KN assets

Overarching Policies – Social Capital (KS) – A Precondition

Concluding Remarks

REVIEW QUESTIONS

REFERENCES

20. AN ENVIRONMENTAL ECONOMICS FOR SUSTAINABILITY

The Premises for Sustainability

Building KN into Economic Models

The Need for a New Kind of Policy

REFERENCES

Index

Editorial Reviews

"An economics textbook that puts environmental capital in first place, and then uses good economic theory to arrive at truthful conclusions and relevant policies. A big step forward in teaching economics!" — Herman Daly, Emeritus Professor, University of Maryland, School of Public Policy, USA

"At last an economics textbook that acknowledges that the basis of an economy is the environment. The potential role of economics in addressing many of the environmental issues facing our planet, especially climate change, has been hampered by the incomplete nature of the basic tenets of neo-classical economics. This book corrects that problem and will provide students with the tools to make much sharper contributions to current policy debates. It is an ideal textbook for any serious environmental economics course." — Peter Phibbs, Department of Urban and Regional Planning Director, Henry Halloran Trust, University of Sydney, Australia

From the Publisher