Introduction to environmental economics

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Introductio n t o

Environmenta l

Economic s

Klic k Hanley , Jaso n F.Shogre n

'and Ben White Số hóa bởi Trung tâm Học liệu – ĐHTN http://www.lrc-tnu.edu.vn

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Introductio n t o

Environmental

Economics

Professor Nick Hanley

Professor of Environmental Economics, University of Glasgow

Professor Jason F. Shogren

Stroock Distinguished Professor of Natural Resource Conservation and Management,

and Professor of Economics, University of Wyoming

Dr Ben White

Senior Lecturer in Agricultural Economics, University of Newcastle and Adjunct Senior Lecturer in

Agricultural Economics, University of Western Australia

OXFOR D

UNIVERSITY PRESS

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OXFOR D

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© Nick Hanley, Jason F. Shogren, and Ben White 2001

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N. Hanley

For Charlie, Fiona, and Rose

J. Shogren

For Deb, Maija, and Riley

B. White

For Jane, Catherine, Steven, and Dominic

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Acknowledgement s

This book would not have been completed without the help of many people. Nick

Hanley would like to thank Linda Goodall for art work, editing and general organ￾ization; Felix Fitzroy for comments on Chapter 9; Ceara Nevin for research assistance;

and Fiona for reading all his chapters with the expert eyes of a non-economist. Jason

Shogren would like to thank Tom Crocker (for advice) and Bob Dylan (for different

advice). Ben White thanks Elizabeth Moore for work on the rainforest chapter and

Katherine Falconer for comments. We all thank staff at OUP for all their hard work

and encouragement.

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xi

xiii

xv

1 Economics for the Environment 3

2 Markets for the Environment 12

3 Valuing the Environment and Natural Resources 34

4 Cost-Benefit Analysis and the Environment 68

5 Environmental Risk 94

6 Economic Growth and Sustainable Development 120

7 Strategic Interaction 148

8 Trade and the Environment 171

HBHHMHHHHHHMi

Part Tw o Applyin g th e Tools

Content s

List of Boxes

List of Figures

List of Tables

Part On e Economi c Tools

9 Transport and the Environment 197

10 Rainforests 219

11 Controlling Water Pollution 238

12 The Economics of Climate Change 276

13 Biodiversity 294

14 Resources and Energy 316

15 Epilogue 339

Index 343

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Lis t o f Boxe s

1.1 Key Insights from Ecology that Economists ought to be aware of? 9

2.1 Market Equilibrium and the Gains from Trade is

2.2 An Example of an Externality: Air Pollution in Ecuador 18

2.3 The Tragedy of the Commons 23

2.4 Government Intervention Failure: The Common Agricultural Policy 26

2.5 Trading Pollution Permits 31

3.1 The Value of Everything or the Value of Nothing? 43

3.2 Valuing Environmental Benefits: Conservation in Africa 46

3.3 Valuing Environmental Costs: Quarrying 48

3.4 The Exxon Valdez Incident and the NOAA Guidelines 51

3.5 Valuing Heritage Sites: Stonehenge 60

4.1 The Welfare Economics Background explored 70

4.2 Discounting and the Discount Rate 11

4.3 An Illustrative CBA 81

4.4 Assessing the Progress of Environmental CBA in the United Kingdom 88

4.5 CBA and the 'Waste Hierarchy' 89

5.1 The Allais Paradox 100

5.2 Valuing Reduced Risk from Food-borne Pathogens in the Lab 107

5.3 Superfund 117

6.1 Is GNP a Good Measure of Well-being? 122

6.2 An EKC Example from the Literature 131

6.3 Sustainability Measures for Scotland 142

6.4 Indicators of Sustainability in Africa 144

7.1 The State of the World's Fisheries 153

7.2 An Example of Self-organization in a Common Property Resource 158

7.3 Revision on Discounting 161

7.4 Self-Enforcing International Enviromental Agreements 166

7.5 Montreal Protocol 167

8.1 World Trade 172

8.2 The Effects on Chile of Trade Liberalization i8i

8.3 The California Effect 182

8.4 The Porter Hypothesis 186

8.5 European Environmental Regulation and Trade 190

9.1 CBA applied to New Roads: the Harrogate-Knaresborough Bypass 204

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XII LIST OF BOXES

9.2 Road Traffic and Pedestrian Accidents: a Grim Externality 206

9.3 Gasoline Prices and Vehicle Use in the USA 209

9.4 The Impact of Increasing Air-Quality Standards on Health 210

9.5 Encouraging the Use of Public Transport: Freiburg and Zurich 212

9.6 Road Pricing in Singapore 213

9.7 Environmental Taxes on the Car: the Leaded Fuel Premium 215

9.8 Road Pricing in Norway 217

10.1 Deforestation in Rondonia an Example of the Frontier Model 223

10.2 Deforestation in the Ivory Coast and the Discount Rate: an Example

of Immiserization 224

10.3 The Rainforest Supply Price: Korup National Park in Cameroon 232

10.4 Madagascar: an Example of a Local Policy 234

11.1 Sources of Pollution and Changes in River Quality over time in Scotland 240

11.2 Water Quality in Hungary and India 243

11.3 TPP Applications to Non-point Pollution in the USA 250

11.4 Economic Incentives and Clean Technology 258

11.5 Do Tradable Permits save Money? 263

11.6 TPPs and Nitrate Pollution in the UK 268

11.7 The Murray-Darling River Basin 269

12.1 Global Warming and Alaskan Forests 279

12.2 The Kyoto Protocol on Climate Change 281

12.3 Carbon Taxes 284

12.4 Tradable Carbon Markets versus Carbon Taxes 285

12.5 Estimating the Impacts of Global Warming 286

12.6 The UK Climate Change Levy 290

13.1 Noah's Library 295

13.2 How Many Species? 297

13.3 INBio: Bioprospecting in Costa Rica 301

13.4 Biological Prospecting: an Example 303

13.5 Mangrove Fisheries Linkages in the Campeche of Mexico 305

13.6 Valuing Biodiversity 306

13.7 Community Development in Pakistan 307

13.8 Saving Elephants 309

14.1 Testing Hotelling's Rule 320

14.2 Why is Resource Scarcity so Difficult to Measure? 321

14.3 Energy Facts 332

14.4 World Estimated Recoverable Coal 333

14.5 World Crude Oil and Natural Gas Reserves 334

14.6 Renewable Energy in the UK: Promotion and Impacts 335

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Lis t o f Figure s

i . i Economy-environment interactions 5

2.1 Marginal benefits and marginal costs: private and social 19

3.1(a) Willingness to pay for wildlife protection 37

3.1(b) Marginal willingness to pay for wildlife protection 38

3.1(c) Marginal willingness to pay for two people 38

3.2 Indifference curves and the value of an increase in environmental quality 39

3.3 Indirect environmental values 40

3.4 Direct environmental values 41

3.5 The economic value of a wetland 45

3.6 The value in the housing market of an improvement in air quality 55

3.7(a) Relationship between visits and travel costs 57

3.7(b) A derivation of consumers' surplus from the visit-cost relationship 57

4.1 The world coal market and social costs 75

4.2 Agricultural product prices versus shadow prices 75

5.1 Diminishing marginal returns 99

5.2 Objective and subjective risk perception 111

6.1 The environmental Kuznets curve 130

6.2 Sustainable versus unsustainable growth 134

6.3 Different views on sustainability 136

7.1 The prisoner's dilemma in extensive form 151

7.2 Yield-effort curve 152

7.3 Fishery Nash equilibrium 155

7.4 Nash bargaining solution 155

7.5 Self-governance game 157

7.6 Coase's Theorem 158

7.7(a) The cooperative solution: individual rationality 164

7.7(b) The cooperative solution: individual and group rationality 164

7.8 Transboundary pollution 169

8.1 Comparative advantage 175

8.2 Gains from trade 176

8.3 The effects of domestic environmental policy and trade policy 178

8.4 Equilibrium without trade 179

8.5 Equilibrium with trade 180

8.6 Trade and environmental policy 1 si

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XIV LIST OF FIGURES

8.7 Partial equilibrium analysis of trade-environment interactions 184

9.1 Technological improvement effects 208

9.2 Petrol price increases and demand for travel 211

9.3 Road price impacts 214

9.4 Changing transport mode choice by changing relative prices 216

10.1(a) The frontier model of deforestation 225

10.1(b) The immiserization model of deforestation 225

10.2 Relationship between Gross National Product and deforestation rate 226

10.3 The optimal timber rotation 228

10.4 Equilibrium rainforest area 230

11.1 Marginal abatement costs for water pollution control 253

11.2 From firm's emissions to aggregate emissions 254

11.3 Impact of a water pollution tax 255

11.4 Pollution taxes as the least-cost solution 256

11.5 Tradable permits as the least-cost solution 259

11.6 Prices in the permit market 260

11.7 Permit trading in an estuary 262

11.8 Using input taxes to reduce non-point pollution 265

11.9 Setting the target 271

12.1 Voluntary contributions to abatement 283

12.2 The flexibility stringency trade-off 291

13.1 Trade-off between cost and the probability of survival 298

13.2 Safe minimum standard 299

13.3 Ecosystem cycles 303

14.1 The Hotelling model of resource extraction 318

14.2 Defining economic reserves for a natural resource 322

14.3 The mineralogical threshold 323

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Lis t o f Table s

3.1 Choice experiment for valuing Australian wetlands 53

3.2 Results from a production function model of wetlands and a crab fishery 60

4.1 Road impacts by income group 79

6.1(a) Real CNP per capita in selected countries 121

6.1(b) CNP annual percentage growth in selected countries 121

6.2 Causes of UK growth, 1951-1985 124

6.3 Human development indices vs. CNP and CNP growth rates 125

7.1 The prisoner's dilemma, strategic form iso

7.2 Fishery prisoner's dilemma 154

7.3 Coase's theorem: a game-theoretic interpretation 159

7.4 Fishery dilemma 160

7.5 Groundwater cooperation game 163

7.6 The acid rain game 167

7.7 Transboundary pollution 168

8.1 Trade and absolute advantage 173

8.2 Trade and comparative advantage 175

8.3 Labour use with an environmental policy 177

8.4 Index of environmental stringency 185

9.1 Road traffic volume in OECD countries, 1970-1992 198

9.2 World motor vehicle fleet, 1970-1993 199

9.3 Mobile source C02

emissions by region, 1971-1993 200

9.4 Valuation methods and transport impacts 202

9.5 Main costs and benefits of a new bypass 203

10.1 Estimates of forest cover and deforestation by geographical regions 221

11.1 Water pollution control policy options 244

11.2 Simulation results for cost savings from economic instruments for water

pollution control in the USA 264

12.1 Total carbon dioxide emissions of Annexe I Parties in 1990 277

12.2 Annexe B. Quantified emission limitation or reduction commitment 278

14.1 World reserves, reserve bases, and crustal abundances of selected materials 324

14.2 World primary energy production 329

14.3 World primary energy consumption 329

14.4 World production of primary energy, 1990 and 1998 330

14.5 World production of primary energy, 1990 and 1998 330

14.6 Energy consumption by region, 1990-2020 331

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