Introduction to Ecological Economics Greentax

Intro to Ecological EconomicsThroughput-open system 1st Law: Conservation of mass some... Intro to Ecological EconomicsEntropy=disorder, randomness 2nd Law: entropy always increases ECON

Introduction to Ecological Economics

Greentax Sep 7, 2004 Gary Flomenhoft-Gund Institute

CIRCULAR FLOW MODEL OF ECONOMY

Environment as subset of ECONOMY

Capital (Mixing bowl)

x

Bread?Capital (oven)

X

Quotable Quotes

• “There is no reason we can’t have a perfectly

healthy economy with virtually no resources whatsoever” Robert Solow

• “We can do without agriculture because it’s

only 2% of the economy.”

Norgaard?

• “neo-classical economics is a form of brain damage” Hazel Henderson

ECOLOGICAL ECONOMY

NO “EXTERNALITIES”

Intro to Ecological Economics

Throughput-open system 1st Law: Conservation of mass

(some)

Intro to Ecological Economics

Entropy=disorder, randomness 2nd Law: entropy always increases

ECONOMY

(waste)

(dissipated)

Intro to Ecological Economics

WHAT IS ANTI-ENTROPIC? (SYNTROPIC)

ECONOMY

(waste)

Intro to Ecological Economics

Throughput-closed system

ECONOMY earth

SCALE-Full World or Empty World?

Marginal disutility

Differences

Sky-Trust model

Appendix : Key Features of U.S Sky Trust

Here are the key features of the proposed U.S Sky Trust.

o Carbon emissions cap set initially at 1.346 billion tons, the 1990 level

o Tradable carbon emission permits sold annually to

energy companies at the top of the carbon chain.

o All revenue from permit sales goes into a nationwide

trust.

o Trust pays equal annual dividends to all U.S citizens

(like the Alaska Permanent Fund).

o Dividends can be placed tax-free in Individual Retirement Accounts or Individual Development Accounts for children.

o Initial price ceiling on carbon emission permits of $25 a ton; ceiling rises 7 percent a year for four years.

o Transition Fund to help those most adversely affected by higher carbon prices Fund starts at 25 percent of permit revenue, declines 2.5 percent per year

Governance

“Maximization of Shareholder Value”

“Golden Rule of Publicly held companies:

“Altruism is evil and selfishness is a

Quotable Quotes

“Few trends could so thoroughly undermine the very foundations of our free society as the

acceptance by corporate officials of a social

responsibility other than to make as much money for their stockholders as possible.”

-Milton Friedman 1962

Enron, World Com, Tyco????

Cost of regulations- OMB report

Annual Cost: $37-43 billion

EPA conservative approach, Consistently overestimates costs, not considering least cost approach and technical innovation

Annual Benefits: $121-193

EPA consistently underestimates benefits USING ACTUAL NOT THEORETICAL CASES BENEFITS OUTWEIGH COSTS

5:1

“~Resources are infinite and the economy can

“Anyone who thinks you can have infinite growth

on a finite planet is either a madman or an

Intro to Ecological Economics

Throughput-isolated system

Universe

Intro to Ecological Economics-human dev

Intro to Ecological Economics-population

Growth Development Demographic transition Theory

Intro to Ecological Economics-population

Intro to Ecological Economics-forest succession

Growth Development

Reorganization Aggredation Transition Steady-state (mature)

We hear:

“There is no conflict between economic growth and environmental protection!”

World GDP and CO2

=205X 1825 level

60 Million yrs

of CO2

CLIMATE DAMAGE

Europe in August 2003

COUNTRY DEATHS DETAILS

France 14,802 Temperatures soared to 104 degrees Fahrenheit in parts of

the country; temperatures in Paris were the highest since record-keeping began in 1873.

Germany 7000 High temperatures of up to 105.4 degrees

Fahrenheit, the hottest since records began in 1901, raised mortality some 10 percent above average.

Spain 4230 High temperatures coupled with elevated ground-level

ozone concentrations exceeding the European Union's health-risk threshold.

Italy 4175 Temperatures in parts of the country averaged 16 degrees

Fahrenheit higher than previous year.

recorded in London.

normal.

Portugal 1316 Temperatures were above 104 degrees Fahrenheit

throughout much of the country.

Belgium 150 Temperatures exceeded any in the Royal Meteorological

Society's records dating back to 1833.

TOTAL 35,118

ESA Listings and GDP

R2 = 98.4

Source: The Wildlife Society Technical Review 2003-1.

Endangerment Causes

Urbanization

Agriculture

Water diversions (e.g., reservoirs)

Recreation, tourism development

Pollution

Domestic livestock, ranching

247 205 160 148 143 136

Czech et al 2000 Bioscience 50(7):593-601.

Czech et al 2000 Bioscience 50(7):593-601.

K and r-selected Species

human economy

Natural capital allocated to

wildlife

Czech, B 2000 Economic growth as the limiting factor for wildlife

conservation Wildlife Society Bulletin 28(1):4-14

(OVERSHOOT)

K and r-selected Economies

Economy of nature

We Might Ask

American GNP, 1929-1997

0 1000 2000 3000 4000 5000 6000 7000 8000

K or r-selected?

to non-human economy

X natural capital allocable

Time

K U

Natural Capital Allocation Revisited

Distribution-Grow out of poverty?

Poverty rate vs GDP per Capita (1996$)

per capita GDP (1996$) poverty rate

Adam Smith

Rivalness and Excludability

• rival

– My use leaves less for you to use

• Excludable (property rights)

– One person can keep another from using the good

– Consumer must pay, market will supply

Must have a price to work in the free market!

Rivalness and Excludability

• Non-rival

– My use does not leave less for you

to use – Market sells for a price,

discouraging use, but social cost of use = 0, therefore market should not supply

Potential market good (Tragedy of the “non-

commons”)but inefficient:

patented information,Pond, roads (congestible),streetlights

Pure Public Good:

climate stability, ozone layer, clean air/water/land, Biodiversity, information, habitat, life support

functions, etc

Open Access Regime:

(misnamed: Tragedy of the commons)

Oceanic fisheries, timberetc from unprotected forests, air pollution, waste absorption capacity