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ENV221-Lecture 2 - Lecture#2 ENV221,FallSemester2010 st...

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ENV221, Fall Semester 2010 Sept. 21 st Lecture #2: ENVIRONMENTAL ECONOMICS BASICS Professor D. Dewees 1. How much environmental protection is enough? Most environmental protection costs money of lifestyle or both People have limited willingness to pay Inevitably policy balances costs against environmental protection Economists do this balancing formally through cost-benefit analysis Equate marginal cost = marginal benefit Marginal cost increase with increasing protection/control Do the easy/cheap stuff first, the costly ones later Reduce emissions when the benefits are higher than the costs (ex: it’s a good policy to spend 5$ to gain 10$ in value) If the benefits are lower than the costs, that means you’ve gone too far (ex: it’s wasteful to spend 10$ to gain 5$ in value) As a result, we should increase control until the MC (Marginal Cost) = MB (Marginal Benefits) Ex: How much should we spend to clean up the Toronto beaches? Value the benefits Identify actions that control water pollution in varying degrees Calculate costs
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