Lecture1 - EC 145E Environmental Economics UCI Dr. Bresnock...

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EC 145E Environmental Economics UCI Dr. Bresnock Lecture 1 Economics – is a social science concerned with the efficient use of limited, or scarce, resources to achieve maximum satisfaction of human material wants. It is concerned with decision making by institutions that include consumers, firms, government agencies, and non-profit organizations such as environmental groups. Environmental Economics -- is the application of the principles of economics to the study of how environmental resources are developed and managed. Decision making includes analysis of the environmental consequences of alternative courses of action so that environmental quality goals are met along with other societal goals. Focus is air, water, hazardous and toxic waste management issues. Resource Economics – is the application of the principles of economics to the study of extraction and utilization of natural resources. Focus is on mineral, forest, marine, land, energy, water, agricultural, and biodiversity management issues. Figure 1 Circular Flow with Environmental and Resource Dimensions Household s Firms Outputs Inputs Incomes Expenditures Environmental Endowment Residuals Extraction
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Environmental Economics Dr. Bresnock Lecture 1 Note: The environmental is viewed as a composite asset , or endowment , that provides a steam of services to the economy, i.e. life support, air, water, energy, wildlife, forests, fisheries, biodiversity, minerals, etc. Figure 1 illustrates that the Earth is a closed system to which the laws of thermo- dynamics apply: (1) 1 st Law of Thermodynamics – “Neither energy nor matter can be created or destroyed”. This law captures what environmental and resource economics refer to as the “materials balance ” perspective. That is: Mass of Material Inputs = Mass of Material Outputs + Mass of Waste, or Residuals If Mass of Waste > “Assimilative Capacity” or Pollution Damages or “Carrying Capacity” of Environment Note : Some portion of the waste, or residuals, will be recycled prior to discharge into environment. The “assimilative capacity”, or “carrying capacity” of the environment refers to natural processes that dilute, remove, or otherwise reduce the amount of discharged residuals. Not all waste, or residuals, becomes pollution, but all pollution is waste, or residuals. Pollution occurs when a substance, form of energy, or action degrades the quality of the “ambient”, or surrounding, environment. Damages are the negative impacts resulting from pollution. The essence of the 1 st Law of Thermodynamics is captured in the equations below. In the long run: M = R p d + R c d where M = Mass of Material Inputs R p d = Residuals Discharged by Producers R c d = Residuals Discharged by Consumers M = G + R p - R p r - R c r where G = Mass of Material Outputs R p = Residuals from Production R p r = Residuals Recycled by Producers R c r = Residuals Recycled by Consumers ( Note : G = R c -- everything that flows into the consumption sector as a good eventually ends up as a residual from that sector.) 2
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This note was uploaded on 02/10/2012 for the course ECONOMICS 140 taught by Professor Unknown during the Winter '11 term at UC Irvine.

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Lecture1 - EC 145E Environmental Economics UCI Dr. Bresnock...

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