BIO320 Chapter 3

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ENVIRONMENTAL
SCIENCE
A Study of Interrelationships
15th Edition
Risk, Economics, and Environmental Concerns
Chapter 3
©2019 McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction
or further distribution permitted without the prior written consent of McGraw-Hill Education.

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Outline
3.1 Making Decisions
3.2 Characterizing Risk
3.3 Environmental Economics
3.4 Comparing Economic and Ecological Systems
3.5 Using Economic Tools to Address Environmental Issues
3.6 Economics and Sustainable Development

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Drinking Water, Sanitation, and
Disease (1 of 2)
World Health Organization: about 1.7 billion cases of
diarrheal disease each year result in about 500,000 deaths
of children under the age of five.
The major cause of diarrhea is infections of the digestive
tract caused by the ingestion of disease organisms in food
or water.
• The solution is to provide safe drinking water and access to toilets or latrines
to people who do not have them. So why is this not done?

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Drinking Water, Sanitation, and
Disease (2 of 2)
One of the primary barriers to accomplishing this goal is
economic.
About 10 percent of the people in the world live on $1.90
per day or less, which makes it impossible for individuals to
provide their own safe drinking water supplies and sanitary
facilities.

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3.1 Making Decisions
Whether we recognize it or not, most life decisions
involve a consideration of two factors: risk and cost.
Typically, the two factors of risk and cost are
interrelated and must be considered at the same time.
• Most decisions related to environmental issues involve characterizing the
risks incurred by people and other living things and evaluating the cost of
taking action to eliminate the risk as well as the cost of doing nothing.

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3.2 Characterizing Risk (1 of 3)

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3.2 Characterizing Risk (2 of 3)
Probability is a mathematical statement about how likely it is that
something will happen.
Probability is often stated in terms like, “The probability of developing a
particular illness is 1 in 10,000,” or “The likelihood of winning the
lottery is 1 in 5 million.”
• It is important to make a distinction between probability and possibility.
When we say something is possible, we are just saying that it could occur.
It is a very inexact term. Probability specifically defines in mathematical
terms how likely it is that a possible event will occur.

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3.2 Characterizing Risk (3 of 3)
The consequences of a bad outcome resulting from
accepting a risk may be minor or catastrophic.
The economic cost of dealing with bad outcomes is one
of the consequences of accepting a risk.

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Risk Assessment (1 of 5)
Environmental risk assessment uses facts and
assumptions to estimate probability of harm to people or
the environment from particular environmental factors or
conditions.

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Risk Assessment (2 of 5)
Assessing the risk of a particular activity, chemical,
technology, or policy to humans is difficult.
• Several sources of information and tools are used to help clarify the
risk.
• If a situation is well known, scientists use statistics based on past
experience to estimate risks.
• Example: the risk of miners developing black lung disease from coal
dust in mines is well established, and people can be informed of the
risks involved and of actions that can reduce the risk.

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Risk Management (3 of 5)
Risk management is a decision-making process that
involves using the results of risk assessment, and
selecting actions to minimize or eliminate the risk. It is
included as part of all good environmental management
systems within business and industry.

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Risk Management (4 of 5)
A risk management plan includes:
Evaluating the scientific information regarding various
kinds of risks.
Deciding how much risk is acceptable.
Deciding which risks should be given highest priority.
Deciding where the greatest benefit would be realized by
spending limited funds.
Deciding how the plan will be enforced and monitored.

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Risk Management (5 of 5)
From a risk management standpoint, the deciding question
ultimately is: What degree of risk is acceptable?
• In general, we are not talking about a “zero risk” standard but rather
the concept of negligible risk.

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Perception of Risk (1 of 3)
One of the most profound dilemmas facing decision makers
and public health scientists is how to address the
discrepancy between the scientific and public perceptions of
environmental risks.
• Numerous studies have shown that environmental hazards truly
affecting health status in the country are not necessarily those
receiving the highest attention.

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Perception of Risk (2 of 3)

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Perception of Risk (3 of 3)
A fundamental issue surfaces concerning the proper role of
government and other organizations in a democracy when it
comes to matters of risk.
• Should the government focus available resources and technology
where they can have the greatest tangible impact on human and
ecological well-being, or should it focus them on problems about
which the public is most upset?

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3.3 Environmental Economics
Economics is the study of how people choose to use
resources to produce goods and services and how these
goods and services are distributed to the public.
• In other words, economics is an allocation process that determines
the purposes to which resources are put.
• In many respects, environmental problems are primarily economic
problems.

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Resources (1 of 2)
Economists look at resources as the available supply of
something that can be used. Classically, there are three
kinds of resources:

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Resources (2 of 2)
Natural resources are usually categorized as either
renewable or nonrenewable.

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Supply and Demand (1 of 4)

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Supply and Demand (2 of 4)
Supply is the amount of a good or service people are willing to sell at
a given price.
Demand is the amount of a good or service that consumers are willing
and able to buy at a given price.
The relationship between supply and demand is often illustrated with a
supply/demand curve:
• Price reflects the strength of demand for and availability of the commodity.
• Demand > Supply: Price Rises
• Demand < Supply: Price Lowers

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Supply and Demand (3 of 4)

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Supply and Demand (4 of 4)

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Assigning Value to Natural
Resources
We assign value to natural
resources based on our
perception of their relative
scarcity.
• If a natural resource has always
been rare, it is expensive.
• If the supply is very large and
the demand is low, the resource
is often perceived to be free.
• Even renewable resources can
be overexploited.
Source: Jeff Vanuga, USDA Natural
Resources Conservation Service

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Ecosystem Services (1 of 2)
Ecosystems are a tangible source of economic wealth.
• The challenge lies in disentangling complex natural systems into
more discrete commodity units so that natural scientists and
economists can use the same terms to describe ecological
changes in the same way.

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Ecosystem Services (2 of 2)
The economic value of pollination services by honeybees
and other animals is estimated to be about $200 billion
per year worldwide.
• This service has been brought into sharp focus by worldwide
problems in the survival of domesticated honeybees.

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Environmental Costs (1 of 3)
Pollution, species extinction,
resource depletion, and loss of
scenic quality are all examples
of the environmental costs of
resource exploitation.
Often environmental costs are
difficult to measure, since they
are not easily converted to
monetary values.

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Environmental Costs (2 of 3)

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Environmental Costs (3 of 3)
Opportunity costs are those that occur when a
decision precludes other potential uses for a
resource. For example, if houses are built in a
forested region, the land’s possible use as a natural
area for hiking or hunting is lost.
Probably most environmental costs include external,
deferred, and opportunity cost aspects.
• High-sulfur coal example

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The Economics of Pollution (1 of 3)
Pollution is any addition of matter or energy that degrades
the environment for humans and other organisms.
• When we think about pollution, however, we usually mean
something that people produce in large enough quantities that it
interferes with our health or well-being.
Pollution costs are private or public expenditures to
correct pollution damage once pollution has occurred.

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The Economics of Pollution (2 of 3)
Pollution-prevention costs are those incurred either
in the private sector or by government to prevent,
either entirely or partially, the pollution that would
otherwise result from some production or consumption
activity.
• The cost incurred by local government to treat its sewage before
releasing it into a river is a pollution-prevention cost

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The Economics of Pollution (3 of 3)
The philosophy of pollution prevention is that
pollution should be prevented or reduced at the source
whenever feasible.
• An important aspect of this philosophy is that pollution should not be
an external cost paid for by the public, but that the potential pollution
cost should be internalized and reflected in the price of the good or
service being provided.

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Environmental Costs
Air pollution, water pollution, plant and animal
extinctions, depletion of a resource, and loss of
scenic quality are all examples of the
environmental costs of resource exploitation.
• Deferred costs
• External costs
• Opportunity costs

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Cost-Benefit Analysis (1 of 2)
Cost-benefit analysis is a formal process for calculating
the costs and benefits of a project or course of action, to
decide if benefits are greater than costs.
• In the United States, the National Environmental Policy Act of 1969
mandates environmental impact statements for major government-
supported projects.

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Cost-Benefit Analysis (2 of 2)
An Example—Providing Clean Water and Improved
Sanitation
• In 2004 the World Health Organization published a cost-benefit
analysis of providing clean water sources and “improved” sanitary
facilities to the people who do not have them.
• The medium level was quite modest and assessed the impact of
providing clean drinking water and at least access to a pit latrine within
a short walking distance of each home.
• For the medium level of service, they determined that for every dollar
spent to provide services, there would be about 11 dollars in benefits.

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Concerns About the Use of Cost-
Benefit Analysis
Some people argue that if the only measure of value is
economic, many simple noneconomic values such as
beauty, quiet, recreational opportunities, or cleanliness will
be overlooked or ignored.
• Different cultures and even different people within a culture may
have very different opinions of the value of a noneconomic resource.

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3.4 Comparing Economic and
Ecological Systems
Many environmental problems are symptoms of an
imbalance between the socioeconomic system and
the natural world.

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How Economic and Ecological
Systems Differ

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Common Property Resource Problems—
The Tragedy of the Commons (1 of 3)
When everybody shares ownership of a resource, there is a
strong tendency to overexploit and misuse that resource.
• The problems inherent in common ownership of resources were
outlined by biologist Garrett Hardin in his classic essay “The Tragedy
of the Commons” (1968).

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Common Property Resource Problems—
The Tragedy of the Commons (2 of 3)
The “Commons” were pasturelands in England provided
free by the king to anyone wishing to graze cattle.
There are no problems on the commons as long as the
number of animals is small in relation to the size of the
pasture.
However, the optimal individual strategy is to enlarge
one’s personal herd as much as possible.

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Common Property Resource Problems—
The Tragedy of the Commons (3 of 3)
The ecosphere is a large
commons.
• The U.S. and other industrialized
nations consume more than their
fair share of resources.
• Harvesting of marine organisms.
• Common ownership of parks and
streets.
Tragedy of the Commons also
operates on an individual scale.
Source: Claire Fackler, CINMS, NOAA

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3.5 Using Economic Tools to Address
Environmental Issues (1 of 2)
A subsidy is a gift from the government to individuals or
private enterprise to encourage actions considered
important to the public interest.
• Subsidies are useful when they have a clear purpose and are
used for short transition periods.

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3.5 Using Economic Tools to Address
Environmental Issues (2 of 2)
When used inappropriately, subsidies can lead to
economic distortions.
• Keeps price of a good or service below true market value.
• May encourage activities detrimental to the environment.
Once subsidies become part of the economic fabric of a country,
they are very difficult to eliminate.

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Market-Based Instruments (1 of 2)
Historically governments have sought to achieve
environmental improvements by establishing regulations
with penalties for those who do not comply with the
regulations.
• However, increasingly governments are looking to economic tools
commonly known as market-based instruments to encourage people
to meet environmental goals.
• Instead of issuing inflexible directives, the use of market-based policies
allows people and businesses to choose solutions that make sense to
them economically.

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Market-Based Instruments (2 of 2)
Information programs
• provide consumers with information about the environmental consequences
of purchasing decisions
Tradable emissions permits
• give companies the right to emit specified quantities of pollutants
Emissions fees and taxes
• Make environmentally damaging activity or products more expensive
Deposit-refund programs
• place a surcharge on the price of a product that is refunded when the
used product is returned
Performance bonds
• fees that are collected to ensure that proper care is taken to protect
environmental resources

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Life Cycle Analysis and Extended Product
Responsibility (1 of 2)
Life-cycle analysis is the process of assessing
environmental effects associated with production, reuse,
and disposal of a product over its entire useful life.
• This process can identify changes in product design and process
technology that would reduce the ultimate environmental impact of
the product.

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Life Cycle Analysis and Extended Product
Responsibility (2 of 2)
Extended product responsibility is the concept that the
producer of a product is responsible for all negative effects
involved in its production, including the ultimate disposal of
the product.
• The logic is that if manufacturers pay for post-consumer impacts,
they will alter designs in order to reduce waste.

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Science, Politics, & Policy (1 of 2)
In the United States environmental policy tends to be
fragmented because the development of a coherent policy is
highly politicized:
• Climate change
• Subsidies for fossil fuels vs renewable energy

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Science, Politics, & Policy (2 of 2)
Despite this piece-meal approach to environmental policy,
there is a great deal of evidence that the science and
technology related to environmental issues is being
accepted by the business community and the public:
• Development of sustainability policies and goals by corporations
• General recognition by business and industry that at some point there will
be a price on carbon emissions

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3.6 Economics and Sustainable
Development (1 of 2)
Sustainable development has become an important policy
priority for the world.
Sustainable development is development that meets
present needs without compromising the ability of future
generations to meet their own needs.
• Most definitions refer to the viability of natural resources and
ecosystems over time, and to maintenance of human living
standards and economic growth.

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3.6 Economics and Sustainable
Development (2 of 2)
A commonly used definition of the term sustainable
development is one that originated with the 1987 report,
Our Common Future, by the World Commission on
Environment and Development (known as the Bruntland
Commission):
• It states that “sustainable development is development that meets
the needs of the present without compromising the ability of future
generations to meet their own needs.”

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Five Sustainability Characteristics

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Issues & Analysis: The Economics and
Risks of Mercury Contamination
Coal plants
Bioaccumulation
Toxic effects
Permits and trading
 Should all pollution be prevented regardless of the cost, or should
risk assessment and economic analysis be a part of the decision
making process?

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Summary (1 of 3)
Risk is the probability that a condition or action will lead to
an injury, damage, or loss.
Risk assessment is the use of facts and assumptions to
estimate the probability of harm to human health or the
environment that may result from exposures to pollutants or
toxic agents.
Cost-benefit analysis is used to determine whether a policy
generates more social benefits than social costs.

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Summary (2 of 3)
Criticism of cost-benefit analysis is based on the question
of whether everything has an economic value.
There is a strong tendency to overexploit and misuse
resources that are shared by all.
Economic policies and concepts, such as supply and
demand and subsidies, play important roles in
environmental decision making.
Recently, several kinds of market-based approaches have
been developed to deal with the economic costs of
environmental problems.

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Summary (3 of 3)
Sustainable development has been defined as actions that
address the needs of the present without compromising the
ability of future generations to meet their own needs.
Sustainable development requires choices based on
values.