introduction to Environmental Economics lecture 1 valuing our natural wealth

1. Environmental Economics
Valuing our Natural Wealth
Rene Rafael B. Juntereal

3. Objectives
• Understand the relevance of environmental
economics “Why environmental economics?”
• Discuss the problems with markets and classical
economics
• Realize the importance of valuing our natural
resources “Natural Capitalism”

4. Table Coral at the Apo Island Marine Reserve
2008

5. Apo Island Marine Reserve 2008

6. Chapel Point Apo Island 2008

7. Conventional view of economic activity

9. Neoclassical economics
• Focuses on the psychology of
consumer choice
•
The market favors equilibrium between
supply and demand.

10. Marginal benefit and cost
Marginal benefit and cost curves determine
an “optimal” level of resource use or
pollution mitigation.

11. The World economy is 7 times the
size it was 50 years ago!
• More & more goods produced
• More material wealth although big gaps
between rich and poor.
• Resources are limited so nonstop
growth is not sustainable.

12. Criticism of neoclassical economics:
• Runaway growth can be compared to...
CANCER

13. We are spending more and more
money, but are our lives really that
much better?

14. GDP vs. GPI(Genuine Progress
Indicator

15. Environmental view of economic activity

16. Donut Model by Kate Raworth

17. Strategies for Sustainability
• Identify external costs
• Assign value to nonmonetary items
• Attempt to make market prices reflect real
costs and benefits

18. Assign Values to Nonmonetary Items
• Nonmarket values- values not included in the
price of a good or service, the worth we
ascribe to things

19. Market failure
• Occurs when markets do not take into
account the environment’s positive effect on
economy or negative effects on environment
or people (external costs).
• Traditionally has been countered by
government intervention: laws & regulation,
green taxes on environmentally harmful
activities, market incentives

20. Natural Capitalism
• Natural capital refers to the natural resources and
ecosystem services that make possible all
economic activity, indeed all life
– Natural capitalism's four interlinked principles are:
• Radically increased resource productivity.
• Redesigning industry on biological models with closed loops
and zero waste
• Shifting from the sale of goods to the provision of services
• Reinvesting in the natural capital that is the basis of future
prosperity.
– Natural Capitalism: Creating the Next Industrial Revolution, by Paul
Hawken, Amory Lovins, and L. Hunter Lovins

21. What can we do individually?
• Be aware and educated about community issues
(economic principles, sound financial decision
making etc.)
• Do not patronize certain products or promote
certain lifestyles
• Waste segregation and management
• Support sustainable economic policy
• Individual micro saving in an environmental fund?

22. Conclusion
“ Environmental values are economic values; it is in principle just as
important, in the interests of economic efficiency and therefore
economic welfare, to conserve our limited natural resources, to make
wise and sparing use of our limited clean air, water and living space,
as it is to economize in the use of labor and capital.”
Alfred Kahn

23. Summary
• Classical Economic theory needs to be
revised/updated
• to accurately plan for sustainable development we
need to quantify what was previously unquantified
• We have to decide what we mean by development
and growth

24. You have to decide whether development means
affluence or whether development means peace,
prosperity and happiness.
Sunderlal Bahuguna