Environmental & Natural Resource Economics, 9th Edition

Cover......Page 1
Title Page......Page 5
Copyright Page......Page 6
Contents......Page 8
Preface......Page 23
Acknowledgments......Page 27
The Self-Extinction Premise......Page 31
EXAMPLE 1.1 Historical Examples of Societal Self-Extinction......Page 32
Climate Change......Page 33
Water Accessibility......Page 34
Meeting the Challenges......Page 35
The Role of Economics......Page 36
DEBATE 1.1 Ecological Economics versus Environmental Economics......Page 37
The Use of Models......Page 38
The Road Ahead......Page 39
The Issues......Page 40
An Overview of the Book......Page 41
Summary......Page 43
Further Reading......Page 44
Introduction......Page 46
The Environment as an Asset......Page 47
The Economic Approach......Page 49
Static Efficiency......Page 50
Property Rights and Efficient Market Allocations......Page 52
Efficient Property Rights Structures......Page 53
Producer's Surplus, Scarcity Rent, and Long-Run Competitive Equilibrium......Page 54
The Concept Introduced......Page 55
Types of Externalities......Page 56
EXAMPLE 2.2 Shrimp Farming Externalities in Thailand......Page 57
Other Property Rights Regimes......Page 58
Public Goods......Page 61
Imperfect Market Structures......Page 63
EXAMPLE 2.3 Public Goods Privately Provided: The Nature Conservancy......Page 64
Government Failure......Page 65
DEBATE 2.1 How Should OPEC Price Its Oil?......Page 66
Private Resolution through Negotiation......Page 68
The Courts: Property Rules and Liability Rules......Page 69
Legislative and Executive Regulation......Page 71
An Efficient Role for Government......Page 72
Discussion Questions......Page 73
Self-Test Exercises......Page 74
Further Reading......Page 75
Evaluating Predefined Options: Benefit–Cost Analysis......Page 76
Finding the Optimal Outcome......Page 78
Relating Optimality to Efficiency......Page 80
Comparing Benefits and Costs Across Time......Page 82
Dynamic Efficiency......Page 83
EXAMPLE 3.2 Does Reducing Pollution Make Economic Sense? Evidence from the Clean Air Act......Page 84
Preservation versus Development......Page 86
Issues in Benefit Estimation......Page 87
Approaches to Cost Estimation......Page 88
The Treatment of Risk......Page 89
Distribution of Benefits and Costs......Page 91
Choosing the Discount Rate......Page 92
EXAMPLE 3.4 The Importance of the Discount Rate......Page 93
Divergence of Social and Private Discount Rates......Page 94
A Critical Appraisal......Page 95
Cost-Effectiveness Analysis......Page 96
Impact Analysis......Page 98
Summary......Page 99
Discussion Questions......Page 100
Further Reading......Page 101
Appendix: The Simple Mathematics of Dynamic Efficiency......Page 103
Introduction......Page 104
Why Value the Environment?......Page 105
Valuing Environmental Services: Pollination as an Example......Page 106
EXAMPLE 4.1 Valuing Ecosystem Services: Pollination, Food Security, and the Collapse of Honeybee Colonies......Page 107
Valuation......Page 108
Types of Values......Page 109
EXAMPLE 4.2 Historical Example: Valuing the Northern Spotted Owl......Page 111
Classifying Valuation Methods......Page 112
Stated Preference Methods......Page 113
EXAMPLE 4.3 Leave No Behavioral Trace: Using the Contingent Valuation Method to Measure Passive-Use Values......Page 119
Travel Cost Method......Page 120
Hedonic Property Value and Hedonic Wage Methods......Page 121
EXAMPLE 4.4 Valuing Damage from Groundwater Contamination Using Averting Expenditures......Page 122
EXAMPLE 4.5 Using GIS to Inform Hedonic Property Values: Visualizing the Data......Page 124
DEBATE 4.2 Is Valuing Human Life Immoral?......Page 125
Summary: Nonmarket Valuation Today......Page 128
Self-Test Exercises......Page 129
Further Reading......Page 130
DEBATE 4.1 Willingness to Pay versus Willingness to Accept: Why So Different?......Page 116
Introduction......Page 132
A Two-Period Model......Page 133
Defining Intertemporal Fairness......Page 137
Are Efficient Allocations Fair?......Page 138
Applying the Sustainability Criterion......Page 140
EXAMPLE 5.2 Nauru: Weak Sustainability in the Extreme......Page 142
Implications for Environmental Policy......Page 143
Summary......Page 144
Self-Test Exercises......Page 145
Further Reading......Page 146
Appendix: The Mathematics of the Two-Period Model......Page 147
Introduction......Page 148
A Resource Taxonomy......Page 149
The Two-Period Model Revisited......Page 153
The N-Period Constant-Cost Case......Page 154
Transition to a Renewable Substitute......Page 155
Increasing Marginal Extraction Cost......Page 157
Exploration and Technological Progress......Page 159
EXAMPLE 6.1 Historical Example of Technological Progress in the Iron Ore Industry......Page 160
Appropriate Property Rights Structures......Page 161
Environmental Costs......Page 162
Summary......Page 164
Self-Test Exercises......Page 165
Further Reading......Page 166
Appendix: Extensions of the Constant Extraction cost Depletable Resource Model: Longer Time Ho izons and the Role of an Abundant Substitute......Page 167
Introduction......Page 170
EXAMPLE 7.1 Hubbert's Peak......Page 171
Natural Gas: Price Controls......Page 172
Oil: The Cartel Problem......Page 176
Price Elasticity of Oil Demand......Page 177
Non-OPEC Suppliers......Page 178
Compatibility of Member Interests......Page 179
The Climate Dimension......Page 181
The National Security Dimension......Page 182
DEBATE 7.1 How Should the United States Deal with the Vulnerability of Its Imported Oil?......Page 184
EXAMPLE 7.2 Strategic Petroleum Reserve......Page 186
Unconventional Oil and Gas Sources......Page 187
EXAMPLE 7.3 Fuel from Shale: The Bakken Formation......Page 188
Uranium......Page 189
Electricity......Page 193
EXAMPLE 7.4 Electricity Deregulation in California: What Happened?......Page 196
EXAMPLE 7.5 Tradable Energy Credits: The Texas Experience......Page 197
EXAMPLE 7.6 Feed-in Tariffs......Page 198
Energy Efficiency......Page 199
Hydroelectric Power......Page 200
Photovoltaics......Page 201
Active and Passive Solar Energy......Page 202
Liquid Biofuels......Page 203
Hydrogen......Page 204
Summary......Page 206
Self-Test Exercises......Page 207
Further Reading......Page 208
Extraction and Disposal Cost......Page 210
Recycling: A Closer Look......Page 212
Recycling and Ore Depletion......Page 213
Exploration and Discovery......Page 214
EXAMPLE 8.1 Lead Recycling......Page 215
Substitution......Page 216
Market Imperfections......Page 218
The Disposal Decision......Page 219
Subsidies on Raw Materials......Page 221
EXAMPLE 8.3 Pricing Trash in Marietta, Georgia......Page 222
DEBATE 8.1 "Bottle Bills": Economic Incentives at Work?......Page 224
EXAMPLE 8.4 Implementing the "Take-Back" Principle......Page 226
E-Waste......Page 227
Pollution Damage......Page 230
Summary......Page 231
Self-Test Exercises......Page 232
Further Reading......Page 233
Introduction......Page 234
The Potential for Water Scarcity......Page 235
The Efficient Allocation of Scarce Water......Page 238
Surface Water......Page 239
Groundwater......Page 241
Riparian and Prior Appropriation Doctrines......Page 242
Sources of Inefficiency......Page 244
DEBATE 9.1 What Is the Value of Water?......Page 248
Water Transfers and Water Markets......Page 249
EXAMPLE 9.1 Using Economic Principles to Conserve Water in California......Page 250
EXAMPLE 9.2 Water Transfers in Colorado: What Makes a Market for Water Work?......Page 251
EXAMPLE 9.3 Water Market Assessment: Austrailia, Chile, South Africa, and the United States......Page 252
Water Prices......Page 253
EXAMPLE 9.4 Reserving Instream Rights for Endangered Species......Page 254
EXAMPLE 9.5 Water Pricing in Canada......Page 259
Desalination......Page 260
Summary......Page 261
DEBATE 9.2 Should Water Systems Be Privatized?......Page 262
Summary......Page 263
Problems......Page 264
Further Reading......Page 265
Introduction......Page 267
Land Use......Page 268
Land-Use Conversion......Page 269
Sprawl and Leapfrogging......Page 270
Undervaluing Environmental Amenities......Page 272
The Influence of Taxes on Land-Use Conversion......Page 273
DEBATE 10.1 Should Landowners Be Compensated for "Regulatory Takings"?......Page 274
Market Power......Page 275
Special Problems in Developing Countries......Page 276
DEBATE 10.2 What Is a "Public Purpose"?......Page 277
Transferable Development Rights......Page 279
EXAMPLE 10.1 Controlling Land Development with TDRs......Page 280
Conservation Banking......Page 281
Safe Harbor Agreements......Page 282
Conservation Easements......Page 283
Land Trusts......Page 284
EXAMPLE 10.3 Using a Community Land Trust to Protect Farmland......Page 285
Property Tax Adjustments......Page 286
DEBATE 10.3 Does Ecotourism Provide a Pathway to Sustainability?......Page 287
Summary......Page 288
EXAMPLE 10.5 Tax Strategies to Reduce Inefficient Land Conversion: Maine's Open Space Program......Page 289
Self-Test Exercises......Page 290
Further Reading......Page 291
Introduction......Page 292
Global Scarcity......Page 293
Formulating the Global Scarcity Hypothesis......Page 294
Testing the Hypotheses......Page 296
Outlook for the Future......Page 297
EXAMPLE 11.1 Can Eco-Certification Make a difference? Organic Costa Rican Coffee......Page 307
The Role of Agricultural Policies......Page 308
Summing Up: Agriculture in the Industrialized Nations......Page 310
DEBATE 11.2 Should Genetically Modified Organisms Be Banned?......Page 311
Distribution of Food Resources......Page 312
Domestic Production in Developing Countries......Page 313
Feast and Famine Cycles......Page 316
Summary......Page 320
Self-Test Exercises......Page 321
Further Reading......Page 322
Introduction......Page 323
Special Attributes of the Timber Resource......Page 324
The Biological Dimension......Page 325
The Economics of Forest Harvesting......Page 326
Extending the Basic Model......Page 329
Perverse Incentives for the Landowner......Page 331
Perverse Incentives for Nations......Page 334
Poverty and Debt......Page 335
Sustainable Forestry......Page 336
Public Policy......Page 337
EXAMPLE 12.1 Producing Sustainable Forestry through Certification......Page 338
EXAMPLE 12.2 Conservation Easements in Action: The Blackfoot Community Project......Page 340
Carbon Sequestration Credits......Page 341
EXAMPLE 12.3 Does Pharmaceutical Demand Offer Sufficient Protection to Biodiversity?......Page 342
EXAMPLE 12.4 Reducing Emissions from Deforestation and Forest Degradation (REDD): A Twofer?......Page 343
Summary......Page 344
Self-Test Exercises......Page 346
Further Reading......Page 347
Appendix: The Harvesting Decision: Forests......Page 348
Introduction......Page 350
The Biological Dimension......Page 351
Static Efficient Sustainable Yield......Page 353
Dynamic Efficient Sustainable Yield......Page 355
Appropriability and Market Solutions......Page 357
EXAMPLE 13.1 Open-Access Harvesting of the Minke Whale......Page 360
EXAMPLE 13.2 Harbor Gangs of Maine and Other Informal Arrangements......Page 361
Aquaculture......Page 362
DEBATE 13.1 Aquaculture: Does Privatization Cause More Problems than It Solves?......Page 365
Raising the Real Cost of Fishing......Page 366
Taxes......Page 368
Individual Transferable Quotas (ITQs) and Catch Shares......Page 369
EXAMPLE 13.3 The Relative Effectiveness of Transferable Quotas and Traditional Size and Effort Restrictions in the Atlantic Sea Scallop Fishery......Page 374
Marine-Protected Areas and Marine Reserves......Page 375
The Economics of Enforcement......Page 377
Preventing Poaching......Page 379
DEBATE 13.2 Bluefin Tuna: Is Its High Price Part of the Problem or Part of the Solution?......Page 380
EXAMPLE 13.4 Local Approaches to Wildlife Protection: Zimbabwe......Page 382
Summary......Page 381
Self-Test Exercises......Page 383
Further Reading......Page 384
Appendix: The Harvesting Decision: Fisheries......Page 386
A Pollutant Taxonomy......Page 389
Stock Pollutants......Page 391
Fund Pollutants......Page 392
Market Allocation of Pollution......Page 395
Efficient Policy Responses......Page 396
EXAMPLE 14.1 Environmental Taxation in China......Page 397
Defining a Cost-Effective Allocation......Page 398
Cost-Effective Pollution-Control Policies......Page 400
DEBATE 14.1 Should Developing Countries Rely on Market-Based Instruments to Control Pollution?......Page 405
The Single-Receptor Case......Page 406
EXAMPLE 14.2 Emissions Trading in Action: The NO[sub(x)] Budget Program......Page 407
The Many-Receptors Case......Page 411
The Revenue Effect......Page 413
EXAMPLE 14.3 The Swedish Nitrogen Charge......Page 414
EXAMPLE 14.4 RGGI Revenue: The Maine Example......Page 415
Responses to Changes in the Regulatory Environment......Page 416
Instrument Choice under Uncertainty......Page 417
Product Charges: An Indirect Form of Environmental Taxation......Page 418
EXAMPLE 14.5 The Irish Bag Levy......Page 419
Summary......Page 420
Discussion Question......Page 421
Self-Test Exercises......Page 422
Further Reading......Page 423
Appendix: The Simple Mathematics of Cast-Effective Pollution Control......Page 425
Conventional Pollutants......Page 427
The Command-and-Control Policy Framework......Page 428
The Efficiency of the Command-and-Control Approach......Page 430
DEBATE 15.1 Does Sound Policy Require Targeting New Sources via the New Source Review?......Page 431
DEBATE 15.2 The Particulate and Smog Ambient Standards Controversy......Page 432
Cost-Effectiveness of the Command-and-Control Approach......Page 434
EXAMPLE 15.1 Controlling SO[sub(2)] Emissions by Command-and-Control in Germany......Page 436
Air Quality......Page 437
Smog Trading (RECLAIM)......Page 439
Emissions Charges......Page 440
Regional Pollutants......Page 441
Acid Rain......Page 442
EXAMPLE 15.2 Adirondack Acidification......Page 443
EXAMPLE 15.3 The Sulfur Allowance Trading Program......Page 445
EXAMPLE 15.4 Why and How Do Environmentalists Buy Pollution?......Page 447
EXAMPLE 15.5 Technology Diffusion in the Chlorine-Manufacturing Sector......Page 450
Summary......Page 449
Discussion Questions......Page 451
Further Reading......Page 452
Introduction......Page 454
The Science of Climate Change......Page 455
Characterizing the Broad Strategies......Page 457
The Precedent: Reducing Ozone-Depleting Gases......Page 458
EXAMPLE 16.1 Tradable Permits for Ozone-Depleting Chemicals......Page 460
The Policy Focus of the Climate Change Negotiations......Page 461
The Evolution of International Agreements on Climate Change......Page 462
EXAMPLE 16.2 The European Union Emissions Trading System (EU ETS)......Page 463
Complementary Strategies......Page 464
DEBATE 16.2 Is Global Greenhouse Gas Trading Immoral?......Page 465
Policy Timing......Page 466
Creating Incentives for Participation in Climate Change Agreements......Page 467
Summary......Page 468
Further Reading......Page 470
Introduction......Page 472
Implicit Subsidies......Page 474
Externalities......Page 475
History......Page 476
Structure of the U.S. Approach......Page 477
CAFE Standards......Page 479
DEBATE 17.1 CAFE Standards or Fuel Taxes?......Page 481
EXAMPLE 17.1 Project XL—The Quest for Effective, Flexible Regulation......Page 482
European Approaches......Page 483
EXAMPLE 17.2 Car-Sharing: Better Use of Automotive Capital?......Page 484
An Economic and Political Assessment......Page 485
Technology Forcing and Sanctions......Page 486
The Deterioration of New-Car Emissions Rates......Page 487
Lead Phaseout Program......Page 489
Fuel Taxes......Page 490
Congestion Pricing......Page 491
Private Toll Roads......Page 493
Accelerated Retirement Strategies......Page 494
EXAMPLE 17.5 Modifying Car Insurance as an Environmental Strategy......Page 495
EXAMPLE 17.6 The Car Allowance Rebate System: Did it Work?......Page 496
Summary......Page 497
Further Reading......Page 499
Introduction......Page 501
Sources of Contamination......Page 502
Types of Pollutants......Page 506
DEBATE 18.1 Toxics in Fish Tissue: Do Fish-Consumption Advisories Change Behavior?......Page 508
Traditional Water Pollution Control Policy......Page 509
Early Legislation......Page 510
Subsequent Legislation......Page 511
The Safe Drinking Water Act......Page 513
Ocean Pollution......Page 514
Ambient Standards and the Zero-Discharge Goal......Page 515
National Effluent Standards......Page 516
Watershed-Based Trading......Page 520
EXAMPLE 18.1 Effluent Trading for Nitrogen in Long Island Sound......Page 522
Municipal Wastewater Treatment Subsidies......Page 523
Nonpoint Source Pollution......Page 524
Atmospheric Deposition of Pollution......Page 527
The European Experience......Page 528
Developing Country Experience......Page 529
Oil Spills from Tankers......Page 530
Citizen Suits......Page 532
An Overall Assessment......Page 533
Summary......Page 534
Discussion Questions......Page 535
Further Reading......Page 536
Introduction......Page 538
Nature of Toxic Substance Pollution......Page 539
Policy Issues......Page 540
Market Allocations and Toxic Substances......Page 542
Occupational Hazards......Page 543
EXAMPLE 19.2 Susceptible Populations in the Hazardous Workplace......Page 545
Product Safety......Page 546
Third Parties......Page 547
History......Page 548
Recent Research and the Emerging Role of Analysis Using GIS......Page 549
EXAMPLE 19.3 Do New Polluting Facilities Affect Housing Values and Incomes? Evidence in New England......Page 550
The Policy Response......Page 552
Creating Incentives through Common Law......Page 555
DEBATE 19.1 Does Offering Compensation for Accepting an Environmental Risk Always Increase the Willingness to Accept the Risk?......Page 556
Statutory Law......Page 557
The Toxic Release Inventory Program......Page 559
International Agreements......Page 560
EXAMPLE 19.5 Regulating through Mandatory Disclosure: The Case of Lead......Page 561
The Efficiency of the Statutory Law......Page 562
Performance Bonds: An Innovative Proposal......Page 564
Summary......Page 565
Discussion Questions......Page 566
Further Reading......Page 567
Introduction......Page 568
Sustainability of Development......Page 569
Market Allocations......Page 571
Efficiency and Sustainability......Page 572
Trade and the Environment......Page 575
EXAMPLE 20.1 Has NAFTA Improved the Environment in Mexico?......Page 578
Trade Rules under GATT and the WTO......Page 580
The Natural Resource Curse......Page 581
The Growth–Development Relationship
......Page 582
Conventional Measures......Page 583
Alternative Measures......Page 585
EXAMPLE 20.3 Happiness Economics: Does Money Buy Happiness?......Page 590
Summary......Page 591
Discussion Questions......Page 592
Further Reading......Page 593
Introduction......Page 594
Population Growth in the United States......Page 595
Effects of Population Growth on Economic Development......Page 598
The Population/Environment Connection......Page 604
DEBATE 21.1 Does Population Growth Inevitably Degrade the Environment?......Page 605
Effects of Economic Development on Population Growth......Page 606
The Economic Approach to Population Control......Page 608
EXAMPLE 21.1 Achieving Fertility Declines in Low-Income Countries: The Case of Kerala......Page 613
Urbanization......Page 614
EXAMPLE 21.2 Income-Generating Activities as Fertility Control: Bangladesh......Page 615
Summary......Page 616
Self-Test Exercises......Page 617
Further Reading......Page 618
Conceptualizing the Problem......Page 619
Institutional Responses......Page 621
EXAMPLE 22.1 Private Incentives for Sustainable Development: Can Adopting Sustainable Practices Be Profitable?......Page 622
Sustainable Development......Page 624
EXAMPLE 22.2 Public–CPrivate Partnerships: The Kalundborg Experience......Page 626
A Concluding Comment......Page 628
Discussion Questions......Page 629
Answers to Self Test Exercises......Page 630
Glossary......Page 653
Name Index......Page 665
Subject Index......Page 672