Crash Course Economics: Environmental Economics

Introduction

• Hosts: Adrienne Hill and Jacob Clifford
• Economics involves choices and managing scarce resources
• Environmental economics: balancing prosperity with resource protection
• Focus on how economics can help keep the planet livable

Pollution

• Pollution is an inevitable byproduct of human activities
• Archaeological insights from ancient waste (middens)
• Focus on carbon dioxide (CO2) emissions
  • Primary greenhouse gas causing climate change
  • CO2 levels at historic highs; considered a planetary emergency

Economic Solutions to Pollution

1. Identify Major Pollution Sources

   • Factories burning fossil fuels
   • Industries using oil and coal
   • Vehicles with internal combustion engines

2. Decrease Supply or Demand of Polluting Technologies

   • Implementation is complex
   • Tragedy of the Commons: challenge in enforcing regulations

Decreasing Supply

• Countries struggle with enforcing regulations independently
• No global entity enforcing environmental practices
• Example: Trinidad and Tobago's high per capita carbon output

Decreasing Demand

• Finding alternative energy sources
• Fossil fuel markets are established and cheap
• Options: wait for technology to become cheaper or manipulate markets

Market Interventions

• Address "negative externalities" where full product costs aren't accounted for
• Pollution represents a market failure
• Government intervention is often necessary

Types of Government Interventions

1. Regulations

   • Set pollution limits for industries

2. Price Incentives

   • Taxes on gasoline
   • Subsidies for electric vehicles

3. Permit Markets (Cap-and-Trade)

   • Limit emissions with tradable permits
   • Balance emissions without stifling economic growth

4. Subsidizing Alternative Technologies

   • Support development of solar, wind energy
   • Renewable energy accounts for 10% of U.S. consumption
   • Predicted to rise to 15% by 2040

Challenges and Considerations

• Alternative energy still expensive; reliance on non-renewable sources likely to continue
• Efficiency improvements have possible "rebound effect"
  • Example of energy savings leading to increased consumption
• Importance of economist involvement in environmental policies

Hope and International Efforts

• Global recognition of greenhouse gas problems
• International treaties aiming to reduce emissions
• Private and government funding for green technology
  • American Recovery and Reinvestment Act (2009)
  • China's investment in renewable energy

Conclusion

• Recognizing individual actions aren't enough
• Collaborative approach needed: industries, governments, and individuals
• Larger interventions necessary for significant impact

Closing

• Importance of thoughtful consumption and conservation
• "We're in this together" approach required to address environmental challenges