answered: Please see attachments on how to help with this assignment. 175-200 words APA

Please see attachments on how to help with this assignment. 175-200 words APA

Discussion questions

Economist Herman Daly characterizes neo-classical economic theory as being analogous to a biologist trying to understand the functioning of an animal by considering only its circulatory system and ignoring its digestive system which connects the animal “firmly to the environment at both ends!” How is this analogous to neo-classical economic theory? What kind of environmental problems does this kind of neo-classical economic thinking lead to? Explain and provide examples.

 

[NOTE: Carefully compare the anatomy of the circulatory system with the anatomy of the digestive system before answering this question: The circulatory system includes the heart and the blood vessels. The digestive system includes the mouth, esophagus, stomach, intestines, and anus.].

Living in the Environment (MindTap Course List)

20th Edition

ISBN-13: 978-0357142202, ISBN-10: 0170291502

Chap23

· 23.1

Economic Systems and the Biosphere

· 23.1a

Economic Systems Depend on Natural Capital

· 23.1b

Government Intervention Helps Correct Market Failures

· 23.1c

Models of Economies

· 23.2

Economic Value of Natural Capital and Pollution Control

· 23.2a

Valuing Natural Capital

· 23.2b

Estimating the Future Value of a Resource

· 23.2c

Optimum Levels of Pollution Control and Resource Use

· 23.2d

Cost–Benefit Analysis

· 23.3

Using Economics to Deal With Environmental Problems

· 23.3a

Full-Cost Pricing

· 23.3b

Environmentally Beneficial Subsidies

· 23.3c

Environmental Indicators

· 23.3d

Taxing Pollution and Wastes Instead of Wages and Profits

· 23.3e

Using Cap-and-Trade to Reduce Pollution and Resource Waste

· 23.3f

Labeling Environmentally Beneficial Goods and Services

· 23.3g

Environmental Laws and Regulations

· 23.3h

Selling Services Instead of Products

· 23.4

Poverty and Environmental Problems

· 23.4a

Reducing Poverty

· 23.4b

Millennium Development Goals and Sustainable Development Goals

· 23.5

Environmentally Sustainable Economies

· 23.5a

Low-Throughput Economies

· 23.5b

Shifting to More Sustainable Economies

· 23.5c

Using Lessons from Nature to Make an Economic Transition

· Tying It All Together

Germany’s Transition to Renewable Energy and Sustainability

·
Chapter Review

·
Critical Thinking

·
Doing Environmental Science

·
Data Analysis

· Germany, one of the world’s most industrialized nations, is undergoing a renewable energy revolution (
Chapter 16
, Case Study). The country aims to get 65% of its electricity from renewable energy resources by 2030 and 80% by 2050. It plans to phase out nuclear power as a source of its electricity by 2022 and ultimately to cease relying on coal to produce electricity.

· In 2018, Germany generated about 40% of its electricity using wind farms on land (see 
chapter-opening photo
) and at sea (
Figure 23.1
, left), solar energy (
Figure 23.1
, right), and other renewable sources. This surpassed the amount of electricity generated from coal and nuclear energy in Germany. On days when conditions were ideal, Germany produced as much as 80% of its electricity from renewable energy. Since 2000, this shift to renewable energy has created a multibillion-dollar German industry that includes renewable energy production and sales of renewable energy technology around the world.

· Figure 23.1

· This wind farm (left) is located off Germany’s coast, and this rural village (right) in Germany’s Rhineland-Palatinate is typical for many German towns in having several rooftop solar panels.

·

·

· Luftbild Bertram/AGE Fotostock; iStock.com/Richard Schmidt-Zuper

· This transition was spurred by government legislation aimed at homeowners, businesses, and communities that produce electricity from solar cells, wind, and other renewable energy systems. The law allows them to sell the electricity they produce to Germany’s major power companies at a fixed rate that guarantees their investments will at least break even. With this feed-in tariff system, the government ensures that renewable energy producers will not lose money. In fact, they often make a profit.

· The German government has also promoted the building of wind farms on land and offshore along the North Sea and Baltic Sea coasts (
Figure 23.1
, left). It plans to have 10,000 offshore wind turbines operating by 2030. There are plans to lay more than 3,700 kilometers (2,300 miles) of high-voltage electrical cables throughout parts of the country and under the North Sea as part of a new state-of-the-art electrical grid. Such a grid would be far more efficient than conventional grids, and would help to make Germany’s dependence on electricity from solar and wind energy more dependable.

· Since 1990, solar energy production has risen steadily in Germany, much of it through rooftop solar collectors (
Figure 23.1
, right). Even when the economy was sagging, solar and wind energy production continued to grow in Germany.

Germany’s shift to renewable energy to produce electricity has faced some challenges that we discuss in this chapter. Even critics of the feed-in tariff agree that it has done its job in helping to establish a vibrant renewable energy industry in Germany. Germany’s example shows that economic improvements in renewable energy and improvements in environmental quality can go hand in hand—an example of the win-win principle of sustainability. Some economists argue that shifting to cleaner renewable energy resources, cleaner industrial production, and more sustainable agriculture would help create more environmentally sustainable economies. 23.1aEconomic Systems Depend on Natural Capital


Economics
 is the social science that deals with the production, distribution, and consumption of goods and services to satisfy people’s needs and wants. In a market-based economic system, buyers and sellers interact to make economic decisions about how goods and services are produced, distributed, and consumed. In a truly free-market economic system, all economic decisions are governed solely by the competitive interactions of supply and demand (Figure 23.2). Supply is the amount of a good or service that producers offer for sale at a given price. Demand is the amount of a good or service that people are willing and able to buy at a given price. If the demand for a good or service is greater than the supply, the price rises. If the supply is greater than demand, the price falls.

Figure 23.2

Supply and demand curves for a saleable product in a free market economic system. If all factors except supply, demand, and price are held fixed, market equilibrium occurs at the point where the supply and demand curves intersect.

Data Analysis:

1. How would an increase in the available supply of oil shift the market equilibrium point on this diagram?

Changes in supply and demand can shift one or both curves back and forth, and thus change the equilibrium point. For example, when supply is increased (shifting the blue curve to the right) and demand remains the same, the market price will go down. Similarly, when demand is increased (shifting the red curve to the right) and supply remains the same, the market price will rise.

A truly free-market economy rarely exists in today’s capitalist market systems because factors other than supply and demand influence prices and sales. The primary goal of any business is to make as large a profit as possible for its owners or stockholders. To do so, most businesses try to take business away from their competitors and to exert as much control as possible over the prices of the goods and services they provide.

For example, many companies push for government support such as 
subsidies
, or payments intended to help a business grow and thrive, along with tax breaks, trade barriers, and regulations that will give their products an advantage in the market over their competitors’ products. When governments give larger subsidies to some companies or industries than they give to others within the same market, it can create an uneven economic playing field.

In addition, some companies withhold information from consumers about the costs and dangers that their products may pose to human health or to the environment, unless the government requires them to provide such information. Thus, buyers often do not get complete information about the harmful environmental impacts of the goods and services they buy. Some economists say that providing such information for consumers should be one of the requirements of a truly free-market economy.

Most economic systems use three types of capital, or resources, to produce goods and services (Figure 23.3). Natural capital (see Figure 1.3) includes resources and ecosystem services produced by the earth’s natural processes, which support all life and all economies. 
Human capital
 includes the physical and mental talents of the people who provide labor, organizational and management skills, and innovation. 
Manufactured capital
, also called built capital, includes tools, materials, machinery, factories, roads, and other infrastructure that people create using natural resources.

Figure 23.3

Three types of resources are used to produce goods and services.



Center: Elena Elisseeva/ Shutterstock.com. Right center: Michael Shake/ Shutterstock.com. Right: iStock.com/Yuri

· 23.1bGovernment Intervention Helps Correct Market Failures

· Markets usually work well in guiding the efficient production and distribution of private goods. However, experience shows that they cannot be relied on to provide adequate levels of public services, such as national security, police and firefighters, and environmental protection. Economists generally refer to such deficiencies as market failures. An important example of a market failure is the inability of markets to prevent the degradation of open-access resources, such as clean air, the open ocean, and the earth’s overall life-support system. Such vital resources are not bought and sold in the marketplace, because they are owned by no one and available for use by everyone at little or no charge.

· Governments intervene in market systems to provide various public services and to help correct market failures. In the 1970s, the U.S. government passed laws to control air pollution (Chapter 18) and water pollution (Chapter 20). Without such laws, air and water pollution in the United States would be much worse than it is.

· One reason why markets often fail to provide environmental protection is their failure to assign monetary value to the benefits provided by the earth’s natural capital and to the harmful effects of various human activities on the environment and on human health. For example, the benefits of leaving an old-growth forest undisturbed (ecosystem services such as water purification and soil erosion reduction) usually are not weighed against the monetary value of cutting the timber in the forest. Thus, many old-growth forests have been cleared for their timber, while their non-timber natural capital value, which can be much higher than the value of their timber, is lost. (See Science Focus 10.1, and the next section of this chapter.) Governments can use economic tools such as subsidies and taxes to correct this market failure.

23.1cModels of Economies


Economic growth
 is an increase in the capacity of a nation, state, city, or company to provide goods and services to people. Today, a typical industrialized country depends on a 
high-throughput economy
, which attempts to boost economic growth by increasing the flow of matter and energy resources through the economic system to produce more goods and services (Figure 23.4). Such an economy produces valuable goods and services. However, it also converts large quantities of high-quality matter and energy resources into wastes, pollution, and low-quality heat, which tend to flow into planetary sinks (air, water, soil, and organisms).

Figure 23.4

The high-throughput economies of most of the world’s more-developed countries rely on continually increasing the flow of energy and matter resources to promote economic growth.

Critical Thinking:

1. What are three ways in which you regularly add to this throughput of matter and energy through your daily activities?


Economic development
 focuses on creating economies that serve to improve human well-being by meeting basic human needs for items such as food, shelter, physical and economic security, and good health. The world’s countries vary greatly in their levels of economic growth and economic development.

For more than 200 years, economists have debated whether there are limits to economic growth. Neoclassical economists, assume that the potential for economic growth is essentially unlimited and is necessary for providing profits for businesses and jobs for workers. Neoclassical economists consider natural capital important but assume that people can find substitutes for essentially any resource or ecosystem service that we might deplete or degrade.


Ecological economists disagree. They point out that there are no substitutes for many vital natural resources, such as climate control, air and water purification, pollination, topsoil renewal, and nutrient cycling. In contrast to neoclassical economists, they view human economic systems as subsystems of the biosphere that depend heavily on the natural resources and ecosystem services that make up the earth’s irreplaceable natural capital (
Figure 23.5).

Figure 23.5

Ecological economists view human economies as subsystems of the biosphere that depend on natural resources and ecosystem services provided by the sun and earth.

Critical Thinking:

1. Can you think of any human activities that do not depend on natural capital? Explain.

Courtesy of JPL/NASA

According to ecological economists, economic growth becomes unsustainable when it depletes or degrades various irreplaceable forms of natural capital, on which all human economic systems depend.

According to some estimates, humanity is currently using the renewable resources of 1.5 planet Earths and could be using that of 2 planet Earths by 2030. In other words, we are living unsustainably by borrowing renewable resources from future generations. This is a violation of the ethical principle of sustainability that states we should leave the planet’s life-support systems in as good a condition or better than what we now experience.

2

Number of planet Earths that could be needed to sustain the world’s projected population and total renewable resource use in 2030

According to ecological and environmental economists, including Herman Daly, E.F. Schumacher, Kenneth Boulding, E. J. Mishan, Joseph H. Vogel, and John M. Gowdy today’s economies are unsustainable because they:

· Deplete the earth’s natural capital by placing little value on its importance in sustaining the earth’s life and economies.

· Focus on increasing economic growth without distinguishing between sustainable and unsustainable forms of growth.

· Rely on GNP economic indicators that do not distinguish between harmful and beneficial forms of economic growth.

· Fail to use full-cost pricing of goods and services that consumers need to evaluate the harmful environmental and health impacts of what they buy.

· Encourage people to consume more and more to satisfy seeming endless wants as a way to achieve happiness.

· Fail to distribute enough of the benefits of economic growth to meet everyone’s basic need and eliminate poverty.

· See population growth as a way to have more consumers.

· Deny that there are resource or environmental limits or assume that technology can overcome them.

· Pass environmental and resource supply problems on to future generations by discounting the future to justify current economic growth.

Most ecological and environmental economists call for 
environmentally sustainable economic development
 to help correct some of the problems just listed. It uses political and economic systems to encourage environmentally beneficial and more sustainable forms of economic improvement, and to discourage environmentally harmful and unsustainable forms of economic growth that degrade natural capital.

Critical Thinking

1. Do you think that the economy of the country where you live is sustainable or unsustainable? Explain.

23.2bEstimating the Future Value of a Resource

One tool used by economists, businesses, and investors to determine the value of a resource is the 
discount rate

an estimate of a resource’s future economic value compared to its present value. It is based on the idea that today’s value of a resource may be higher than its value in the future. Thus, its future value should be discounted. The size of the discount rate (usually given as a percentage) is a key factor affecting how a resource such as a forest or fishery is used or managed.

At a zero discount rate, for example, the timber from a stand of redwood trees (Figure 23.7) worth $1 million today will still be worth $1 million 50 years from now. However, the U.S. Office of Management and Budget, the World Bank, and most businesses typically use a 10% annual discount rate to estimate the future value of a resource. At this rate as the years go by, the timber in a stand of redwood trees will be worth increasingly less, and within 45 years, it will be worth less than $10,000. Using this discount rate, it makes sense from an economic standpoint for the owner of this resource to cut these trees down as quickly as possible.

Figure 23.7

Economists have tried several methods for estimating the economic value of ecosystem services, recreation opportunities, and beauty in ecosystems such as this patch of redwood forest.

Critical Thinking:

1. What discount rate, if any, would you assign to this stand of trees?

Sharon Eisenzopf/ Shutterstock.com


However, this economic analysis does not take into account the immense economic value of the ecosystem services provided by forests (see Figure 10.2, left and Figure 23.6). Such services include the absorption of precipitation and gradual release of water and other nutrients, natural flood control, water and air purification, prevention of soil erosion, removal and storage of atmospheric carbon dioxide, and protection of biodiversity within a variety of forest habitats.

A high discount rate (5–10%) makes it difficult to sustain these important ecosystem services. If their economic values were included, it would make more sense now, and in the future, to preserve large areas of redwoods for the ecosystem services they provide and to find substitutes for redwood products. However, while these ecosystem services are vital for the earth as a whole and for future generations, they do not provide the current owner of the redwoods with any monetary return.

Setting discount rates can be difficult and controversial. Proponents cite several reasons for using high discount rates. One argument is that inflation can reduce the value of future earnings on a resource. Another is that innovation or changes in consumer preferences can make a product or resource obsolete. For example, the plastic composites made to look like redwood may reduce the future use and market value of timber from a redwood forest (Figure 23.7).

Critics point out that high discount rates encourage rapid exploitation of resources for immediate payoffs, thus making long-term sustainable use of most renewable natural resources virtually impossible. They argue that a 0% or even a negative discount rate should be used to protect unique, scarce, and irreplaceable resources such as old-growth forests. A negative discount rate would result in the value of a forest or other resource increasing over time. Some economists argue that as ecosystem services continue to be degraded, they will only become more valuable, so a negative discount rate is the only type that makes sense. They point out that zero or negative discount rates of -1 to -3% would make it profitable to use nonrenewable and renewable resources more slowly and in more sustainable ways.

Critical Thinking

1. If you owned a forested area, would you want the discount rate for resources such as trees from the forest to be positive, zero, or negative? Explain.

23.2cOptimum Levels of Pollution Control and Resource Use

An important concept in environmental economics is that of optimum levels for pollution control and resource use. In the early days of a new coal mining operation, for example, the cost of extracting coal is typically low enough to make it easy for developers to recover their investments by selling their product. However, the cost of removal goes up with each additional unit of coal taken. Economists refer to this as the 
marginal cost
—any increase in the cost of producing an additional unit of a product. After most of the more readily accessible coal has been removed from a mine, the marginal cost is too high and at some point, taking what is left becomes unaffordable. This can change if some factor such as scarcity raises the value of the coal remaining in the mine.

Figure 23.8 shows this in terms of supply, demand, and equilibrium. The point at which removing more coal is not worth the marginal cost is where the demand curve crosses the supply curve, theoretically the optimum level of resource use.

Figure 23.8

Optimum resource use: The cost of extracting coal (blue line) from a particular mine rises with each additional unit removed. Mining a certain amount of coal is profitable, but at some point, the marginal cost of further removal exceeds the monetary benefits (red line).

Critical Thinking:

1. How would the location of the optimum level of resource use shift if the price of coal doubled?

nito/ Shutterstock.com

You might think that the best solution for pollution is total cleanup. In fact, there are optimum levels for various kinds of pollution. This is because the cost of pollution control goes up for each additional unit of a pollutant removed from the environment. This increase in cost per additional unit is the marginal cost of pollution control. The main reason for the increasing cost is that, as concentrations of a pollutant from the air, water, or soil get lower, it takes larger amounts of energy to remove the pollutant. At some point, the cost of removing more pollutants is greater than the harmful costs of the pollution to society. That point is the equilibrium point, or the optimum level for pollution cleanup.

23.2dCost–Benefit Analysis

Another widely used tool for making economic decisions about how to control pollution and manage resources is 
cost–benefit analysis
. In this process, analysts compare estimated costs and benefits of actions such as implementing a pollution control regulation, building a dam on a river, and preserving an area of forest. Economists also use cost–benefit analysis to estimate the optimum level of pollution cleanup or resource use (Figure 23.8).

Making a cost–benefit analysis involves determining who benefits and who is harmed by a particular regulation or project and estimating the monetary values (costs) of those benefits and harms. Direct costs involving land, labor, materials, and pollution-control technologies are often easy to estimate. However, estimates of indirect costs, such as a project’s effects on air and water, are not considered in the marketplace. Analysts can put estimated price tags on human life, good health, clean air and water, and natural capital such as an endangered species, a forest, or a wetland. However, such monetary value estimates vary widely depending on the assumptions, value judgments, and discount factors used by the estimators.

Because of these drawbacks, a cost–benefit analysis can lead to a wide range of benefits and costs with a lot of room for error, and this is a source of controversy. For example, one cost–benefit analysis sponsored by a U.S. industry estimated that compliance with a regulation written to protect American workers from vinyl chloride would cost $65 billion to $90 billion. In the end, complying with the regulation cost the industry less than $1 billion. A study by the Economic Policy Institute of Washington, D.C., found that the estimated costs projected by industries for complying with proposed U.S. environmental regulations are often inflated in an effort by industries to avoid or delay complying with such regulations.

If conducted fairly and accurately, cost–benefit analysis can be a helpful tool for making economic decisions, but it always includes uncertainties. Environmental economists advocate using the following guidelines to minimize possible abuses and errors in cost–benefit analysis involving some part of the environment:

· State all assumptions used.

· Include estimates of the ecosystem services provided by the ecosystems involved.

· Estimate short- and long-term benefits and costs for all affected population groups.

· Compare the costs and benefits of alternative courses of action.

According to Gaylord Nelson, founder of the world’s first Earth Day on April 22, 1970: “When it is asked how much it will cost to protect the environment, one more question should be asked: How much will it cost our civilization if we do not?”

· 23.3aFull-Cost Pricing

· The market price, or direct price, that people pay for a product or service usually does not include all of the indirect, or external, costs of harm to the environment and human health associated with providing and using them. Such costs are called hidden costs.

· For example, if someone buys a new car, the price includes the direct, or internal, costs of raw materials, labor, shipping, and a markup for dealer profit. In using the car, owners pay additional direct costs for gasoline, maintenance, repairs, and insurance.

· However, the extraction and processing of raw materials to make a car uses energy and mineral resources, disturbs land, produces solid and hazardous wastes, pollutes air and water, and releases climate-changing greenhouse gases into the atmosphere. These hidden external costs can have harmful effects on people, economies, and on the earth’s life-support system.

· Because these harmful external costs are not included in the market price of a car, most people do not connect them with car ownership. Still, the car buyer and other people in a society pay these hidden costs sooner or later, in the forms of poorer health, higher expenses for health care and insurance, higher taxes for pollution control, traffic congestion, and degradation of natural capital.

· Ecological economists and environmental experts call for including external costs of harm to the environment and human health in the market prices of goods and services. This practice is called full-cost pricing, and is one of the six principles of sustainability. Failure to include the estimated harmful environmental and health costs in the market prices of goods and services is viewed as one of the major causes of the environmental problems we face.

· According to its proponents (Individuals Matter 23.1), full-cost pricing would reduce resource waste, pollution, and environmental degradation and improve human health. It would also encourage producers to invent more resource-efficient and less-polluting methods of production, and it would inform consumers about the environmental and health effects of the goods and services they buy. For example, if the harmful environmental and health costs of mining and burning coal to produce electricity (Figure 23.9) were included in the market prices of coal-fired electricity, coal would be much more expensive and likely would be replaced by improved energy efficiency and less environmentally harmful resources such as natural gas and solar and wind power.

· Individuals Matter 23.1

· Paul Hawken: Businessman and Environmental Champion

·

· Beck Starr/WireImage/Getty Images

· Paul Hawken understands both business and ecology. He is an entrepreneur and a visionary environmental and social activist. In addition to starting several businesses, he has authored several widely acclaimed books that have been published in over 50 countries in 27 languages and have sold more than 2 million copies.

· One of Hawken’s major themes has been the importance of full-cost pricing. As Hawken has pointed out in many of his writings, the fact that many harmful environmental and health costs are externalized is a major cause of the global loss and degradation of natural capital. This happens because of a failure to implement full-cost pricing and an obsession with the growth of gross domestic product (GDP) regardless of its effect on the environment. With our current pricing system, Hawken says, “we are stealing the future, selling it in the present, and calling it GDP, and patting ourselves on the back.”

· Hawken calls for us to modify our economies in ways that will sustain the natural capital that in turn sustains all life and economies. He is not against economic growth. Instead, he calls for using government subsidies and taxes to encourage forms of growth that increase environmental sustainability and social justice and to discourage forms of growth that harm the environment and human health.

· According to Hawken, “We have the capacity to create a remarkably different economy: one that can restore ecosystems and protect the environment while bringing forth innovation, prosperity, meaningful work, and true security.” This shift “is based on the simple but powerful proposition that all natural capital must be valued. … If we have doubts about how to value a 500-year-old tree, we need only ask how much would it cost to make a new one from scratch? Or a new river? Or a new atmosphere?”

· Hawken has worked with business and government leaders throughout the world and won numerous awards for his work. However, his greatest accomplishment may be getting many of us to rethink our ideas about economics, business, and the environment.

· Figure 23.9

· Most of the harmful environmental and health effects of strip-mining coal and burning it to produce electricity are not included in the cost of electricity.

·

·

· Andreas Reinhold/ Shutterstock.com

· Putting full-cost pricing into practice would result in some industries and businesses disappearing or remaking themselves. New businesses would also appear. This is a normal and revitalizing process in a dynamic and creative capitalist economy. Shifting to full-cost pricing over a decade or two would give some environmentally harmful businesses enough time to transform themselves into profitable, environmentally beneficial businesses.

· There are three reasons why full-cost pricing is not used more widely. First, most producers of harmful products and services would have to charge more for them, and some would go out of business. Naturally, these producers oppose such pricing. Second, many environmental and health costs are difficult to estimate. Third, many environmentally harmful businesses use their political and economic power to obtain government subsidies and tax breaks that help them increase their profits and, in some cases, stay in business.

23.3bEnvironmentally Beneficial Subsidies

Some subsides, called perverse subsidies, lead to environmental damage and harmful health effects. Examples include depletion subsidies and tax breaks for extracting minerals and fossil fuels, cutting timber on public lands, and irrigating with low-cost water. These subsidies and tax breaks distort the economic playing field and create a huge economic incentive for unsustainable resource waste, depletion, and environmental degradation.



Environmental scientist Norman Myers estimates that these perverse subsidies and tax breaks cost the world’s governments (taxpayers) at least $2 trillion a year—an average $3.8 million a minute. This amount is larger than all but a few of the national economies in the world and twice as large as all of the world’s military spending. Myers also estimates that perverse government subsidies and tax breaks cost the average American taxpayer $2,000 per year.

$3.8 Million

Estimated cost per minute to the world’s taxpayers of perverse subsidies

A number of environmental scientists and ecological economists call for phasing out environmentally harmful subsidies and tax breaks and phasing in environmentally beneficial subsidies and tax breaks. More subsidies and tax breaks would go businesses involved in pollution prevention, waste prevention, sustainable forestry and agriculture, conservation of water supplies, energy-efficiency improvements, renewable energy use, and measures to slow projected climate change.

However, economically and politically powerful interests receiving these environmentally harmful subsidies spend a lot of time and money lobbying, or trying to influence governments to continue and even to increase their subsidies. For example, the fossil fuel and nuclear power industries in the United States are mature and highly profitable industries that get billions of dollars in government subsidies and tax breaks every year. Such industries also lobby against subsidies and tax breaks for their more environmentally beneficial competitors such as solar and wind energy.

Some countries have reduced perverse subsidies. Japan, France, and Belgium have phased out all coal subsidies. China has cut coal subsidies by about 73% and has imposed a tax on high-sulfur coals.

Making a shift from environmentally harmful to environmentally beneficial subsidies and tax breaks on a global basis over the next 2 to 3 decades would encourage businesses to make the transition from environmentally harmful to more environmentally beneficial goods and services.

Critical Thinking

· Can you think of any problems that might result from phasing out environmentally harmful government subsidies and tax breaks and phasing in environmentally beneficial ones? How might such a subsidy shift affect your lifestyle?

23.3cEnvironmental Indicators

Economic growth is usually measured by the percentage of change per year in a country’s 
gross domestic product (GDP)
: the annual market value of all goods and services produced by all firms and organizations, foreign and domestic, operating within a country. A country’s economic growth per person is measured by changes in the 
per capita GDP
: the GDP divided by the country’s total population at midyear.

GDP and per capita GDP indicators provide a standardized, useful method for measuring and comparing the economic outputs of nations. However, the GDP was deliberately designed to measure such outputs without taking into account their beneficial or harmful environmental or health impacts. Many environmental economists and environmental scientists call for the development and widespread use of new indicators—called 
environmental indicators
—to help monitor environmental quality and human well-being.

One such indicator is the genuine progress indicator (GPI)—the GDP plus the estimated value of beneficial transactions that meet basic needs, minus the estimated harmful environmental, health, and social costs of all transactions. Examples of beneficial transactions included in the GPI are unpaid volunteer work, health care provided by family members, child care, and housework. Harmful costs that are subtracted to arrive at the GPI include the costs of pollution, resource depletion and degradation, and crime.

Figure 23.10 compares the per capita GDP and GPI for the United States between 1950 and 2004 (the last year in which the GPI was compiled). While the per capita GDP rose sharply over this period, the per capita GPI stayed flat, or in some cases even declined slightly. This shows that even if a nation’s economy is growing, its people are not necessarily better off. Environmental economists developed the GPI with the hope that governments would adopt it. However, it has not been implemented by any of the world’s economies.

Figure 23.10

Monitoring environmental progress: The per capita gross domestic product (GDP) compared with the per capita genuine progress indicator (GPI) in the United States between 1950 and 2004.

Critical Thinking:

1. Would you favor making widespread use of this or similar green economic indicators? Why or why not? Why do you think this has not been done?

(Compiled by the authors using data from Redefining Progress.)

Another environmental indicator is the Global Green Economy Index (GGEI). It measures the performances of 130 nations in areas of leadership on climate change, energy efficiency, markets and investments, and natural capital, based on analysis by a panel of experts. In 2018, the top five ranked countries on the GGEI were Sweden, Switzerland, Iceland, Norway, and Finland. The United States ranked 42nd.

These and other environmental indicators now being developed are far from perfect. However, without such indicators, it will be difficult to monitor the overall effects of human activities on human health, on the environment, and on the planet’s natural capital and to evaluate the effectiveness of solutions to the environmental problems humanity faces. Such indicators are also helpful for finding the best ways to improve environmental quality and life satisfaction.

23.3dTaxing Pollution and Wastes Instead of Wages and Profits

Another way to discourage pollution and resource waste is to tax them. Green taxes could be levied on a per-unit basis on the amount of pollution and hazardous waste produced by a farm, business, or industry, and on the use of fossil fuels, nitrogen fertilizer, timber, minerals, water, and other resources. This approach would implement the full-cost pricing principle of sustainability and increase our beneficial environmental impact.

To many analysts, the tax systems in most countries are backward. They discourage what we want more of—jobs, income, and profit-driven innovation—and encourage what we want less of—pollution, resource waste, and environmental degradation. A more environmentally sustainable economic and political system would lower taxes on labor, income, and wealth, and raise taxes on environmental activities that produce pollution, wastes, and environmental degradation. Some 2,500 economists, including eight Nobel Prize winners in economics, have endorsed this tax-shifting concept.

Proponents list three requirements for the successful shift to more environmentally sustainable or green taxes:

· Phase in green taxes over 10 to 20 years to allow business to plan for change.

· Reduce income, payroll, or other taxes by an amount equal to that of the green taxes so that there would be no net increase in taxes.

· Design a safety net for the poor and lower-middle class individuals who would suffer financially from any new taxes on essentials such as fuel, water, electricity, and food.


Figure 23.11
 lists some of the advantages and disadvantages of using green taxes.

Figure 23.11

Trade-offs: Using green taxes to help reduce pollution and resource waste has advantages and disadvantages.

Critical Thinking:

1. Do the advantages outweigh the disadvantages? Why or why not?


Top: Chuong Vu/ Shutterstock.com. Bottom: EduardSV/ Shutterstock.com.

In Europe and the United States, polls indicate that once such tax shifting is explained to voters, 70% of them support the idea. Germany’s green tax on fossil fuels, introduced in 1999, has reduced pollution and greenhouse gas emissions, helped to create up to 250,000 new jobs, lowered taxes on wages, and greatly increased the use of renewable energy resources. Costa Rica, Sweden, Denmark, Spain, and the Netherlands have raised taxes on several environmentally harmful activities while cutting taxes on wages, investment income, or both.

To help reduce climate-changing carbon dioxide emissions, since 1997, Costa Rica has imposed a 3.5% tax on the market values of any fossil fuels that are burned in the country. The tax revenues go into a national forest fund set up for paying indigenous communities to help protect the forests around them, thereby helping to reverse deforestation (
Chapter 10

Core Case Study
). The fund is also intended to help Costa Ricans work their way out of poverty. Costa Rica has also taxed water use to reduce water waste and pollution, and the tax revenues are used to pay villagers living upstream to reduce their inputs of water pollutants.

The U.S. Congress has not enacted green taxes, mostly because of opposition by the automobile, fossil fuel, mining, chemical and other politically powerful industries. These opponents claim that green taxes will harm the economy and consumers by forcing producers to raise the prices of their goods and services. In addition, most voters have been conditioned to oppose any new taxes and have not been educated about the economic and environmental benefits of a tax-shifting approach that would improve environmental quality with no net increase in their taxes.

23.3eUsing Cap-and-Trade to Reduce Pollution and Resource Waste

In one incentive-based regulation system, the government decides on acceptable levels of total pollution or resource use; sets limits, or caps, to maintain these levels; and gives or sells companies a certain number of tradable pollution or resource-use permits governed by the caps.

With this cap-and-trade approach, a permit holder that does not use its entire allocation can save credits for future expansion, use them in other parts of its operation, or sell them to other companies. The United States has used this approach to reduce the emissions of sulfur dioxide (see Chapter 18) and several other air pollutants. Tradable rights could also be established among countries to help preserve biodiversity and to reduce emissions of greenhouse gases (Figure 19.23) and other regional and global pollutants.

Figure 23.12 lists the advantages and disadvantages of using tradable pollution and resource-use permits (cap-and-trade). The effectiveness of such programs depends on how high or low the initial cap is set and on the rate at which the cap is regularly reduced to encourage further innovation.

Figure 23.12

Trade-offs: Cap-and Trade: Using tradable pollution and resource-use permits to reduce pollution and resource waste has advantages and disadvantages.

Critical Thinking:

1. Do the advantages outweigh the disadvantages? Why or why not?

Top: M. Shcherbyna/ Shutterstock.com.

· 23.3fLabeling Environmentally Beneficial Goods and Services

· Product eco-labeling and certification can encourage companies to develop environmentally beneficial (green) products and services and can help consumers to select such products and services. Eco-labeling programs have been developed in Europe, Japan, Canada, and the United States. The U.S. Green Seal labeling program has certified more than 335 products and services as environmentally friendly based on life-cycle analysis. Eco-labels are also used to identify fish caught by sustainable methods (certified by the Marine Stewardship Council) and to certify timber produced and harvested by sustainable methods (evaluated by organizations such as the Forest Stewardship Council, see Chapter 10Improving Management of Forest Fires).

· Eco-labeling systems usually include a simple rating scale such as 0–10, applied to factors such as environmental damage, climate impact, carbon footprint, air and water pollution, and energy, water, and pesticide use. Such eco-labeling informs consumers about the environmental impacts of what they buy and helps them vote with their wallets.

· Providing easily understandable ratings on the sustainability of goods and services helps expose and reduce 
greenwashing
, a deceptive practice that some businesses use to spin environmentally harmful products and services as green, clean, or environmentally beneficial. For example, in 2008, the U.S. coal industry spent about $45 million on a successful public relations campaign to imbed the words “clean coal” in the minds of Americans, even though certain harmful aspects of mining and using coal will always make it by far the dirtiest fossil fuel (Chapter 15, and Figure 23.9).

· Other examples of greenwashing, closer to home for most people, can mislead consumers and distort market information, making it harder for environmentally beneficial products and services to compete. For example, phrases like “environmentally friendly” and “eco-conscious” placed on cleaning product labels can be meaningless or false. Consumers who want to buy green must be careful to choose products that actually are environmentally friendly.

· 23.3gEnvironmental Laws and Regulations

· Environmental regulation is a form of government intervention in the marketplace that is widely used to help control or prevent pollution and environmental degradation and to encourage more efficient resource use. It involves enacting and enforcing laws that set pollution standards, regulate the release of toxic chemicals into the environment, and protect certain slowly replenished resources such as public forests, parks, and wilderness areas (Figure 23.13) from unsustainable use.

· Figure 23.13

· Environmental regulations have helped preserve irreplaceable resources such as this mountainous National Wilderness Area near Aspen, Colorado.

·

·

· Charles Kogod/National Geographic Image Collection

·
Such regulation is another way to help implement the full-cost pricing principle of sustainability, because it forces companies to include more of the costs of pollution control and other regulated aspects in the prices of their products. Opponents of regulation claim that it can slow economic growth and lead to job losses

· However, proponents of regulation point to the results of China’s lax environmental regulations. While that country’s economy has been growing rapidly since 1980, its environmental problems have also multiplied dramatically. Now, according to the Chinese Academy of Sciences, its major cities suffer from serious air pollution. About 57% of its urban groundwater, used for drinking water for hundreds of millions of people, and 43% of its surface water is too polluted to use. Its topsoil is severely polluted and some of its food is tainted with harmful chemicals. These problems are leading to civil unrest in China, as well as to a less favorable standing in the global marketplace.

· Most environmental regulation in the United States and in many other countries has involved passing laws that are typically enforced through a command-and-control approach. Critics say that this strategy can unnecessarily increase costs and discourage innovation, because many of these government regulations concentrate on cleanup instead of prevention. Some regulations also set compliance deadlines that are often too short to allow companies to find innovative ways to reduce pollution and waste.

· A different approach favored by many economists and environmental and business leaders is to use incentive-based environmental regulations. Rather than to require all companies in a particular market to follow the same fixed procedures or use the same technologies, governments can establish long-term goals and heavy penalties for not achieving the goals. This approach uses the economic forces of the marketplace to encourage businesses to be innovative in reducing pollution and resource waste.

·
Several European nations use such innovation-friendly environmental regulation, which involves setting goals, freeing industries to meet the goals in any way that works, and allowing enough time for innovation. This has motivated several companies to develop green products and industrial processes that have created jobs. It has also helped some companies to boost their profits while becoming more competitive in national and international markets.

23.3hSelling Services Instead of Products

One approach to working toward more environmentally beneficial economies is to sell certain services in place of the products that provide those services. With this approach, a manufacturer or service provider makes more money if the production of its product involves minimal material use and pollution, and if the product lasts, is energy efficient, produces as little pollution as possible while in use, and is easy to maintain, repair, reuse, or recycle (see Chapter 21Core Case Study).

Such an economic shift is under way in some businesses. Since 1992, Xerox has been leasing most of its copy machines as part of its mission to provide document services instead of selling photocopiers. When a customer’s service contract expires, Xerox takes the machine back for reuse or remanufacture. It has a goal of sending no material to landfills or incinerators. To save money, Xerox designs machines to have the fewest possible parts, be energy efficient, and emit as little noise, heat, ozone, and chemical waste as possible.

Learning from Nature

At the flooring service company Interface, engineers studied the floors of tropical forests to design a best-selling, nature-based carpet pattern that allows installers to reduce carpet waste and installation time.

In Europe, Carrier has begun shifting from selling heating and air conditioning equipment to providing indoor heating and cooling services. The company makes higher profits by leasing and installing energy-efficient equipment that is durable and easy to rebuild or recycle. Carrier also makes money through helping clients save energy by adding insulation, eliminating heat losses, and boosting energy efficiency in their offices and homes.

Critical Thinking

· Can you think of any drawbacks to leasing a service provided by a product instead of buying the product? What service or services would you consider leasing?

23.4aReducing Poverty


Poverty
 occurs when people cannot meet their basic needs for food, water, shelter, health care, and education. People suffering from extreme poverty (Figure 23.14) live on less than $1.90 a day. According to the World Bank and the World Data Lab, 8.2% of the world’s people lived in extreme poverty in 2018—down from 36% in 1990. This is good news but the bad news is that 627 million people—almost twice the U.S. population—lived in extreme poverty in 2018.

Figure 23.14

This 3-year-old girl was sleeping in her family’s shack in a slum in Port-au-Prince, Haiti.

James P. Blair/National Geographic Creative

Some analysts are alarmed at the widening gap between rich and poor countries and between super-rich individuals and the rest of the world. According to Oxfam International, 82% of wealth generated worldwide in 2017 went to the richest 1% of the world’s population, while the 3.8 billion of the poorest half of the world’s population had no increase in their wealth. Eighty-five billionaires have as much of the world’s wealth as the bottom half of the world’s population. Some economists say that part of this wealth will trickle down to the poor and middle class. Others point out that for three decades, instead of trickling down, most of the world’s wealth has been flowing up to rich individuals, corporations, and countries at an increasing rate. This has greatly increased the economic gap between the rich and the poor and has reduced the middle class.

82%

Percentage of wealth generated worldwide in 2017 that went to the richest 1% of the world’s population

Poverty causes a number of harmful health effects such as hunger, malnutrition (Figure 12.3), and infectious disease, and it kills an estimated 11 million people per year—more deaths than from any other major cause (see Figure 17.21). Another effect of poverty is illness caused by limited access to adequate sanitation facilities and clean drinking water. More than one-third of world’s people have no bathroom facilities and are forced to use backyards, alleys, ditches, and streams. As a result, one of every nine of the world’s people get water for drinking, washing, and cooking from sources polluted by human and animal feces. Poverty also leads to harmful health effects and deaths from indoor air pollution (Figure 18.15).

In 2017, the World Health Organization (WHO) estimated that malnutrition and indoor air pollution, mostly related to poverty, were killing about 7 million children under age 5 each year—an average of 19,000 young children per day. This is equivalent to 95 fully loaded 200-passenger airliners crashing every day with no survivors. The news media rarely cover this ongoing human tragedy.

To reduce poverty and its harmful effects, governments, businesses, international lending agencies, and wealthy individuals could undertake the following:

· Mount a massive global effort to combat malnutrition and the infectious diseases that kill millions of people.

· Provide universal primary school education for all children and for the world’s 750 million illiterate adults. Illiteracy can foster terrorism and strife within countries by contributing to the creation of large numbers of unemployed individuals who have little hope of improving their lives or those of their children.

· Help less-developed countries reduce their population growth, mostly by elevating the social and economic status of women, reducing poverty, and providing access to family planning.

· Focus on sharply reducing the total and per capita ecological footprints of more-developed countries such as the United States and less-developed countries such as China and India.

· Make large investments in small-scale infrastructure such as solar-cell power facilities for rural villages and sustainable agriculture projects to help less-developed nations work toward more energy-efficient and environmentally beneficial economies.

· Encourage lending agencies to make small loans to poor people who want to increase their income (see the Case Study that follows).

Case Study

Microlending

Most of the world’s able-bodied poor people want to work and earn enough to climb out of poverty and make a better life for themselves and their families. With small loans, they could buy what they need to start farms or small businesses. However, few of them have credit records or assets that they could use as collateral to secure the loans.

For over three decades, an innovation called microlending, or microfinance, has helped a number of people living in poverty to deal with this problem. In 1983, economist Muhammad Yunus started the Grameen (Village) Bank in Bangladesh, a country with a high poverty rate and a rapidly growing population. Unlike commercial banks, the Grameen Bank is essentially owned and run by borrowers and by the Bangladeshi government. Since it was founded, the bank has provided more than $8 billion in microloans of $50 to $500 at low interest rates to more than 7 million impoverished people in Bangladesh who do not qualify for loans at traditional banks.

Most of these loans have been used by women to start small businesses, plant crops, buy small irrigation pumps, buy cows and chickens for producing and selling milk and eggs, and buy bicycles for transportation. Microloans are also used to develop day-care centers, health-care clinics, reforestation projects, drinking water supply projects, literacy programs, and small-scale solar- and wind-power systems in rural villages (Figure 23.15).

Figure 23.15

A microloan helped these women in a rural village in India to buy a small solar-cell panel (installed on the roof behind them) that provides electricity to help them make a living, thus applying the solar energy principle of sustainability. 

National Renewable Energy Laboratory

The Grameen Bank’s average repayment rate on its microloans has been 95% or higher. That is nearly twice the average repayment rate for loans by conventional commercial banks—and the Grameen Bank consistently made a profit. Typically, about half of Grameen’s borrowers move above the poverty line within 5 years of receiving their loans.

Since 1975, the Grameen Bank’s innovative approach helped to reduce the poverty rate in Bangladesh from 74% to 40%, primarily because of the hard work of the people receiving the microloans. In addition, birth rates are lower among most of the borrowers, a majority of whom are women, because the loans have given them more freedom and control over their lives.

One of the bank’s goals was to help protect borrowers from loan sharks who were charging high interest rates and bankrupting many people. Unfortunately, some loan sharks and commercial companies have moved into the microfinance sector and turned it to their advantage, which has given microlending a bad name in some areas.

However, Yunus and his supporters point out that microlending, when done properly, can help people escape poverty and improve their lives. In 2006, Yunus and his colleagues at the bank jointly won the Nobel Peace Prize for their pioneering use of microcredit loans that change people’s lives. He has stated, “Unleashing the energy and creativity in each human being is the answer to poverty.” Banks based on the Grameen microcredit model have spread to 58 countries (including the United States) with an estimated 500 million participants.

Ecologist and Geographic Explorer Sasha Kramer has been working in the impoverished and ecologically degraded nation of Haiti to attack the problems of hunger, topsoil depletion, and water pollution all at once. Her nonprofit organization has distributed waterless composting toilets throughout the country to collect human wastes and transform them into compost, which Haitian farmers can use to rebuild depleted soil and boost food production. This process also keeps human wastes out of Haiti’s water supply and reduces the dangerous threat of waterborne infectious diseases.

23.4bMillennium Development Goals and Sustainable Development Goals

In 2000, the world’s nations set goals—called Millennium Development Goals—for sharply reducing hunger and poverty, improving health care, achieving universal primary education, empowering women, and moving toward environmental sustainability by 2015. That year, the United Nations published its Progress Chart showing highly mixed results in reaching the goals. Most countries did well in expanding primary education while women’s representation in national parliaments did not improve in most places. Many countries succeeded in bringing clean drinking water to most of their citizens while some countries did very poorly.

More-developed countries pledged to donate 0.7%—or $7 of every $1,000—of their annual national income to less-developed countries to help them in achieving these goals. So far, Denmark, Luxembourg, Sweden, Norway, and the Netherlands have donated what they had promised. In fact, the average amount donated in most years has been 0.25% of national income. The United States—the world’s richest country—gives only 0.16% of its national income and Japan, another wealthy country, gives only 0.18% compared with 0.9% given by Sweden. For any country, deciding whether or not to help poorer countries in this way is an ethical issue that requires individuals and nations to evaluate their priorities (Figure 23.16).

Figure 23.16

What should our priorities be?

Critical Thinking:

1. Which items on the right side of the figure would you do without or reduce to pay for solving some of the problems listed on the left side of the figure?

(Compiled by the authors using data from United Nations, World Health Organization, U.S. Department of Commerce, U.S. Office of Management and Budget, World Bank, Earth Policy Institute, and Stockholm International Peace Research Institute.)

In 2015, the United Nations General Assembly adopted Sustainable Development Goals (SDGs) with a target date of 2030. The goals include elimination of poverty and hunger and providing, for all people, good health and well-being, a quality education, gender equality, clean water and sanitation, affordable and clean energy, and decent jobs. The goals also include, for all nations, economic growth, industry innovation and infrastructure, sustainable cities and communities, and peace, justice, and strong institutions. The goals are aimed at encouraging responsible consumption and production, slowing climate change, and protecting ocean life and life on land.

In 2015, the 193 member nations of the United Nations adopted these goals. By 2018, no country was on track to achieve all of the Sustainable Development Goals.

Critical Thinking

1. Which five of the U.N. Sustainable Development Goals do you think are the most important? Why?

23.5aLow-Throughput Economies

The three scientific laws governing matter and energy changes (see 
Chapter 2

Law of Conservation of Matter
 and 
Energy Changes Obey Two Scientific Laws
) and the six principles of sustainability suggest that the best long-term solution to our environmental and resource problems is to shift away from a high-throughput (high-waste) economies based on ever-increasing matter and energy flow (
Figure 23.4
) over the next few decades. The goal would be to develop more sustainable 
low-throughput (low-waste) economies
 based on energy efficiency and matter recycling (
Figure 23.17
). Such economies would work with nature to reduce inefficient use and excessive throughputs of matter and energy resources and the resulting pollution and wastes.

Figure 23.17

Solutions: Learning and applying lessons from nature can help us design and manage more sustainable low-throughput economies.

Critical Thinking:

1. What are three ways in which your school could decrease any unsustainable economic and environmental practices, and three ways that it could promote more sustainable economic and environmental practices?

A low-throughput economy works by

1. reusing and recycling most nonrenewable matter resources;

2. using renewable resources no faster than natural processes can replenish them;

3. reducing resource waste by using matter and energy resources more efficiently;

4. reducing environmentally harmful forms of consumption; and

5. promoting pollution prevention and waste reduction.

Some experts would add that such an economy works best when population growth can be slowed so that the number of matter and energy consumers grows slowly, and eventually, not at all.

Some environmental scientists suggest that an important step in shifting to a low-throughput economy is to relocalize economies so that communities can depend more on their local resources. For example, Kelly Cain and his colleagues (
Science Focus 22.1
) have created a computer model for estimating the amount of money and other resources that leave any community that imports most of its food, usually through large retailers. Cain argues that such a community can save large amounts of money and shrink its ecological footprint by learning how to produce much more of its own food and energy from renewable sources such as the sun, wind, and biomass.

One highly successful example of relocalizing an economy, and of Germany’s shift to renewable energy (
Core Case Study
), is the small windswept rural village of Feldheim, south of Berlin, with a population of about 150. There a young energy entrepreneur, interested in relocalizing energy production, invested in a small number of wind turbines. The village followed his lead and built its own power grid, along with a biogas plant that produces natural gas from corncobs, pig manure, and other farm wastes. Today the village produces all of its own heat and electricity and has a zero-carbon footprint and full employment. It makes a profit by selling the excess energy it produces to major power companies for use in Germany’s electrical grid system.

23.5bShifting to More Sustainable Economies

Figure 23.18 shows some of the components of societies that have more sustainable economic systems. A common goal of such systems is to put more emphasis on conserving and sustaining the air, water, soil, biodiversity, and other natural resources and ecosystem services that in turn sustain all life and all economies.

Figure 23.18

Solutions: Some of the components of more environmentally sustainable economic development favored by ecological and environmental economists.

Critical Thinking:

1. What are three new types of jobs that could be generated by such an economy?











Photos going clockwise starting at “No-till cultivation”: Jeff Vanuga/National Resource Conservation Service. Natalia Bratslavsky/ Shutterstock.com. Pi-Lens/ Shutterstock.com. Vladislav Gajic/ Shutterstock.com. hxdbzxy/ Shutterstock.com. Varina C/ Shutterstock.com. Kalmatsuy/ Shutterstock.com. Brenda Carson/ Shutterstock.com. Alexander Chaikin/ Shutterstock.com. Copper Development Corp/National Renewable Energy Laboratory. Anhong/ Dreamstime.com. pedrosala/ Shutterstock.com. Robert Kneschke/ Shutterstock.com.


A shift to more sustainable economies will involve the death of some industries and the birth of others, which is a normal and beneficial effect of what economists call creative capitalism. Recall that ecological succession occurs when changes in environmental conditions enable certain species to move into an area and replace other species that are no longer favored by the changing environmental conditions (Figure 5.12 and Figure 5.13). By analogy, economic succession in a dynamic capitalist economy occurs as new and more innovative businesses replace older ones that can no longer thrive under changing economic conditions.

The drive to improve environmental quality and to work toward environmental sustainability has created new major growth industries along with profits and large numbers of new green jobs (Figure 23.19). Examples of such jobs include those devoted to protecting natural capital, expanding organic agriculture, making homes and other buildings more energy efficient, modernizing the electrical grid system, and developing low-carbon renewable energy resources.

Figure 23.19

Green careers: Some key environmental businesses and careers are expected to flourish during this century, while environmentally harmful, or sunset, businesses are expected to decline. See the website for this book for more information on various environmental careers.

Critical Thinking:

1. How could some of these careers help you to apply the three scientific principles of sustainability




Top: Goodluz/ Shutterstock.com. Second from top: Goodluz/ Shutterstock.com. Second from bottom: Dusit/ Shutterstock.com. Bottom: Corepics VOF/ Shutterstock.com.

Older industries such as the fossil fuels industry have claimed repeatedly that a switch to a more sustainable economy will lead to massive job losses. However, a study by University of California–Berkeley scientists led by Max Wei reviewed 15 studies on job creation in the energy sector. They found that the production and use of renewable energy sources created more jobs per unit of energy generated than did the production and use of fossil fuels.

Making the shift to more sustainable economies will require governments and industries to greatly increase their spending on research and development—especially in the areas of energy efficiency and renewable energy—as Germany has done in recent years (Core Case Study).


One of the most highly respected leaders in making businesses more sustainable was Ray Anderson (1934–2011), founder of the American company Interface, the world’s largest manufacturer of commercial carpet tiles. In 1994, he announced plans to develop the nation’s first truly sustainable corporation. Within 16 years, Interface had cut water usage by 74%, net greenhouse gas emissions by 32%, solid waste by 63%, fossil fuel use by 60%, and energy use by 44%. These efforts have saved Interface more than $433 million, and the company’s profits tripled. Anderson also created a consulting group as part of Interface to help other businesses start on the path toward becoming more sustainable.

23.5cUsing Lessons from Nature to Make an Economic Transition

In this chapter, we have considered how certain principles of sustainability can guide us in shifting to more sustainable economic systems. This has revealed a sharp contrast between the hypotheses of neoclassical economists and those of ecological economists. We close this chapter with the words of the highly regarded environmental scientist Donella Meadows (1941–2001). In 1996, she contrasted the views of neoclassical and ecological economists as follows:

· The first commandment of economics is: Grow. Grow forever. . . . The first commandment of the earth is: Enough. Just so much and no more. . .

· Economics says: Compete. . . . The earth says: Compete, yes, but keep your competition in bounds. Don’t annihilate. Take only what you need. Leave your competitor enough to live. Wherever possible, don’t compete, cooperate. . . . You’re not in a war, you’re in a community. . . .

· Economics says: Use it up fast. Don’t bother with repair; the sooner something wears out, the sooner you’ll buy another. This makes the gross national product go round. Throw things out when you get tired of them. . . . Get the oil out of the ground and burn it now. . . . The earth says: What’s the hurry? . . . When any part wears out, don’t discard it, turn it into food for something else. . . .

· Economics discounts the future. … a resource 10 years from now is worth only half of what it’s worth now. Take it now. Turn it into dollars. The earth says: Nonsense. … give to the future. … Never take more in your generation than you give back to the next.

· The economic rule is: Do whatever makes sense in monetary terms. The earth says: Money measures nothing more than the relative power of some humans over other humans, and that power is puny compared with the power of the climate, the oceans, the uncounted multitudes of one-celled organisms that created the atmosphere, that recycle the waste, and that have lasted for 3 billion years. The fact that the economy, which has lasted for maybe 200 years, puts zero values on these things means only that the economy knows nothing about value—or about lasting.

Big Ideas

· Making a transition to more sustainable economies will require finding ways to estimate and include the harmful environmental and health costs of producing goods and services in their market prices.

· Making this economic transition will also mean phasing out environmentally harmful subsidies and tax breaks, and replacing them with environmentally beneficial subsidies and tax breaks.

· Another way to further this transition would be to tax pollution and wastes instead of wages and profits and to use most of the revenues from these taxes to promote environmental sustainability and reduce poverty.

· Tying It All TogetherGermany’s Transition to Renewable Energy and Sustainability

·

· iStock.com/Richard Schmidt-Zuper

· The Core Case Study that opens this chapter is about how Germany has used economic tools to spur a shift from using fossil fuels and nuclear energy to relying increasingly on renewable energy to produce its electricity (Figure 23.1). It shows how a country can use its economic policy tools to affect the energy market. As energy use and environmental quality in a country or region are closely intertwined, this story also shows how economics can be used directly to reduce a country’s environmental impact—how economics can play a major role in determining the size of a country’s ecological footprint.

· This story and others in this chapter show how several of the principles of sustainability can be applied to help us shift to more sustainable economies in the near future. The full-cost pricing principle will play a major role in such a shift, because if consumers have to pay the harmful environmental and health costs of the goods and services they use, they will be inclined to choose those that have lower costs and thus lower impacts on the environment and human health. Germany is finding that renewable energy resources—the sun, wind, biogas, and other resources—have lower environmental and health costs, and the country is thus applying the solar energy principle of sustainability. In addition, several companies are developing products and services based more on reuse and recycling, in accordance with the chemical cycling principle of sustainability.

· Think about the other three principles of sustainability related to economics, politics, and ethics (Figure 1.7) and see if you can find ways in which Germany and other subjects of stories in this chapter are applying those principles as they take part in a historic effort to shift to dependence on renewable energy as a part of a more sustainable economy.


Critical Thinking

· Explain how Germany’s transition to increased use of renewable energy to produce much of its electricity (Core Case Study) shows that the economy and the environment are linked. What are some ways in which Germany’s example could be applied to improve the environment and the economy where you live?

· Is it a good idea to maximize economic growth by producing and consuming more and more economic goods and services? Why or why not? What are some alternatives?

· According to one definition, environmentally sustainable economic development involves meeting the needs of the present human generation without compromising the ability of future generations to meet their needs. What do you believe are the needs referred to in this definition? Compare this definition with the characteristics of a low-throughput economy depicted in Figure 23.17.

· Is environmental regulation bad for the economy? Explain. Assume you are a government official and devise an incentive-based regulation for an industry of your choice. (It could be a coal mine, a power plant, a fishing fleet, a chemical plant, or any other business that has a large effect on the environment.) Explain how your regulatory plan will benefit both the industry and the environment.

· Suppose that over the next 20 years, the environmental and health costs of goods and services are gradually added to market prices until their market prices more closely reflect their full costs. What harmful effects and what beneficial effects might such a full-cost pricing process have on your lifestyle and on the lives of any children, grandchildren, and great-grandchildren you might eventually have?

· Do you believe that reducing poverty should be a major environmental goal? Explain. List three ways in which reducing poverty could benefit you and any children, grandchildren, and great-grandchildren you might eventually have. Why do you think the world has not focused more intense efforts on reducing poverty?

· Do you think we should shift to an economy based on the idea of leasing certain services instead of buying the products that provide the services? Explain. If you are for such a shift, what do you think is the best strategy for making it happen? If you are opposed, what are your main objections to the idea?

· Congratulations! You are in charge of the world. Write up a 5- to 10-point strategy for shifting the world to more environmentally sustainable economic systems over the next 50 years.

Doing Environmental Science

Go online and find a tool for estimating the full cost (including harmful environmental and health costs) of common products. Choose five products that you regularly buy and use this tool to estimate the full cost of each. Record these data in a table, along with the price you paid for each product. (Estimate this price if you don’t remember what you paid.) Now do some market research and try to find alternatives to these products that have lower full costs. Record these data in your table. Do some calculations to learn

· the differences between the prices you paid for your common products and their full costs;

· for each product, the difference between its price and the price of the alternative substitute you found; and

· for each product, the difference between its full cost and the full cost of the alternative substitute you found.

Finally, for each product pair, use your data to answer these questions:

· Without knowledge of the full costs, would the price differences be large enough to keep you from buying the alternative product and sticking with your commonly used product? Explain.

· Comparing their full costs, does this change your mind about whether the price difference is high enough to keep you from switching products? Explain.

· How high would the full cost of your commonly used product have to be to get you to pay the higher price for the alternative?

· Doing Environmental Science

· Go online and find a tool for estimating the full cost (including harmful environmental and health costs) of common products. Choose five products that you regularly buy and use this tool to estimate the full cost of each. Record these data in a table, along with the price you paid for each product. (Estimate this price if you don’t remember what you paid.) Now do some market research and try to find alternatives to these products that have lower full costs. Record these data in your table. Do some calculations to learn

· the differences between the prices you paid for your common products and their full costs;

· for each product, the difference between its price and the price of the alternative substitute you found; and

· for each product, the difference between its full cost and the full cost of the alternative substitute you found.

· Finally, for each product pair, use your data to answer these questions:

· Without knowledge of the full costs, would the price differences be large enough to keep you from buying the alternative product and sticking with your commonly used product? Explain.

· Comparing their full costs, does this change your mind about whether the price difference is high enough to keep you from switching products? Explain.

· How high would the full cost of your commonly used product have to be to get you to pay the higher price for the alternative?

·

Chap23

·

23.1

Economic Systems and the Biosphere

·

23.1a

Economic Systems Depend on Natural Capital

·

23.1b

Government Intervention Helps Correct Market Failures

·

23.1c

Models of Economies

·

23.2

Economic Value of Natural Capital and Pollution Control

·

23.2a

Valuing Natural Capital

·

23.2b

Estimating the Future Value of a Resource

·

23.2c

Optimum Levels of Pollution C

ontrol and Resource Use

·

23.2d

Cost

Benefit Analysis

·

23.3

Using Economics to Deal With Environmental Problems

·

23.3a

Full

Cost Pricing

·

23.3b

E

nvironmentally Beneficial Subsidies

·

23.3c

Environmental Indicators

·

23.3d

Taxing Pollution and Wastes Instead of Wages and Profits

·

23.3e

Using Cap

and

Trade to Reduce Pol

lution and Resource Waste

·

23.3f

Labeling Environmentally Beneficial Goods and Services

·

23.3g

Environmental Laws and Regulations

·

23.3h

Selling Services Instead of Products

·

23.4

Poverty and Environmental Problems

·

23.4a

Reducing Poverty

·

23.4b

Millennium Development Goals and Sustainable Development Goals

·

23.5

Environmentally Sustainable Economies

·

23.5a

Low

Throughput Economies

·

23.5b

Shifting to More Sustainable Economies

·

23.5c

Using Lessons f

rom Nature to Make an Economic Transition

·

Tying It All Together

Germany’s Transition to Renewable Energy and Sustainability

·

Chapter Review

·

Critical Thinking

·

Doing Environmental Science

Chap23

 23.1Economic Systems and the Biosphere

 23.1aEconomic Systems Depend on Natural Capital

 23.1bGovernment Intervention Helps Correct Market Failures

 23.1cModels of Economies

 23.2Economic Value of Natural Capital and Pollution Control

 23.2aValuing Natural Capital

 23.2bEstimating the Future Value of a Resource

 23.2cOptimum Levels of Pollution Control and Resource Use

 23.2dCost–Benefit Analysis

 23.3Using Economics to Deal With Environmental Problems

 23.3aFull-Cost Pricing

 23.3bEnvironmentally Beneficial Subsidies

 23.3cEnvironmental Indicators

 23.3dTaxing Pollution and Wastes Instead of Wages and Profits

 23.3eUsing Cap-and-Trade to Reduce Pollution and Resource Waste

 23.3fLabeling Environmentally Beneficial Goods and Services

 23.3gEnvironmental Laws and Regulations

 23.3hSelling Services Instead of Products

 23.4Poverty and Environmental Problems

 23.4aReducing Poverty

 23.4bMillennium Development Goals and Sustainable Development Goals

 23.5Environmentally Sustainable Economies

 23.5aLow-Throughput Economies

 23.5bShifting to More Sustainable Economies

 23.5cUsing Lessons from Nature to Make an Economic Transition

 Tying It All TogetherGermany’s Transition to Renewable Energy and Sustainability

 Chapter Review

 Critical Thinking

 Doing Environmental Science

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