Cover
Half Title
Title Page
Copyright Page
Table of Contents in Brief
Table of Contents in Full
Preface
New to this Edition
An Overview of the Book
Acknowledgments
Part I Introduction to the Field of Environmental and Natural Resource Economics
Chapter 1 Visions of the Future
Introduction
The Self-Extinction Premise
Example 1.1 A Tale of Two Cultures
Future Environmental Challenges
The Climate Change Challenge
The Water Accessibility Challenge
Example 1.2 Climate Change and Water Accessibility: The Linkage
The Just Transition Challenge
The Policy Context
How Will Societies Respond?
The Role of Economics
Debate 1.1 Ecological Economics versus Environmental Economics
The Use of Models
The Road Ahead
Example 1.3 Experimental Economics: Studying Human Behavior in a Laboratory and in the Field
Some Overarching Questions to Guide our Investigation
An Overview of the Book
Summary
Discussion Questions
Self-Test Exercise
Notes
Further Reading
Chapter 2 The Economic Approach: Property Rights, Externalities, and Environmental Problems
Introduction
The Human–Environment Relationship
The Economic Approach
Example 2.1 Economic Impacts of Reducing Hazardous Pollutant Emissions from Iron and Steel Foundries
Economic Efficiency
Static Efficiency
Property Rights
Property Rights and Efficient Market Allocations
Efficient Property Rights Structures
Producer’s Surplus, Scarcity Rent, and Long-Run Competitive Equilibrium
Externalities as a Source of Market Failure
The Concept Introduced
Types of Externalities
Example 2.2 Shrimp Farming Externalities in Thailand
Alternative Property Right Structures and the Incentives They Create
Public Goods
Example 2.3 Public Goods Privately Provided: The Nature Conservancy
Imperfect Market Structures
Asymmetric Information
Government Failure
The Pursuit of Efficiency
Judicial Liability Rules
Legislative and Executive Regulation
Example 2.4 Can Eco-Certification Make a Difference? Organic Costa Rican Coffee
Summary
Discussion Questions
Self-Test Exercises
Notes
Further Reading
Chapter 3 Evaluating Trade-Offs: Benefit-Cost Analysis and Other Decision-Making Metrics
Introduction
Normative Criteria for Decision Making
Evaluating Predefined Options: Benefit-Cost Analysis
Finding the Optimal Outcome
Relating Optimality to Efficiency
Comparing Benefits and Costs across Time
Dynamic Efficiency
Applying the Concepts
Pollution Control
Example 3.1 Does Reducing Pollution Make Economic Sense? Evidence from the Clean Air Act
Estimating Benefits of Carbon Dioxide Emission Reductions
Example 3.2 Using the Social Cost of Capital: The DOE Microwave Oven Rule
Example 3.3 Revisiting the Social Cost of Carbon: Just How High Should it Be?
Issues in Benefit Estimation
Approaches to Cost Estimation
The Treatment of Risk
Distribution of Benefits and Costs
Choosing the Discount Rate
Example 3.4 The Importance of the Discount Rate
Debate 3.2 Discounting over Long Time Horizons: Should Discount Rates Decline?
Divergence of Social and Private Discount Rates
A Critical Appraisal
Example 3.5 Is the Two for One Rule a Good Way to Manage Regulatory Overreach?
Other Decision-Making Metrics
Cost-Effectiveness Analysis
Impact Analysis
Summary
Discussion Questions
Self-Test Exercises
Notes
Further Reading
Chapter 4 Valuing the Environment: Methods
Introduction
Why Value the Environment?
Debate 4.1 Should Humans Place an Economic Value on the Environment?
Valuation
Types of Values
Classifying Valuation Methods
Stated Preference Methods
Contingent Valuation Method
Debate 4.2 Willingness to Pay versus Willingness to Accept: Why So Different?
Choice Experiments
Example 4.1 Leave No Behavioral Trace: Using the Contingent Valuation Method to Measure Passive-Use Values
Example 4.2 Careful Design in Contingent Valuation: An Example of WTP to Protect Brown Bears
Example 4.3 The Value of U.S. National Parks
Revealed Preference Methods
Example 4.4 Using the Travel-Cost Method to Estimate Recreational Value: Beaches in Minorca, Spain
Benefit Transfer and Meta-Analysis
Using Geographic Information Systems to Enhance Valuation
Challenges
Example 4.5 Using GIS to Inform Hedonic Property Values: Visualizing the Data
Example 4.6 Valuing the Reliability of Water Supplies: Coping Expenditures in Kathmandu Valley, Nepal
Debate 4.3 Distance Decay in Willingness to Pay: When and How Much Does Location Matter?
Valuing Human Life
Debate 4.4 What Is the Value of a Polar Bear?
Debate 4.5 Is Valuing Human Life Immoral?
Example 4.7 Using the Value of Statistical Life to Inform Policy: COVID-19
Damage Assessments: Loss of Ecosystem Services
Summary: Nonmarket Valuation Today
Discussion Question
Self-Test Exercises
Notes
Further Reading
Chapter 5 Dynamic Efficiency and Sustainable Development
Introduction
A Two-Period Model
Defining Intertemporal Fairness
Are Efficient Allocations Fair?
Example 5.1 The Alaska Permanent Fund
Applying the Sustainability Criterion
Example 5.2 Nauru: Weak Sustainability in the Extreme
Implications for Environmental Policy
Summary
Discussion Question
Self-Test Exercises
Notes
Further Reading
Appendix: The Simple Mathematics of Dynamic Efficiency
Chapter 6 Depletable Resource Allocation: The Role of Longer Time Horizons, Substitutes, and Extraction Cost
Introduction
A Resource Taxonomy
Terms
Efficient Intertemporal Allocations
The Two-Period Model Revisited
The N-Period Constant-Cost Case
Transition to a Renewable Substitute
Increasing Marginal Extraction Cost
Exploration and Technological Progress
Example 6.1 Historical Example of Technological Progress in the Iron Ore Industry
Market Allocations of Depletable Resources
Appropriate Property Rights Structures
Environmental Costs
Example 6.2 The Green Paradox
Summary
Discussion Question
Self-Test Exercises
Notes
Further Reading
Appendix: Extensions of the Constant-Extraction-Cost Depletable Resource Model: Longer Time Horizons and the Role of an Abundant Substitute
The N-Period, Constant-Cost, No-Substitute Case
Constant Marginal Cost with an Abundant Renewable Substitute
Part II Economics of Pollution Control
Chapter 7 Economics of Pollution Control: An Overview
Introduction
A Pollutant Taxonomy
Defining the Efficient Allocation of Pollution
Stock Pollutants
Fund Pollutants
Market Allocation of Pollution
Efficient Policy Responses
Cost-Effective Policies for Uniformly Mixed Fund Pollutants
Defining a Cost-Effective Allocation
Cost-Effective Pollution Control Policies
Debate 7.1 Should Developing Countries Rely on Market-Based Instruments to Control Pollution?
Cost-Effective Policies for Nonuniformly Mixed Surface Pollutants
The Single-Receptor Case
Policy Approaches for Nonuniformly Mixed Pollutants
The Many-Receptors Case
Other Policy Dimensions
The Revenue Effect
Example 7.1 The Swedish Nitrogen Oxide Charge
Example 7.2 RGGI Revenue: The Maine Example
Responses to Changes in the Regulatory Environment
Instrument Choice under Uncertainty
Summary
Discussion Questions
Self-Test Exercises
Notes
Further Reading
Appendix: The Simple Mathematics of Cost-Effective Pollution Control
Policy Instruments
Chapter 8 Stationary-Source Local and Regional Air Pollution
Introduction
Conventional Pollutants
The Regulatory Policy Framework
The Efficiency of the Command-and-Control Approach
Debate 8.1 Does Sound Policy Require Targeting New Sources via the New Source Review?
Example 8.1 Do Uniform Ambient Air Quality Standards Provide Just Protection for all U.S. Residents?
Debate 8.2 The Particulate and Smog Ambient Standards Controversy
Cost-Effectiveness of the Traditional Regulatory Approach
Air Quality
Market-Based Approaches
Example 8.2 Japan’s Pollution-related Health Damage Compensation System
Example 8.3 The U.S. Sulfur Allowance Program in Retrospect
Example 8.4 Controlling SO2 Emissions in the United States and Germany: A Comparison
Co-Benefits and Co-Costs
Summary
Example 8.5 Technology Diffusion in the Chlorine-Manufacturing Sector
Discussion Questions
Self-Test Exercises
Notes
Further Reading
Chapter 9 Water Pollution: Managing Water Quality for Rivers, Lakes, and Oceans
Introduction
Nature of Water Pollution Problems
Types of Waste-Receiving Water
Sources of Contamination
Types of Pollutants
Debate 9.1 Toxics in Fish Tissue: Do Fish Consumption Advisories Change Behavior?
Traditional Water Pollution Control Policy
The U.S. Experience
Early Legislation
Subsequent Legislation
Example 9.1 The Challenges of Estimating the Benefits of Water Pollution Policy
Example 9.2 Effluent Trading for Nitrogen in Long Island Sound
The Clean Water Rule
The European Experience
European Water Framework Directive
The Developing Country Experience
Example 9.3 Economic Incentives for Water Pollution Control: The Case of Colombia
Ocean Pollution
Oil Spills
Ocean Dumping
Ocean Trash
Debate 9.2 To Ban or Not to Ban: The Unintended Consequences of Plastic Bag Policies
Oil Spills—Tankers and Offshore Drilling
An Overall Assessment
Example 9.4 Deepwater Horizon BP Oil Spill—Estimating the Damages
Summary
Discussion Questions
Self-Test Exercises
Notes
Further Reading
Chapter 10 Toxic Substances and Environmental Justice
Introduction
Nature of Toxic Substance Pollution
Toxic Substance Health Effects
Policy Issues
Example 10.1 The Arduous Path to Managing Toxic Risk: Bisphenol A
Market Allocations and Toxic Substances
Occupational Hazards
Example 10.2 Susceptible Populations in the Hazardous Workplace: An Historical Example
Product Safety
Third Parties
Example 10.3 Private Judicial Remedies for Managing Toxic Risk: The Case of PFAS
Environmental Justice and the Siting of Hazardous Waste Plants
History
Environmental Justice Research and the Emerging Role of GIS
The Economics of Site Location
Example 10.4 Which Came First—The Toxic Facility or the Minority Neighborhood?
Environmental Justice in Canada and Europe
Programs to Improve Information
Proposition 65
Example 10.5 Regulating through Mandatory Disclosure: The Case of Lead
Europe’s Approach to Toxic Substance Management
Summary
Discussion Questions
Self-Test Exercises
Notes
Further Reading
Part III Climate Section
Chapter 11 Climate Change I: The Nature of the Challenge
Introduction
The Science of Climate Change: The Basics
Quantifying the Intensity of the Threats
Tipping Points and Fat Tails
Example 11.1 The Permafrost Thaw Tipping Point
Dealing with Uncertainty
Broad Strategies
The Evolution of Targets
Economic Insights on Targets and Timing
Getting There: The Economics of International Climate Agreements
The Precedent: Reducing Ozone-Depleting Gases
Summary
Discussion Question
Self-Test Exercise
Notes
Further Reading
Chapter 12 Climate Change II: The Role of Energy Policy
Introduction
Future Pathways
Energy Efficiency
Example 12.1 On-Bill Financing in Hawai‘i: Solving the Up-Front Cost Problem
Example 12.2 Energy Efficiency: Rebound and Backfire Effects
Fuel Switching
Beneficial Electrification
The Potential Role for Nuclear Energy
The Role of Policy in Transitioning to Renewables
Policy Design Issues
Example 12.3 The Relative Cost-Effectiveness of Renewable Energy Policies in the United States
Transition Complexities
Example 12.4 Negative Prices in the Energy Industry
Dealing with Intermittent Sources
Integrating Distributed Energy Sources
Example 12.5 Thinking Outside of the Box: The Boothbay Pilot Project
Example 12.6 The Economics of Solar Microgrids in Kenya
Access to Critical Resources
Summary
Discussion Questions
Self-Test Exercises
Note
Further Reading
Chapter 13 Climate Change III: Carbon Pricing
Introduction
Carbon Pricing and Emissions Mitigation Policy
Forms of Carbon Pricing
Carbon Offset Markets
Example 13.1 Air Capture and Storage as an Offset
Debate 13.1 Are Offsets Helpful or Harmful in Efforts to Reduce the Climate Threat?
Carbon Markets and Taxes: How have these Approaches Worked in Practice?
Cost Savings
Economic Impacts
The Sufficiency of Carbon Pricing: Meeting the Goals?
Protecting Trade-Vulnerable Industries
Using the Revenue: Possibilities and Experience
Uncertainty-Decreasing Hybrid Carbon Pricing Designs
Emissions Trading Program Hybrids
Carbon Tax Hybrids
Providing Context: A Brief Look at Four Illustrative Carbon Pricing Programs
Output-Based Carbon Pricing Systems
Policy Design and the Just Transition
Controversy: The Morality of Emissions Trading
Debate 13.2 Is Global Greenhouse Gas Trading Immoral?
Summary
Discussion Questions
Self-Test Exercises
Notes
Further Reading
Chapter 14 Climate Change IV: Adaptation: Floods, Wildfires, and Water Scarcity
Introduction—The Role of Adaptation Policy
Adaptation and Mitigation—Complements or Substitutes?
Climate Adaptation: Flood Risks—Storms, Sea Level Rise, and Storm Surges
Flood Insurance in the United States
Example 14.1 Enhancing Resilience against Natural Disasters with Flood Insurance
Proactive versus Reactive Adaptation Strategies
Flood Insurance around the World
Rethinking Flood Insurance
Example 14.2 Shoreline Stabilization and Beach Renourishment: Buying Time
Managed Retreat: Buyouts
Prioritizing among Adaptation Options in the Presence of Ethical Boundaries
Information as an Adaptive Strategy
Example 14.3 What to Expect when you Are Expecting a Hurricane: Hurricane Exposure and Birth Outcomes
Climate Adaptation: Wildfire Risk and Management
Example 14.4 Mandatory Adaptation Benefits Homeowners AND their Neighbors?
Climate Adaptation: Managing Water Shortages
The Efficient Allocation of Scarce Water
Municipal Water Pricing
Example 14.5 The Cost of Conservation: Revenue Stability versus Equitable Pricing
Full Cost Recovery Pricing
Desalination and Wastewater Recycling
Example 14.6 Moving Rivers or Desalting the Sea? Costly Remedies for Water Shortages
Roles for Public and Private Institutions
Summary
Discussion Questions
Self-Test Exercises
Notes
Further Reading
Chapter 15 Transportation: Managing Congestion and Pollution
Introduction
Subsidies and Externalities
Implicit Subsidies
Externalities
Consequences
The U.S. and E.U. Policy Approaches
Example 15.1 Monitoring and Enforcement: The Volkswagen Experience
Transportation Pricing
Fuel Taxes
Congestion Pricing
Example 15.2 Zonal Mobile-Source Pollution-Control Strategies: Singapore
Example 15.3 Sacrificing Efficiency for Acceptability? Congestion Charges in Practice
Example 15.4 New York City’s Congestion Pricing Plan: Will it Really Reduce Congestion?
Fuel-Economy Standards: The U.S. Approach
Debate 15.1 CAFE Standards or Fuel Taxes?
Example 15.5 Fuel-Economy Standards When Fuel Prices Are Falling vs. Rising
Gas Guzzler Tax
Fuel-Economy Standards in the European Union
Example 15.6 Car-Sharing: Better Use of Automotive Capital?
Fuel-Economy Standards in Other Countries
External Benefits of Fuel-Economy Standards
Other Transportation Policies
Private Toll Roads
Parking Cash-Outs
Bike-Sharing Programs
Pricing Public Transport
Feebates
Zero-Emission Vehicles and Tax Credits for Electric Vehicles
Example 15.7 Modifying Car Insurance as an Environmental Strategy
Accelerated Retirement Strategies
Example 15.8 The Cash-for-Clunkers Program: Did it Work?
Example 15.9 Counterproductive Policy Design
Summary
Discussion Question
Self-Test Exercises
Notes
Further Reading
Part IV Natural Resource Economics
Chapter 16 Ecosystem Services: Nature’s Threatened Bounty
Introduction
The State of Ecosystem Services
Economic Analysis of Ecosystem Services
Demonstrating the Value of Ecosystem Services
The Value of Coral Reefs
Example 16.1 The Value of Protecting Coral Reefs in the Coral Triangle and Mesoamerica
Valuing Supporting Services: Pollination
Example 16.2 Valuing Pollination Services: Two Illustrations
Valuing Supporting Services: Forests and Coastal Ecosystems
Challenges and Innovation in Ecosystem Valuation
Institutional Arrangements and Mechanisms for Protecting Nature’s Services
Payments for Environmental Services (PES)
Debate 16.1 Paying for Ecosystem Services or Extortion? The Case of Yasuni National Park
Example 16.3 Trading Water for Beehives and Barbed Wire in Bolivia
Tradable Entitlement Systems
Example 16.4 Reducing Emissions from Deforestation and Forest Degradation (REDD): A Twofer?
Debate 16.2 Tradable Quotas for Whales?
Ecotourism
Debate 16.3 Does Ecotourism Provide a Pathway to Sustainability?
Example 16.5 Payments for Ecosystem Services—Wildlife Protection in Zimbabwe
Example 16.6 On the Error of Ignoring Ecosystem Services: The Case of Wolf Recovery in the United States
Poverty and Debt
Debt-for-Nature Swaps
Extractive Reserves
The World Heritage Convention
Royalty Payments
Example 16.7 Does Pharmaceutical Demand Offer Sufficient Protection to Biodiversity?
Example 16.8 Trust Funds for Habitat Preservation
The Special Problem of Protecting Endangered Species
Conservation Banking
Example 16.9 Conservation Banking: The Gopher Tortoise Conservation Bank
The Agglomeration Bonus
Safe Harbor Agreements
Preventing Invasive Species
Example 16.10 The Changing Economics of Monitoring and its Role in Invasive Species Management
Moving Forward
Summary
Discussion Questions
Self-Test Exercises
Notes
Further Reading
Chapter 17 Common-Pool Resources: Commercially Valuable Fisheries
Introduction
Efficient Allocations—Bioeconomics Theory
The Biological Dimension
Static Efficient Sustainable Yield
Dynamic Efficient Sustainable Yield
Appropriability and Market Solutions
Public Policy toward Fisheries
Example 17.1 Harbor Gangs of Maine and Other Informal Arrangements
Raising the Real Cost of Fishing
Taxes
Perverse Incentives? Subsidies
Catch Share Programs
Example 17.2 The Relative Effectiveness of Transferable Quotas and Traditional Size and Effort Restrictions in the Atlantic Sea Scallop Fishery
Debate 17.1 ITQs or TURFs? Species, Space, or Both?
Aquaculture
Subsidies and Buybacks
Debate 17.2 Aquaculture: Does Privatization Cause More Problems Than it Solves?
Exclusive Economic Zones—The 200-Mile Limit
Marine Protected Areas and Marine Reserves
Enforcement—Illegal, Unreported, and Unregulated Fish Stocks
Debate 17.3 Bluefin Tuna: Difficulties in Enforcing Quotas for High-Value Species
Summary
Discussion Questions
Self-Test Exercises
Notes
Further Reading
Appendix: The Harvesting Decision: Fisheries
Chapter 18 Forests: Storable, Renewable Resources
Introduction
Characterizing Forest Harvesting Decisions
Special Attributes of the Timber Resource
The Biological Dimension
The Economics of Forest Harvesting
Extending the Basic Model
Sources of Inefficiency
Perverse Incentives for the Landowner
Perverse Incentives for Nations
Debate 18.1 Is Firewood a Carbon-Neutral Fuel?
Sustainable Forestry
Public Policy
Example 18.1 Producing Sustainable Forestry through Certification: Is it Working?
Forestry Offsets (Credits)
Summary
Discussion Questions
Self-Test Exercises
Notes
Further Reading
Appendix: The Harvesting Decision: Forests
Chapter 19 Land: A Locationally Fixed, Multipurpose Resource
Introduction
The Economics of Land Allocation
Land Use
Land-Use Conversion
The Ethanol Story
The Role of Irrigation
The Rise of Organic Food
Sources of Inefficient Use and Conversion
Sprawl and Leapfrogging
Incompatible Land Uses
Undervaluing Environmental Amenities
Debate 19.1 Should Landowners Be Compensated for “Regulatory Takings”?
The Influence of Taxes on Land-Use Conversion
Market Power
Debate 19.2 What Is a “Public Purpose”?
Special Problems in Developing Countries
Innovative Market-Based Policy Remedies
Establishing Property Rights
Transferable Development Rights
Example 19.1 Controlling Land Development with TDRs in Practice
Conservation Easements
Development Impact Fees
Real Estate Tax Adjustments
Summary
Discussion Question
Self-Test Exercises
Notes
Further Reading
Part V Sustainable Development
Chapter 20 Sustainable Development: Meeting the Challenge
Introduction
The Basic Elements of Sustainable Development
The Sufficiency of Market Allocations in Attaining Just, Sustainable Outcomes
Market Imperfections
The Evolution of the Sustainable Development Concept
The Current Sustainable Development Vision in Practice
Debate 20.1 What Role Should Nuclear Power Play in our Energy Future?
The Evolution of Sustainable Development Metrics
Enter Donut Economics
Meeting the Challenges
The Intergenerational Challenge
Example 20.1 Metropolitan Tokyo’s Cap-and-Trade Program for Buildings
The Intragenerational Challenge
The Evolving Roles of Technology, the Business Community, and Nongovernmental Organizations
Example 20.2 The Effects of an Unconditional Cash Transfer System in Kenya
Summary
Discussion Questions
Self-Test Exercise
Notes
Further Reading
Answers to Self‑Test Exercises
Glossary
Index