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Environmental Economics

Valuing our Natural Wealth

Rene Rafael B. Juntereal

• Understand the relevance of environmental

economics “Why environmental economics?”
• Discuss the problems with markets and classical
• Realize the importance of valuing our natural
resources “Natural Capitalism”
Table Coral at the Apo Island Marine Reserve
Apo Island Marine Reserve 2008
Chapel Point Apo Island 2008
Conventional view of economic activity
Neoclassical economics
• Focuses on the psychology of
consumer choice

The market favors equilibrium between

supply and demand.
Marginal benefit and cost

Marginal benefit and cost curves determine

an “optimal” level of resource use or
pollution mitigation.
The World economy is 7 times the
size it was 50 years ago!

• More & more goods produced

• More material wealth although big gaps
between rich and poor.
• Resources are limited so nonstop
growth is not sustainable.
Criticism of neoclassical economics:

• Runaway growth can be compared to...

We are spending more and more
money, but are our lives really that
much better?
GDP vs. GPI(Genuine Progress
Environmental view of economic activity
Donut Model by Kate Raworth
Strategies for Sustainability

• Identify external costs

• Assign value to nonmonetary items

• Attempt to make market prices reflect real

costs and benefits
Assign Values to Nonmonetary Items
• Nonmarket values- values not included in the
price of a good or service, the worth we
ascribe to things
Market failure

• Occurs when markets do not take into

account the environment’s positive effect on
economy or negative effects on environment
or people (external costs).

• Traditionally has been countered by

government intervention: laws & regulation,
green taxes on environmentally harmful
activities, market incentives
Natural Capitalism

• Natural capital refers to the natural resources and

ecosystem services that make possible all
economic activity, indeed all life
– Natural capitalism's four interlinked principles are:
• Radically increased resource productivity.
• Redesigning industry on biological models with closed loops
and zero waste
• Shifting from the sale of goods to the provision of services
• Reinvesting in the natural capital that is the basis of future

– Natural Capitalism: Creating the Next Industrial Revolution, by Paul

Hawken, Amory Lovins, and L. Hunter Lovins
What can we do individually?

• Be aware and educated about community issues

(economic principles, sound financial decision
making etc.)
• Do not patronize certain products or promote
certain lifestyles
• Waste segregation and management
• Support sustainable economic policy
• Individual micro saving in an environmental fund?

“ Environmental values are economic values; it is in principle just as

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

• Classical Economic theory needs to be

• to accurately plan for sustainable development we
need to quantify what was previously unquantified
• We have to decide what we mean by development
and growth
You have to decide whether development means
affluence or whether development means peace,
prosperity and happiness.
Sunderlal Bahuguna