Question: Based on your “expertise” in environmental economics, you have been hired as a consultant to the country of DCM to assist them in their investment planning regarding Plastics

17 Oct 2023,11:42 PM

 

 

1. (12 points total) Recycling or reuse of resources is an important part of sustainability because it reduces the negative human impact on the environment and helps reduce the pressure on natural resources. Recognizing there is no clear solution, the country of DCM is, nevertheless, planning on making a significant investment in setting up recycling facilities throughout the country. DCM has embraced the new economic model of a “circular economy” as discussed in “Towards a Circular Economy: Business Rationale for an Accelerated Transition” Link is also available on course website.

 

Based on your “expertise” in environmental economics, you have been hired as a consultant to the country of DCM to assist them in their investment planning regarding Plastics. In a minimum of 1000 words, provide the country of DCM with your recommendations on how to best achieve their goal. In your analysis, be sure to discuss the benefits and costs of plastic recycling (some have claimed it is not the panacea often discussed).  Since you will need to consult additional sources, be sure to cite these sources (make the link available, for example).  

 

 

2. (10 points total) You are appointed advisor to the government of a large, developed country which is seeking to reduce the environmental impact of fossil fuels on the economy and society. Referring to the link below, answer the following questions. 

 

               https://ourworldindata.org/energy

     

1. (2 points) What factors contribute most to the negative environmental impacts of energy production? Be specific and explain.  

 

2. (6 points) You are now asked to write a letter of about 750 words to the Ministry of the Environment discussing recommendations and policies the government can implement to achieve its goal of reducing the environmental impact of energy on the economy and society. Be specific and explain in detail. Since you will need to consult additional sources, again be sure to cite properly these sources.

 

3. (2 points) Are there costs to this reduction? Explain.

 

3. (6 points total) Consider a two-period model in which there is a fixed supply of a depletable resource. The demand for this resource is constant over both periods and is given as:

There is an initial resource endowment (supply) of 1000 units of the depletable resource.

 

1. (2 points) Based on this information, what it the amount of the resource extracted in each period. Show your work as well as a graph showing the outcome in each period.

 

2. (4 points) Now suppose the initial resource endowment (supply) is now given to be only 400 units of the good and you are told the discount rate (factor) is determined to be 8 percent. Given this information, how much of the resource will be extracted in time period 1 and time period 2 if you desire to satisfy the condition that the present value of the marginal benefit from the last unit in period 1 equals the present value of the marginal net benefit in period 2?

 

4. (6 points total) The country of WWTWB (Whichever Way the Wind Blows) is considering implementing a project that will install a windmill farm 10 miles offshore of a rapidly growing beach community. You have been requested to undertake a cost-benefit analysis to evaluate the feasibility of the project. Research this issue and list what you perceive to be the:

 

1. (1 point) Private Costs of the project.
2. (1 point) Social Costs of the project.
3. (1 point) Private Benefits of the project.
4. (1 point) Social Benefits of the project.
5. (1 point) What type of uncertainty could exist for such a project? Explain.
6. (1 point) If you lived in this beach community would you support the project. Explain

5. (6 points total) Explain (in at least 200 words for each letter), why you agree or disagree with the following ideas:

 

1. (3 points) All people have a right to use as many resources as they want.
2. (3 points) Other species exist to be used by humans.

 

 

6. (6 points total) For each of the examples below, please answer the following:

 

1. Does an externality exist? If so, classify the externality as positive/negative (or both).
2. If an externality exists, determine whether the Coase Theorem applies (i.e. is it possible to assign property rights and solve the problem?
3. If it is possible for the Coase Theorem to solve this problem explain how.

 

 

Example 1 (3 points) – ABC Company builds a garbage recycling plant in a low-income area of the city.

 

Example 2 (3 points) - Your neighbors (whose apartment is right next door and has thin walls) are big fans of football and they blast their television at all hours watching games.

 

 

7. (6 points) Assume an increasing marginal-extraction-cost model of the allocation of a depletable resource with a renewable substitute (refer to text and/or notes for graph). Showing diagrammatically, what happens if:

 

1. (3 points) A per-unit tax if imposed by the government on each unit of the depletable resource used. Be sure to show the new effect on (i) marginal extraction cost and marginal user cost; (ii) quantity extracted; and (iii) switching point.

 

2. (3 points) Now on a new graph, show diagrammatically what happens to the (i) quantity extracted; and (ii) switching point if technological development in resource extraction reduces the extraction cost for each unit by an amount equal to the per-unit tax.

 

8. (4 points total) The country of DCM is also considering building a recreational area about an hour’s drive from the urban area. You are assigned the task of developing a survey to estimate the values of a project using the travel-cost method. Develop eight (8) questions to be used in the survey to find out information that will help you estimate the benefits and costs of this project and list them below. For each question, also specify what economics cost of benefit you are trying to ascertain.

 

 

9. (4 points total) Refer to the diagram below and fill in the blanks with letters with the correct answer to the questions in the given paragraphs (0.5 point each).

 

 

On the left side of the diagram, there are no controls on pollution emissions and there is a 0% reduction in pollution. As we move toward the right along the horizontal axis, pollution is reduced through the application of environmental controls. Industrial emissions are entirely eliminated at 100%.

 

Consider a polluting firm that faces an increasing marginal abatement cost curve. If level of abatement was initially W, total net benefits would be equal to 1. ____________ and marginal benefit exceeds marginal cost by an amount equal to 2.___________. At the optimal level of pollution control, total benefits is the area 3._____________ and total cost is the area 4. _____________. At this level of pollution the net marginal benefit would be equal to 5.__________ .

 

Now assume were are now at the optimal level of pollution control, However, the government enacts stringent pollution controls that require firms to reduce pollution to H.  Were pollution to decrease from the optimal level (you have figured this out), the total benefit from this reduction in pollution would be equal to area 6.___________ and the total cost of this reduction in pollution would be equal to area 7.___________.  The difference between total benefits and total costs is defined as the net change in total welfare and is equal to area 8.___________ .