Environmental and Natural Resource Economics Environmental and Natural Resource Economics is the best-selling text for natural resource economics and environmental economics courses, offering a policy-oriented approach and introducing economic theory and empirical work from the field. Students will leave the course with a global perspective of both environmental and natural resource economics and how they interact. Complemented by a number of case studies showing how underlying economic principles provided the foundation for specific environmental and resource policies, this key text highlights what can be learned from the actual experience. This new, 11th edition includes updated data, a number of new studies and brings a more international focus to the subject. Key features include: ● Extensive coverage of the major issues including climate change, air and water pollution, sustainable development, and environmental justice. ● Dedicated chapters on a full range of resources including water, land, forests, fisheries, and recyclables. ● Introductions to the theory and method of environmental economics including externalities, benefit-cost analysis, valuation methods, and ecosystem goods and services. ● Boxed ‘Examples’ and ‘Debates’ throughout the text which highlight global examples and major talking points. The text is fully supported with end-of-chapter summaries, discussion questions, and self-test exercises in the book and multiple-choice questions, simulations, references, slides, and an instructor’s manual on the Companion Website. Tom Tietenberg is the Mitchell Family Professor of Economics, Emeritus at Colby College, Maine, USA. Lynne Lewis is Elmer W. Campbell Professor of Economics at Bates College, Maine, USA. Taylor & Francis Taylor & Francis Group http:/taylorandfrancis.com Environmental and Natural Resource Economics 11th Edition Tom Tietenberg and Lynne Lewis RO Routledge UTLEDG Taylor & Francis Group E NEW YORK AND LONDON Eleventh edition published 2018 by Routledge 711 Third Avenue, New York, NY 10017 and by Routledge 2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN Routledge is an imprint of the Taylor & Francis Group, an informa business © 2018 Taylor & Francis The right of Tom Tietenberg and Lynne Lewis to be identified as authors of this work has been asserted by them in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. First edition published by Scott, Foresman and Co. 1984 Tenth edition published by Pearson 2014 Library of Congress Cataloging-in-Publication Data A catalog record for this book has been requested ISBN: 978-1-138-63229-5 (hbk) ISBN: 978-1-315-20834-3 (ebk) Typeset in Sabon by Keystroke, Neville Lodge, Tettenhall, Wolverhampton Visit the Companion Website: www.routledge.com/cw/Tietenberg Contents in Brief Preface xxiii New to this Edition xxiii An Overview of the Book xxv 1 Visions of the Future 1 2 The Economic Approach: Property Rights, Externalities, and Environmental Problems 17 3 Evaluating Trade-Offs: Benefit-Cost Analysis and Other Decision-Making Metrics 45 4 Valuing the Environment: Methods 73 5 Dynamic Efficiency and Sustainable Development 107 6 Depletable Resource Allocation: The Role of Longer Time Horizons, Substitutes, and Extraction Cost 123 7 Energy: The Transition from Depletable to Renewable Resources 145 8 Recyclable Resources: Minerals, Paper, Bottles, and E-Waste 171 9 Water: A Confluence of Renewable and Depletable Resources 197 10 A Locationally Fixed, Multipurpose Resource: Land 233 11 Storable, Renewable Resources: Forests 251 12 Common-Pool Resources: Commercially Valuable Fisheries 273 13 Ecosystem Goods and Services: Nature’s Threatened Bounty 307 14 Economics of Pollution Control: An Overview 333 15 Stationary-Source Local and Regional Air Pollution 357 16 Mobile-Source Air Pollution 373 17 Climate Change 399 v Contents in Brief 18 Water Pollution 421 19 Toxic Substances and Environmental Justice 453 20 The Quest for Sustainable Development 475 21 Visions of the Future Revisited 499 Answers to Self-Test Exercises 509 Glossary 529 Index 545 vi Contents in Full Preface xxiii New to this Edition xxiii An Overview of the Book xxv 1 Visions of the Future 1 Introduction 1 The Self-Extinction Premise 1 Future Environmental Challenges 2 Climate Change 2 Example 1.1 A Tale of Two Cultures 3 Water Accessibility 4 Example 1.2 Climate Change and Water Accessibility: How Are these Challenges Linked? 5 Meeting the Challenges 5 How Will Societies Respond? 6 The Role of Economics 7 Debate 1.1 Ecological Economics versus Environmental Economics 7 The Use of Models 8 The Road Ahead 9 The Underlying Questions 9 Example 1.3 Experimental Economics: Studying Human Behavior in a Laboratory 10 Debate 1.2 What Does the Future Hold? 11 An Overview of the Book 12 Summary 13 Discussion Questions 13 Self-Test Exercise 14 Further Reading 14 2 The Economic Approach: Property Rights, Externalities, and Environmental Problems 17 Introduction 17 vii Contents in Full The Human–Environment Relationship 18 The Environment as an Asset 18 The Economic Approach 19 Example 2.1 Economic Impacts of Reducing Hazardous Pollutant Emissions from Iron and Steel Foundries 20 Environmental Problems and Economic Efficiency 21 Static Efficiency 21 Property Rights 23 Property Rights and Efficient Market Allocations 23 Efficient Property Rights Structures 23 Producer’s Surplus, Scarcity Rent, and Long-Run Competitive Equilibrium 24 Externalities as a Source of Market Failure 25 The Concept Introduced 25 Types of Externalities 26 Example 2.2 Shrimp Farming Externalities in Thailand 27 Perverse Incentives Arising from Some Property Right Structures 27 Public Goods 30 Imperfect Market Structures 31 Example 2.3 Public Goods Privately Provided: The Nature Conservancy 33 Asymmetric Information 34 Government Failure 34 The Pursuit of Efficiency 36 Private Resolution through Negotiation—Property, Liability, and the Coase Theorem 36 Legislative and Executive Regulation 39 An Efficient Role for Government 40 Example 2.4 Can Eco-Certification Make a Difference? Organic Costa Rican Coffee 40 Summary 42 Discussion Questions 42 Self-Test Exercises 43 Further Reading 44 3 Evaluating Trade-Offs: Benefit-Cost Analysis and Other Decision-Making Metrics 45 Introduction 45 Normative Criteria for Decision Making 45 Evaluating Predefined Options: Benefit-Cost Analysis 46 Finding the Optimal Outcome 47 Relating Optimality to Efficiency 48 Comparing Benefits and Costs across Time 49 Dynamic Efficiency 51 viii Contents in Full Applying the Concepts 51 Pollution Control 51 Example 3.1 Does Reducing Pollution Make Economic Sense? Evidence from the Clean Air Act 52 Estimating Benefits of Carbon Dioxide Emission Reductions 54 Example 3.2 Using the Social Cost of Capital: The DOE Microwave Oven Rule 55 Issues in Benefit Estimation 56 Debate 3.1 What Is the Proper Geographic Scope for the Social Cost of Carbon? 57 Approaches to Cost Estimation 58 The Treatment of Risk 58 Distribution of Benefits and Costs 60 Choosing the Discount Rate 60 Example 3.3 The Importance of the Discount Rate 61 Debate 3.2 Discounting over Long Time Horizons: Should Discount Rates Decline? 62 Divergence of Social and Private Discount Rates 63 A Critical Appraisal 64 Example 3.4 Is the Two for One Rule a Good Way to Manage Regulatory Overreach? 65 Other Decision-Making Metrics 66 Cost-Effectiveness Analysis 66 Impact Analysis 68 Summary 68 Discussion Questions 69 Self-Test Exercises 70 Further Reading 71 4 Valuing the Environment: Methods 73 Introduction 73 Why Value the Environment? 74 Debate 4.1 Should Humans Place an Economic Value on the Environment? 75 Valuation 75 Types of Values 77 Classifying Valuation Methods 78 Stated Preference Methods 78 Contingent Valuation Method 79 Debate 4.2 Willingness to Pay versus Willingness to Accept: Why So Different? 81 Choice Experiments 83 Example 4.1 Leave No Behavioral Trace: Using the Contingent Valuation Method to Measure Passive-Use Values 84 Example 4.2 The Value of U.S. National Parks 87 ix