Topic5.2

Question 1

Resource and Environmental Economics

Answer 1

Focus Areas:
- Economic use of resources
- Ethics, welfare, and the environment
- Externalities
- Governmental intervention / Public policy
- Cost-benefit analysis
- International environmental problems
- Exhaustible and renewable natural resources
- Sustainability concepts

Question 2

Cost-Benefit Analysis (CBA) Examples

Answer 2

Applications of CBA:

• OECD: Regulatory Impact Analysis guidance
• U.K. Treasury: The Green Book
• U.S. EPA: Guidelines for economic and regulatory impact analyses
• European Commission: Cohesion Policy Economic appraisal tool
• World Bank: International development interventions evaluation

Question 3

The Benefits and Costs of the Clean Air Act (1990-2020)

Answer 3

Key Steps in Analysis:

1. Air pollutant emissions modelling
2. Compliance cost estimation
3. Ambient air quality modelling
4. Health and environmental effects estimation
5. Economic valuation of effects
6. Results aggregation and uncertainty characterisation

Question 4

Clean Air Act Benefits vs Costs

Answer 4

Benefits exceed costs by a factor of more than 30 to 1

Question 5

Objections to CBA for Environmental Issues

Answer 5

• Are consumer preferences the right benchmark?
• Should animals and plants have ethical value?
• How to handle risk and irreversibility?
• Incorporating distributional concerns in analysis