ECON 3755 Environmental Economics Final Exam Review Questions:

Transcription

1 ECON 3755 Environmental Economics Final Exam Review Questions: Note: The final exam will consist of approximately 70% of questions from material after the midterm and 30% of questions from material before the midterm. The following are examples of the types of questions that could be asked. 1. Ground level ozone is composed of: Sulfur dioxide and volatile organic compounds Nitrogen oxides and sulfur dioxide Volatile organic compounds and nitrogen oxides 2. We used the production possibilities frontier diagram to: Understand the trade-offs that exist between pollution and GDP/capita Understand the trade-offs that exist between environmental quality and produced goods Understand the manner in which environmental policies affect the rate of technological innovation 3. When a consumption externality is present in a competitive market economy, the equilibrium price for the polluting good is too and output is too compared to the socially efficient levels. High; Low Low; High High; High 4. An advantage of cost-effectiveness analysis is that it allows us to determine the socially efficient aggregate level of pollution. 5. The use of high discount rates in benefit-cost analysis adversely affects environmental quality when the benefits occur in the distant future and the costs occur today. 6. The travel cost method can be used to assess: The recreation value of a provincial park. The amenity value of a clear view of the landscape The value of maintaining agricultural productivity 1

2 7. When would it be more cost-effective to implement individual emission taxes compared to uniform emission taxes on polluters? When polluter MAC curves are identical When polluter MAC curves differ When polluter emissions differ in an unregulated competitive market 8. Since the Constitution sets forth clear federal and provincial responsibility over environmental attributes in Canada, there is little role for the courts to affect environmental policies. True 9. If a country fails to meet their Kyoto Commitment to reduce CO 2 emissions, they will: Be required to withdraw from the Kyoto Protocol Be required to meet their current Kyoto Commitment and pay a fine not exceeding $50 million to remain in the Kyoto Protocol Be required to meet their current Kyoto Commitment and reduce emissions by a further 30% in a future target date 10. Who tends to be the main governing body that oversees waste-water emissions and treatment in Canada? The Federal Government Provincial Governments Municipal Governments 11. Firms will have less incentive to innovate (eg. purchase new pollution abatement technology) under a system of marketable pollution permits than under pollution emission standards. 12. Without considering issues associated with enforceability, polluters generally prefer. Pollution standards Pollution taxes Pollution marketable permits 13. The Federal Government of Canada has set strict air pollution standards and fines for noncompliance, based on maximum acceptable levels of ambient concentrations: 14. Recycling is voluntary in all Canadian provinces 2

3 15. Ambient concentrations of nitrogen dioxide (NO x ) is typically measured in the following units: Tons Parts per billion Cubic meters 16. Draw, label, and explain a typical Environmental Kuznets Curve. 17. Briefly explain how input-output models can be used to assess environmental policies. 18. Consider a water pollution market involving tradable phosphorous permits between two polluters: a farmer (F) and a steel producer (S). Each polluter is allocated 500 pollution permits (each permit is for a ton of pollution). Indicate, using areas in the diagram: (i) the value of permits traded; and (ii) the incentive that each producer has to buy or sell permits, assuming a market equilibrium permit price of $10/ton. MAC S Initial Permit Allocation $10 MAC F Phosphorous emissions (tons) 19. List two Canadian Federal or Provincial Acts that affect water and air pollution emissions. List specific water and air pollutants (one each) that have been reduced as a result of the above Acts. Act affecting water pollution emissions: Pollutant reduced: Act affecting air pollution emissions: Pollutant reduced: 20. Identify a Canadian incentive-based policy tool that has successfully reduced an air pollutant. Briefly explain why it has been successful. 3

4 21. Suppose you work for the New Brunswick Department of Environment and are asked to estimate the costs and benefits of implementing uniform vs. individual emissions standards on two pulp and paper plants discharging nitrogen into a waterway. In an unregulated competitive market economy, Plant A emits 3,000 tons and Plant B emits 2,000 tons of nitrogen per year (total emissions = 5,000 tons). The government wants total nitrogen emissions to be reduced to 3,000 tons. Under a uniform standard, each Plant would emit 1,500 tons. Under individual standards, Plant A would emit 2,300 and Plant B would emit 700 tons. The following illustrates the MAC curves for each plant. a. Calculate the individual and total abatement costs from a uniform standard vs. individual standards. Which one is more cost effective & what are the cost savings? b. Discuss any issues that would be associated with implementing the cost-effective policy determined in part (a). 22. Suppose you work for the New Brunswick Department of Environment and are asked to estimate the costs and benefits of implementing liability laws for reducing sulfur dioxide (SO 2 ) emissions from the UNB power plant. The plant currently burns wood and coal to produce energy for the campus, and emits 1,000 tons of SO 2 per year into the air. The following illustrates the marginal abatement costs and marginal damages: a. If liability laws were effectively implemented, prove (using words and calculations) that UNB would have an incentive to reduce emissions to 250 tons from 1000 tons. Calculate the costs and benefits of this policy for the polluter and for 3 rd parties, and determine the overall net benefits of this policy. b. What are the potential problems associated with relying on liability laws to reduce SO 2 emissions from the UNB power plant? 4

5 23. Establishing pollution taxes or property rights (given to polluters) could be used to reduce the amount of pollution produced by industries in Canada. Compare these policies using the following evaluation criteria: (i) Efficiency; (ii) Fairness/Moral; (iii) Incentive to innovate; and (iv) Enforcement. Summarize your comparison using the table format shown below: Efficiency Fairness/Moral Incentive to innovate Enforcement Taxes Property Rights (given to polluters) 24. Compare and contrast the use of the hedonic pricing method vs. the contingent valuation method for estimating the value of reducing smog in a city. What is different about the way information is collected and assessed? How reliable is one vs. the other? What possible issues are there with each method? Summarize your comparison using the table format shown below: Information collection Information assessment Reliability Issues Hedonic Pricing Method Contingent Valuation Method 25. There were a number of student presentations given in class after the midterm that dealt with current environmental issues. Describe one that you found interesting. What general problem and/or solution was raised? [Note: you cannot describe an article that you presented]. 5