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Economics and the environment

Rashid SumailaUBC Fisheries Centre

2202 Main MallPh. 822-0224.

Email: r.sumaila@fisheries.ubc.ca

How many economists in this class?

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• Economics - what is that?

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• An economist???• An environmental and resources

economist???• An ecological economist???• A fisheries economist???

‘Public’ versus ‘firm’ economist

• ‘Firm’ economist:

• Works to maximize profits to the firm.

• ‘Public’ economist:

• Works to maximize net benefits to ‘society’.

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Learning objectives for lecture• Understand the role of economics in

helping us achieve sustainability;

• Have a reasonable knowledge of the economic approach to the analysis of fisheries resource use and sustainability;

• Demonstrate how crucial the link between ecology-economics-policy are;

• Arouse the interest of some of you in ocean & fisheries economics.

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Key concept in resource economics & sustainability• Private versus Social (Group)

interest/benefits;• Examples:

– Driving to work and C02 emission;– Overfishing;– Deforestation.

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The economy and

the environment

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A taxonomy

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(a) Raw materials flowing into production and consumption: The concern of natural resource economics;

(b) The impact of economic activity on the quality of the natural environment: The concern of environmental economics.

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Role of natural resources & the environment

• The natural environment has a fundamental role in a modern economy;

• In industrial economies, in particular, it is sometimes easy to over look the fact that economic activity depends on a variety of natural resources as inputs and the environment as the receptor of emissions from economic activities.

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The economy consist of…• Consumers, e.g., private households,

government agencies, etc.• Producers, e.g., firms, public agencies,

NGOs, non profit organizations, etc.• Notes:

– All goods and services are derived from primary inputs with the application of energy inputs;

– In a broad sense, producers and consumers consist of the same people in different capacities.

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The fundamental balance

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• What can we do to reduce environmental degradation?

• Many approaches – here, the economic approach.

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Key question

• Why do people behave in ways that cause environmental destruction?– Unethical or immoral human behavior;

– The way the economy and its institutions are set up and how they lead people to make decisions that result in environmental degradation/destruction;

– Economists believe people pollute because firms and individuals make decisions on consumption, production and disposal of waste within a certain set of economic and social institutions, which structure the incentives under which make make decisions.

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Incentives

– An incentive is something that attracts or repels people and leads them to modify their behavior in some way;

– An econ incentive leads people to channel their efforts at production and consumption in certain directions;

– Econ incentives are often viewed as consisting of payoffs in terms of material wealth;

– But there are also non material incentives that lead people to modify their economic behavior: can you name some examples?

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In summary, environmental, and therefore, fisheries economics is about:

• How incentive processes work;

• How to restructure existing incentives so that people will be led to make decisions and develop life styles that are sustainable.

Economics & sustainability science

Sustainability science

• Origins of sustainability science traced to the Brundtland Report: WCED (1987):– development that "meets the needs of the present

generation without compromising the ability of future generations to meet their own needs”.

• But I think there is a longer history …

Photo: NASA

“The Earth and the fullness of it belongs to every generation, and the preceding one can have no

right to bind it up from posterity” (Adam Smith, 1766 Lecture on Jurisprudence).

The challenge to sustainability

• … is how to reconcile society’s development goals with the planet’s environmental limits over the long term. For e.g., in the case of fisheries, we want to obtain:– Fish protein;– Jobs and incomes;– Profits.

• … without depleting the fish stock and messing up the ocean.

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• Do you think we can resolve this challenge – how?

To achieve sustainability …

• We need to focus on the dynamic interactions between nature (fish) and humans (fishers).

Vulnerability according to ecology

Sumaila, Cheung et al. (in prep.) Cheung & Sumaila (in prep.)

Vulnerability according to economics

Sumaila, Cheung et al. (in prep.) Cheung & Sumaila (in prep.)

Vulnerability according to ecology and economics

Sumaila, Cheung et al. (in prep.) Cheung & Sumaila (in prep.)

To achieve sustainability …

• It is crucial to give attention to how social change shapes the environment and how environmental change shapes society:– Examples: Recent earthquake/tsunami/nuclear

meltdown;– Recent flooding in Bangkok;– The provision of fisheries subsidies by

government.

Subsidies by category

Sumaila et al. (2010)

Global subsidies by category

Sumaila et al. (2010)

The science of sustainability

• The science of sustainability is problem-driven, with the goal of creating and applying knowledge in support of decision-making for a sustainable world:– Example: illegal fishing.

What is IUU fishing?• I = illegal;

• U = unreported;

• U = unregulated.

• Whys is IUU fishing big on the international fisheries management agenda - it has:– Ecological; economic and social consequences.

Sumaila et al. (2006)

Number of incriminated vessels fishing illegally between 1980 and 2003

Sumaila et al. (2006) Sumaila et al. (2006)

Why high IUU incidence?

• Potential catch is high;

• Fish price – valuable fish;

• Detection likelihood low – weak Monitoring Control and Surveillance;

• Low levels of fines.

Sumaila et al. (2006)

Sustainability science

• … is grounded in the belief that for the knowledge of nature-society interaction to be truly useful, they have to be ‘co-produced’ through close collaboration between scholars and practitioners.

NRC (1999); Clark and Dickson (2003)

Can you think of other ways to achieve sustainability in fisheries?

Has this lecture changed your understanding of the relationship between

economics and sustainability, how?

Best wishes in your studies