Professional Documents
Culture Documents
CERTIFICATE IN ENVIRONMENTAL
HEALTH AND SAFETY MANAGEMENT
ENIVORNMENTAL ECONOMICS
NATIONAL OFFICE
DZIDZO HOUSE
ENTERPRISE RD SOUTH
LONDONDERRY AVENUE
EASTLEA,
HARARE
Est. 1957
ISSAC KWESU
CONTENT REVIEWER:
NELSON CHANZA
Publisher:
Coordinator:
Dr. S. Karambwe
Editor:
E. Muzanenhamo
E. Muzanenhamo
All rights reserved: No part of this module may be reproduced or distributed in any form without the
prior written permission of the Zimbabwe Institute of Management.
Copyright (c) 2013
Table of Contents
MODULE OVERVIEW
iii
OVERALL MODULE OBJECTIVES
iii
UNIT ONE
1
OCCUPATIONAL HYGIENE AS A SUBJECT
1
SUMMARY
4
BIBLIOGRAPHY
4
UNIT TWO
NOISE AND VIBRATION
SUMMARY
BIBLIOGRAPHY
5
5
10
11
UNIT THREE
OCCUPATIONAL HEALTH EXPOSURE LIMITS
SUMMARY
BIBLIOGRAPHY
UNIT FOUR
MEASUREMENT OF HAZARDOUS SUBSTANCES
SUMMARY
BIBLIOGRAPHY
12
12
15
15
UNIT FIVE
THERMAL ENVIRONMENT AND NON-IONISING RADIATION
SUMMARY
BIBLIOGRAPHY
24
24
30
31
UNIT SIX
ERGONOMICS
SUMMARY
BIBLIOGRAPHY
32
32
36
36
UNIT SEVEN
ASBESTOS AND OTHER FIBRES
SUMMARY
BIBLIOGRAPHY
37
37
41
42
(ii)
17
17
22
23
(iii)
UNIT ONE
UNIT CONTENTS
Learning Outcomes
Definition of Economics
Economic systems
Market Economy
Commmand Economy
Mixed Economy
Introduction to Environmemtal and Resource Economics
Summary
Bibliography
1.2 LEARNING OUTCOMES
By the end of this unit, you should be able to:
10
ACTIVITY
COMPARE AND CONTRAST MARKET ECONOMY AND
COMMAND ECONOMY.
GIVEN THE ANALYSIS PRESENTED IN THIS MODULE,
WHICH ECONOMIC SYSTEM WOULD YOU RECOMMEND FOR ZIMBABWE AND WHY?
1.16 BIBLIOGRAPHY
11
UNIT TWO
UNIT CONTENTS
Learning Outcomes
12
The scope of a market is the area over which a single price prevails. Price serves the following
functions, namely transmission of information, correctly influence incentives, and coordinating
economic activity between buyers and sellers
(a) Transmit Information - Information content of prices
An individuals dollar expenditure transmits very valuable information about his preferences. We
tell producers/suppliers what we like by what we spend money on and how much we spend. If we
want to see whether people like Lee or Levis jeans, we look at how much they spend. Spending
money transmits very valuable information to producers about what we like. Suppliers are able to
extract our desires through the price system. Prices are a measure of relative scarcity, they transmit very valuable information about the relative scarcity of a good.
(b) Prices correctly influence incentives
Market prices create an atmosphere of incentives that motivate people. Prices are the foundation
of the profit/loss system that creates a reward/penalty system of organisations. Market prices
for our labour service motivate us to study and prepare for years through education and training
to develop our human capital. If prices change, incentives change automatically and behaviour
changes are always correct. At a higher price, suppliers are willing to supply more of a good.
(c)
Prices coordinate economic activity between buyers and suppliers
Prices and profits guide the invisible hand of self-interest and maximise consumer satisfaction,
optimise production and maximise our standard of living. Prices are the basis of the self-correcting
mechanism of the free market by transmitting valuable, accurate information as part of the feedback loop of the market.
13
14
Quantity
Demanded (kg) per month
$5
$4
$3
$2
$1
0
2
4
5
8
The demand schedule we presented above is for one individual consumer. But what we are really
interested in is the total demand for a particular good or service for all the consumers in an economy. This is called the market demand curve. To derive a market demand schedule we add up all the
individual demand schedules. If the demand schedule for each consumer conforms to the Law of
Demand, then the market demand schedule will also conform to the Law of Demand. For example,
lets assume we have a market that has only three consumers: Susan, Melissa, and Prince. We create
a market demand schedule by adding up the quantities demanded at each price by each consumer:
Quantity purchased by
Susan
Mellissa
Prince
Total (market
demabd)
per month
$5
$4
$3
$2
13
$1
17
The market demand schedule applies to a specific population and to a specific time period.
15
Figure 2.1 above shows that when price decreases from $4 to $3 per kg quantity demanded will increase from 5kg to 9kg per month.
The Law of Demand implies the following with respect to a demand curve (all of these say exactly
the same thing):
The demand curve is downward sloping.
The demand curve has a negative slope.
The demand curve shows an inverse relationship between price and quantity demanded.
2.5.4 WHY A DEMAND CURVE SLOPES DOWNWARDS
There are two reasons why a demand curve is downward sloping:
The Income Effect: There is an income effect when the price of a good falls because the consumer
can maintain current consumption for less expenditure. Provided that the good is normal, some
of the resulting increase in real income is used by consumers to buy more of this product.
The Substitution Effect: There is also a substitution effect when the price of a good falls because
16
17
18
Change in Price
of Good B
Change in Demand
for Good A
Example
Complements
Increase
Decrease (shift
left)
Increase (shift
right)
Substitutes
Increase
19
ACTIVITY
LIST AND EXPLAIN THE FUNCTION OF PRICE IN A
MARKET ECONOMY.
EXPLAIN THE DIFFERENCE BETWEEN A CHANGE IN
QUANTITY DEMANDED AND A CHANGE IN DEMAND.
20
Average Price
of beef
$5
16
$4
13
$3
$2
$1
21
First, we said that according to the Law of Supply that a change in price will lead to a
movement along a stable supply curve and result in a change in the quantity supplied. For
example, more will be produced for sale, but only at a higher price.
Second, we said that if one of the ceteris paribus assumptions is violated or relaxed
(e.g., a change in technology) there will be a change in supply. Economists use the term
supply to refer to the entire supply curve. Consequently, when we say there has been
an increase in supply, we mean that the entire supply curve has shifted to the right. More
will now be produced at the same price.
22
Change in price of
Good B
Complements
Increase
Increase
(shift right)
Substitutes
Increase
Decrease
(shift left)
Rye and
wheat grains
23
Change in supply of
Good A
Example
Quantity
demanded
Quantity
supplied
Explanation
$5
17
Excess supply
$4
13
Excess supply
$3
Equilibrium
$2
13
Excess demand
$1
17
Excess demand
A more convenient depiction of market equilibrium is where the demand and supply
curves intersect. When a market price is below or above the equilibrium level, there will be
an imbalance (disequilibria) between the quantity demanded and the quantity supplied.
24
25
26
ACTIVITY
GIVE A CONCRETE EXAMPLE OF EACH OF THE LISTED
CORRECTIVE MEASURES TAKEN BY THE ZIMBABWEAN
GOVERNMENT TO REMEDY MARKET FAILURE.
27
28
ACTIVITY
IN EACH CASE, IDENTIFY THE NATURE OF THE MARKET FAILURE
- WHY ARE THESE PROBLEMS ARISING?
IDENTIFY POTENTIAL MEASURES THE GOVERNMENT MIGHT USE
TO INTERVENE IN THE MARKET TO CORRECT THE PERCEIVED
FAILURE. THERE MAY NEED TO BE A VARIETY OF SOLUTIONS
USED, EACH OF WHICH CONTRIBUTES IN SOME WAY TO THE SOLUTION.
REFER TO THE INFORMATION ON RENT SEEKING AND LOGROLLING IN THE PRESENTATION. WHAT RELEVANCE HAVE
THESE CONCEPTS GOT TO THE PROBLEMS IDENTIFIED? WHO
MIGHT THE SPECIAL INTEREST GROUPS BE WHO MIGHT SEEK
TO GAIN BENEFITS AT THE EXPENSE OF OTHERS?
HOW MIGHT THE GOVERNMENT MEASURE THE EFFECT OF THE
INTERVENTION STRATEGIES YOU HAVE IDENTIFIED IN QUESTION 2 ABOVE? WHAT PROBLEMS MIGHT THEY FACE IN GAINING AN ACCURATE MEASURE OF SUCH EFFECTS?
CHOOSE ONE OF THE PROBLEMS YOU HAVE INVESTIGATED AND
PRODUCE A 750-WORD REPORT SUMMARISING THE PROBLEM,
THE SOLUTIONS AND THE LIKELY OUTCOMES OF THE SOLUTIONS ON CORRECTING THE MARKET FAILURE.
29
30
UNIT THREE
EXTERNALITIES
3.0 INTRODUCTION
UNIT CONTENTS
Learning Outcomes
31
32
Whatever solution or combination of solutions are used to help reduce the problem of negative
externalities, the main aim is to try to internalise the externality - what we mean by this is that
the decision maker takes into consideration the impact of his or her decisions on a third party.
33
34
35
36
ACTIVITY
CONSIDER THE SOLUTIONS TO THE PROBLEM OF
MARKET FAILURE IN THIS CONTEXT AND EXAMINE THE
CASE FOR AND AGAINST EACH MEASURE. SUPPORT YOUR
ANSWER WITH APPROPRIATE EXAMPLES. (30 MARKS)
37
38
UNIT FOUR
SUSTAINABLE DEVELOPMENT
4.0 INTRODUCTION
UNIT CONTENTS
Learning Outcomes
39
40
41
For example, take a business that is considering changing their lighting from traditional incandescent bulbs to fluorescents. The initial investment to change the lights themselves would be
$40,000. After the initial investment, it is expected to cost $2,000 to operate the lighting system
but will also yield $15,000 in savings each year; thus, there is a yearly cash flow of $13,000 every
year after the initial investment. For simplicity, assume a discount rate of 10% and an assumption
that the lighting system will be utilized over a 5 year time period. This scenario would have the
following NPV calculations:
t = 0 NPV = (-40,000)/(1 + .10) 0 = -40,000.00
t = 1 NPV = (13,000)/(1.10) 1 = 11,818.18
t = 2 NPV = (13,000)/(1.10) 2 = 10,743.80
t = 3 NPV = (13,000)/(1.10) 3 = 9,767.09
t = 4 NPV = (13,000)/(1.10) 4 = 8,879.17
t = 5 NPV = (13,000)/(1.10) 5 = 8,071.98
Based on the information above, the total net present value over the lifetime of the project would
be $9,280.22.
Once the net present value is calculated, various alternatives can be compared and/or choices can
be made. Any proposal with a NPV < 0 should be dismissed because it means that a project will
likely lose money or not create enough benefit. The clear choice is a project whose NPV > 0 or,
if there are several alternatives with positive NPVs, the choice would be the alternative with the
higher NPV. With most societal choices, the opportunity costs are also considered when making
decisions. Net present value provides one way to minimize foregone opportunities and identify the
best possible options.
This particular example assumes that the interest rate does not change over time. Longer periods of time will often require separate calculations for each year in order to adjust for anticipated
changes in the interest rate. When discounting is used it takes into account the fact that benefits
in the future are not expected to be worth as much as in the present time. For example, $10 today
may only be worth $9, $5, or even $1 in 2025. The rationale behind using a discount rate is twofold: all things being equal, (1) individuals prefer to benefit now rather than later and (2) they tend
to be risk averse, uncertain of what will occur in the future.
42
43
44
On the graph, X is the point where we have an even balance of time and money; yet an indifference curve is such that one is equally satisfied at any point along the curve. Therefore, we
could move to point A, where we would have a lot more time but less money, or we could move
to point B, with a lot more money but less time, and we would be equally satisfied. The slope of
the indifference curve is based on the marginal utility of each decision; each successive move towards an axis comes at a higher price. For example, at point B we require more money for each
unit of time than we do at point X because our time is more valuable since we have less of it.
Therefore, we will begin to experience diminishing marginal utility. The economy and the environment are inextricably linked. Whether one is looking at daily life or natural resources and other
environmental issues, because resources are scarce, choices have to be made about how to use
them. The basic fact is that resources used to meet one choice or alternative cannot be used to
meet another. Just like how we value regular goods, the valuation of natural resources and the
environment is based on how we value their services and, for services that are consumed directly,
that value is based on our utility and willingness to pay for a certain amount of the services.
The decision about how to allocate resources relating to the environment has an impact on all
sectors of our economy, primarily because of the complex relationship between utilizing natural
resources and economic output. Many times, the cost of utilizing these resources and/or services
include direct costs as well as opportunity costs and external costs, which are not traded in markets or assessed directly in monetary terms. For example, when trees are cut for such uses as
housing and furniture, some of the direct costs will include the cost of machinery and labor during cutting, processing, and manufacturing. The opportunity costs relating to this use would be
the opportunities foregone by the machinery and labor that could not be used elsewhere, since it
was occupied cutting trees. The external costs are the loss of environmental benefits that are no
longer realized which may include a loss in watershed management services, species protection,
and CO2 reduction. Many agree that in most cases the market is the best way to determine the
allocation of resources. The demand for various products and the availability of natural resources
along with a number of other factors, including preferences, the number of buyers and sellers,
45
46
Taking a look at the graph above, the total consumer benefit that is represented as the dark grey
area, the net benefit is greatest when the quantity Q reaches the marginal benefit curve. We
could increase total benefit by adding pollution controls beyond Q, but only with marginal costs
(MC) greater than marginal benefits (MB), so it is no longer efficient to further increase the benefits. Oftentimes, benefits are more difficult to measure because they are not always monetary.
In cases such as these the measurement may involve utilizing revealed preferences, through a
survey or another mechanism, in order to discover the maximum price consumers are willing to
pay for a particular quantity of a good. An average benefit is used when considering society as a
whole because each individuals willingness to pay is different. Marginal costs and benefits are a
vital part of economics because they help to provide the relevant measurement of costs and benefits at a certain level of production and consumption. If measured marginal costs and benefits are
provided, it is much easier to calculate the ideal price and quantity. It is where the two intersect
that will always be the most economically efficient point of production and consumption. When
considering environmental issues, the efficient point at which marginal costs and marginal benefits
are equal is an important economic concept because it captures the essence of tradeoffs. Often,
environmental improvement Concerns often revolve around whether we are above or below this
point whether any additional environmental improvement can provide more benefit than it will
cost; this becomes an essential component in cost-benefit analysis.
47
48
Command-and-control is comforting to politicians and people: governments know what they are
asking for, people know what they are getting, companies know what they are supposed to deliver;
the only people who do not like it are economists.
~ The Economist, September 2, 1989
49
50
4.10 SUMAARY
51
4.10 BIBLIUOGRAPHY
52
UNIT FIVE
ENVIRONMENTAL
VALUATION: PRINCIPLES,
TECHNIQUES AND APPLICATIONS
5.0 INTRODUCTION
From scenic beauty and recreational opportunities to direct inputs into the production process, environmental resources provide a complex set of values to individuals and benefits to society. Coastal
areas, for example, offer scenic panoramas and radiant sunsets. Fish and other edible sea life caught
in coastal areas provide a rich and nutritious source of food to consumers. Beaches are also excellent
recreation areas, used for relaxation, exercise, or bird watching. These are only the direct benefits.
There are also values that are not directly tied to use, such as climate modulation, physical protection,
and stewardship for future generations. All of these benefits are relevant in environmental valuation.
UNIT CONTENTS
Learning Outcomes
53
54
It is important to note that there are certain environmental assets that are absolutely essential
to the support of animal life, and that the total value of these assets is not definable. Marginal
changes, however, in the productivity and security of even irreplaceable environmental assets
(e.g., the degradation of part of a large ecosystem or environmental resources essential to human
life) can be captured in terms of total economic value. For example, the total economic value of
air and water quality are immeasurably large because extreme degradation of either would result
in irreversible and catastrophic damage to the capacity of this planet to support human and other
life. However, we can observe the finite value that society places on small losses of even those
assets that are absolutely essential for sustaining life. For instance, society has proven willing to
accept some degradation of air quality to improve the efficiency and convenience of transportation. In this particular example, individual choices are not a good indicator of the value of air
quality since most of the costs of reduced air quality are externalized or passed on to others.
5.4 METHODS FOR VALUING THE ENVIRONMENT
Environmental valuation is largely based on the assumption that individuals are willing to pay for
environmental gains and, conversely, are willing to accept compensation for some environmental
55
56
in a
Ecocusarea
57
________________________________________
Table 2 shows that the decline in habitat has reduced the daily catch by 3,000 pounds. In turn,
commercial fishermen are expending more resources (fuel, labor) per pound of fish caught. That
is, as the fish population declines, variable costs rise because more effort is required to land the
same catch. Finally, this analysis holds the price-per-pound constant, although the basic principles
of supply and demand suggest that prices would likely increase as the supply of fish declines. In
reality, the ex-vessel price would likely rise in response to the declining catch rate as consumers
bid up the price for the dwindling supply of striped bass (a discussion on consumer surplus follows). Based on this analysis, the producer surplus resulting from the commercial fishing of striped
bass has declined by $22,400 ($38,400 - $16,000) as a result of habitat degradation.
Producer surplus is only half the total economic picture. To capture the entire economic impact
of the decline in the striped bass catch, the analyst must also measure the change in consumer
surplus. When measuring consumer surplus, a demand curve must be constructed to quantify the
area of Figure 2 represented by Area abc. Measuring the consumer surplus, however, generally involves the use of econometric techniques and requires time series information on the market price
of the good or service and the quantity consumed at each price level, along with other factors
affecting the demand for the product. Provided all of this information is available, the analyst can
construct a product demand curve to measure the expansion or contraction of consumer surplus
in response to changing environmental conditions and corresponding shifts in the quantity
58
59
The travel cost method can be used to measure not only the elimination of a site but also the impact of access restrictions and changes in environmental quality. The travel cost method, however,
is limited in application and captures only direct recreational benefits and only when there are
measurable travel costs to examine. Finally, the travel cost method does not measure non-use and
intrinsic values or other sources of value, such as commercial values. Random utility models (RUMs)
are econometric models that, among other uses, permit the estimation of preferences among different recreational areas with varying characteristics. The RUM, with its ability to assess competing
multiple sites with varying recreational characteristics, holds considerable appeal for economists.
Consider three beaches with characteristics that vary based on location, water quality, landscape features, access, existence of lavatories, and other services. These characteristics can be transformed into discrete and continuous variables used to assess consumer preference by examining location preference and the total cost of trips taken (Table 4).
Based on the data collected through surveys of various sites, the RUM estimates the probability that an individual will visit one site out of several sites based on site characteristics. Varying the quality of those characteristics (e.g., water quality, landscape features) permits the analyst to assess how recreational travelers value changes in environmental quality at particular
sites. A RUM is not specific to surrogate market techniques. Rather, a RUM is an estimation
procedure that can be combined with surrogate and non-market techniques used in valuing, for
example, recreational areas and wetland area restoration. Travel cost studies often use RUMs;
however, they may also be applied in stated preference studies that use choice experiments.
60
Travel Costs /
Site I
Site II
Number of Trips
Travel Costs
$20
$40
Number of trips
Travel Costs
$52
$26
Number of trips
Travel Costs
$30
$30
Number of trips
Site III
$50
2
$15
2
$45
1
Non-Market Methods. The Contingent Valuation Method (CVM) is a non-market-based technique that elicits information concerning environmental preferences from individuals through
the use of surveys, questionnaires, and interviews. When deploying the contingent valuation
method, the examiner constructs a scenario or hypothetical market involving an improvement
or decline in environmental quality. The scenario is then posed to a random sample of the population to estimate their willingness to pay (e.g., through local property taxes or utility fees)
for the improvement or their willingness to accept monetary compensation for the decline in
environmental quality. The questionnaire may take the form of a simple open-ended question
(e.g., how much would you be willing to pay) or may involve a bidding process (e.g., would
you accept $10, would you accept $20) or take-it-or-leave-it propositions. Based on survey
responses, examiners estimate the mean and median willingness to pay for an environmental improvement or willingness to accept compensation for a decline in environmental quality.
5.5 SUMMARY
61
5.6 BIBLIOGRAPHY
62