NEOCLASSICAL AND
ENVIRONMENTAL
ECONOMICS
27.3.2015
Filip Černoch
Environmental aspects of energy
Energy in modern societies
Households energy costs (electricity): UK 5 %, Germany
2,5 %.
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Economic policy
 = refers to the actions that govt takes in the
economic field. It covers taxation, budget, the
money supply, interest rates, labor market,
national ownership…
 Macroeconomic stabilisation policy
 Trade policy
 Support of growth and development
 Redistribution of income, property (wealth)
 Regulatory, anti-trust, industrial…policy
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Neoclasical economics (NE)
 Sources distributed in markets through supply
and demand (rational choice theory).
 Emphasis on economic growth = labor +
capital (+ natural resources, mainly land)
 Energy as an input is marginalised = market
forces arrange sufficient supply through
substitution or other measures.
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Neoclassical economics – cyclical model
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Neoclassical economics - extended c. model
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Neoclassical economics
 Infinite economic growth possible
 Individuals act rationally
 Primarily concerned with efficient allocation
of resources
 Economy is the whole, ecosystem a part
 Natural capital can be replaced with
technology or human capital
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Neoclassical economics
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Zdroj: Eos-
intelligence
Environmental economics critique
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Classical econmists assume that the economy exists in a vacuum, a
complete little private universe that can be understood on its owh,
without considering externalities in the form of the resources that
cycle in and the waste that cycle out…
They assume that needed resources will magically arise because the
market place demands them…
The only world in which conventional economics make sense is in a
world without limites, where no resource constraints exist…
Order and complexity arise in any open system if and only if energy
is consumed…
Once fossil fuels are consumed our economy´s growth in complexity
will also stall at first and then go into reverse…
Environmental economics (EE)
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Environmental economics (EE)
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Energetika v ekonomice
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NE EE
Infinite economic growth
possible and desirable
Growth constrained by material and energy
stocks and flows, and waste accumulation.
Market growth may be undesirable due to
encroachment on non-market benefits
Individuals act rationally Individuals sometimes act for other than
rational motives
Primarily concerned with
efficient allocation of
resourses
Primarily concerned with scale of economy
and justice of distribution; secondarily
concerned with efficient allocation of
resources
Economy is the whole,
ecosystem a part
Economy exists within global ekosystem and is
subject to ecological constraints
Natural capital can be
replaced with technology or
human capital
Thermodynamics rules about matter and
energy
Approaches to energy
 NE: Technology-based substitution
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Approaches to energy
EE: Thermodynamics argumentation:
1) energy can neither be created nor destroyed
2) Evergy transformation always losses at least a little
energy in the form of diffuse heat (entropy)
3) In any process some energy is always needed – full
suplementation of energy with technology is not possible
(Steam engine – from 0,5% efficiency to 60 % efficiency
at best).
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Approaches to energy
 NE: New sources of known energy
 EE: EROEI = usable energy output/energy
consumed
 Net energy = energy output – energy
consumed
 Global EROEI is declining (= you need to
produce more gross energy to satisfy the same
consumption)
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Approaches to energy
 NE: New source of energy
 EE: Is „somewhere out there“ the new source?
 EE: Path dependence
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