ECS2606 – Environmental Economics | Assignment 1
ECS2606 ENVIRONMENTAL ECONOMICS ASSIGNMENT 1 ANSWERS 2026 |
DISTINCTION PASS | EXTERNALITIES CARBON TAX COMMONS PROPERTY
RIGHTS POLICY INSTRUMENTS | UNISA
UNIVERSITY OF SOUTH AFRICA
College of Economic and Management Sciences
ECS2606
Environmental Economics
ASSIGNMENT 1
Semester 1 | 2026
Student Name: [Your Full Name]
Student Number: [Your Student Number]
Module Code: ECS2606
Due Date: [Assignment Due Date]
Total Marks: 100 marks
Question 1: Introduction to Environmental Economics
[20 marks] Answer all parts of this question.
Department of Economics | UNISA Page 1
, ECS2606 – Environmental Economics | Assignment 1
1.1 Define environmental economics and explain how it differs from conventional economics in
its treatment of natural resources and environmental quality.
(6 marks)
Answer:
Environmental economics is a branch of economics that examines the relationship between
economic activity and the natural environment. It applies economic principles to the study of
environmental issues — including pollution, natural resource depletion, biodiversity loss, and
climate change — with a view to identifying policies that promote efficient and sustainable use of
environmental resources.
Conventional (neoclassical) economics focuses primarily on the production, distribution, and
consumption of goods and services within markets. It typically treats the natural environment as
a backdrop to economic activity — a source of inputs (raw materials) and a sink for waste — but
does not explicitly account for the finite nature of natural systems or the costs imposed by
environmental degradation.
Environmental economics, by contrast, explicitly recognises that the environment performs three
critical economic functions:
• Resource function: The environment supplies renewable and non-renewable natural
resources as inputs to production.
• Sink function: The environment absorbs and neutralises waste products generated by
production and consumption.
• Amenity function: The environment provides direct welfare benefits through clean air,
scenic landscapes, biodiversity, and recreational opportunities.
Because conventional markets fail to price these environmental services correctly, environmental
economics analyses market failures such as externalities, public goods, and open-access
problems, and prescribes corrective policies to internalise environmental costs and benefits into
economic decision-making.
1.2 Distinguish between renewable and non-renewable natural resources. Provide TWO
examples of each and explain the economic challenge associated with managing each type.
(8 marks)
Answer:
Renewable Resources: are natural resources that regenerate through natural processes within
a human-relevant timescale, provided the rate of harvesting does not exceed the rate of
regeneration. Examples include fish stocks and timber forests.
Non-Renewable Resources: are natural capital stocks that either do not regenerate or
regenerate so slowly on human timescales that they are effectively finite. Once extracted and
used, they are permanently depleted. Examples include crude oil and coal.
Economic Management Challenges:
• Renewable resources: The core challenge is the common pool problem. Open-access
renewable resources are prone to overexploitation because no individual user bears the
full cost of reducing the stock. This leads to the 'tragedy of the commons' — overfishing,
deforestation — as each user has an incentive to extract as much as possible before
others do. The efficient solution requires establishing enforceable property rights or
imposing harvest quotas.
Department of Economics | UNISA Page 2
ECS2606 ENVIRONMENTAL ECONOMICS ASSIGNMENT 1 ANSWERS 2026 |
DISTINCTION PASS | EXTERNALITIES CARBON TAX COMMONS PROPERTY
RIGHTS POLICY INSTRUMENTS | UNISA
UNIVERSITY OF SOUTH AFRICA
College of Economic and Management Sciences
ECS2606
Environmental Economics
ASSIGNMENT 1
Semester 1 | 2026
Student Name: [Your Full Name]
Student Number: [Your Student Number]
Module Code: ECS2606
Due Date: [Assignment Due Date]
Total Marks: 100 marks
Question 1: Introduction to Environmental Economics
[20 marks] Answer all parts of this question.
Department of Economics | UNISA Page 1
, ECS2606 – Environmental Economics | Assignment 1
1.1 Define environmental economics and explain how it differs from conventional economics in
its treatment of natural resources and environmental quality.
(6 marks)
Answer:
Environmental economics is a branch of economics that examines the relationship between
economic activity and the natural environment. It applies economic principles to the study of
environmental issues — including pollution, natural resource depletion, biodiversity loss, and
climate change — with a view to identifying policies that promote efficient and sustainable use of
environmental resources.
Conventional (neoclassical) economics focuses primarily on the production, distribution, and
consumption of goods and services within markets. It typically treats the natural environment as
a backdrop to economic activity — a source of inputs (raw materials) and a sink for waste — but
does not explicitly account for the finite nature of natural systems or the costs imposed by
environmental degradation.
Environmental economics, by contrast, explicitly recognises that the environment performs three
critical economic functions:
• Resource function: The environment supplies renewable and non-renewable natural
resources as inputs to production.
• Sink function: The environment absorbs and neutralises waste products generated by
production and consumption.
• Amenity function: The environment provides direct welfare benefits through clean air,
scenic landscapes, biodiversity, and recreational opportunities.
Because conventional markets fail to price these environmental services correctly, environmental
economics analyses market failures such as externalities, public goods, and open-access
problems, and prescribes corrective policies to internalise environmental costs and benefits into
economic decision-making.
1.2 Distinguish between renewable and non-renewable natural resources. Provide TWO
examples of each and explain the economic challenge associated with managing each type.
(8 marks)
Answer:
Renewable Resources: are natural resources that regenerate through natural processes within
a human-relevant timescale, provided the rate of harvesting does not exceed the rate of
regeneration. Examples include fish stocks and timber forests.
Non-Renewable Resources: are natural capital stocks that either do not regenerate or
regenerate so slowly on human timescales that they are effectively finite. Once extracted and
used, they are permanently depleted. Examples include crude oil and coal.
Economic Management Challenges:
• Renewable resources: The core challenge is the common pool problem. Open-access
renewable resources are prone to overexploitation because no individual user bears the
full cost of reducing the stock. This leads to the 'tragedy of the commons' — overfishing,
deforestation — as each user has an incentive to extract as much as possible before
others do. The efficient solution requires establishing enforceable property rights or
imposing harvest quotas.
Department of Economics | UNISA Page 2
