ECS2606 Assignment 1 Semester 1 2026 (146722) Due 12 March 2026

Environmental Economics


Analysis of Climate Change Impacts and Economic Principles




Course Code: ECS2603/ECS2604




Student Number:
Date: March 2026

,UNISA | Environmental Economics Climate Change & Economic Analysis



Contents



1 Climate Change Evidence and Materials Balance Principle 4

1.1 Does the Excerpt Present Sufficient Evidence that Climate Change Worsened the
Flood? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

1.1.1 Evaluation of the Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . 4

1.1.2 Substantiation of the Conclusion . . . . . . . . . . . . . . . . . . . . . . . 5

1.2 Impact of COVID-19 Pandemic Restrictions on the Materials Balance Principle . 5

1.2.1 Understanding the Materials Balance Principle . . . . . . . . . . . . . . . 5

1.2.2 COVID-19 Restrictions Impact . . . . . . . . . . . . . . . . . . . . . . . . 6


2 Production Possibility Curves and Intergenerational Equity 8

2.1 Current Irresponsible Consumption and Future Generations . . . . . . . . . . . . 8

2.1.1 The Production Possibility Framework . . . . . . . . . . . . . . . . . . . . 8

2.1.2 Diagrammatic Illustration . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

2.1.3 Explanation of the Mechanism . . . . . . . . . . . . . . . . . . . . . . . . 8

2.1.4 Real-World Examples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

2.1.5 Mathematical Representation . . . . . . . . . . . . . . . . . . . . . . . . . 10

2.2 Policy Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11


3 Opportunity Costs versus External Costs 11

3.1 Conceptual Distinction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

3.1.1 Opportunity Cost Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

3.1.2 External Cost Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12




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3.2 Detailed Examples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

3.2.1 Example 1: Agricultural Land Use . . . . . . . . . . . . . . . . . . . . . . 12

3.2.2 Example 2: Transportation Choice . . . . . . . . . . . . . . . . . . . . . . 14

3.2.3 Example 3: Industrial Production . . . . . . . . . . . . . . . . . . . . . . . 14

3.3 Policy Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15


4 Positive versus Normative Economics 16

4.1 Fundamental Distinction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

4.1.1 Positive Economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

4.1.2 Normative Economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

4.2 Examples in Environmental Economics . . . . . . . . . . . . . . . . . . . . . . . . 17

4.2.1 Positive Economics Examples . . . . . . . . . . . . . . . . . . . . . . . . . 17

4.2.2 Normative Economics Examples . . . . . . . . . . . . . . . . . . . . . . . 18

4.3 Interplay Between Positive and Normative Analysis . . . . . . . . . . . . . . . . . 20

4.4 Common Pitfalls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21


5 Demand Elasticity and Environmental Policy Effectiveness 21

5.1 Conceptual Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

5.2 Graphical Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

5.2.1 Graph 1: Inelastic Demand for Petrol . . . . . . . . . . . . . . . . . . . . 22

5.2.2 Graph 2: Elastic Demand for Plastic Bags . . . . . . . . . . . . . . . . . . 23

5.3 Comparative Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

5.4 Strategic Policy Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

5.5 South African Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26


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Reference List 28




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1. Climate Change Evidence and Materials Balance Principle


1.1. Does the Excerpt Present Sufficient Evidence that Climate Change Worsened
the Flood?


1.1.1 Evaluation of the Evidence


The excerpt provides substantial scientific evidence that climate change intensified the recent
flooding in southern Africa. The World Weather Attribution study employed peer-reviewed
methods to analyze the extreme rainfall events affecting South Africa, Mozambique, and Zim-
babwe. Several key pieces of evidence support the conclusion:

Key Distinction

Attribution Science Methodology: The study used established climate attribution
methods that compare observed weather events with climate model simulations of a
world with and without human-caused climate change.


First, the magnitude of the event itself is significant. The region experienced a year’s worth of
rainfall within 10 days, representing an event with a return period of approximately 50 years.
This statistical rarity indicates an extreme deviation from normal weather patterns.

Second, the researchers quantified the climate change contribution. Dr. Izidine Pinto from the
Royal Netherlands Meteorological Institute indicated that while precise quantification proved
challenging, a 40% increase in rainfall intensity could not be explained without accounting for
anthropogenic climate change (World Weather Attribution, 2026).

Third, the study identified the mechanism: continued fossil fuel combustion increases atmo-
spheric temperature, which enhances the atmosphere’s water-holding capacity. The Clausius-
Clapeyron relationship indicates that for each degree Celsius of warming, the atmosphere can
hold approximately 7% more moisture, leading to more intense precipitation events.

Critical Consideration

Compound Effects: The La Niña phenomenon naturally brings wetter conditions to
southern Africa, but operated within a much warmer atmosphere due to climate change,
creating compound effects that amplified the flooding severity.



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Fourth, the researchers noted a "clear move toward more violent downpours," indicating a
trend rather than an isolated incident. This pattern aligns with broader climate change projec-
tions for the region.

However, some limitations exist. The climate models struggled to pinpoint the exact magni-
tude of climate change’s contribution, suggesting uncertainty in the precise attribution. De-
spite this, the direction and significance of the effect remain clear.



1.1.2 Substantiation of the Conclusion


The evidence meets scientific standards for attribution because it:


• Uses peer-reviewed methodology

• Employs multiple lines of evidence (observations, models, physical understanding)

• Quantifies the contribution where possible

• Acknowledges uncertainties transparently

• Identifies physical mechanisms


The transformation of what would have been a serious rainfall event into a catastrophic deluge
demonstrates that climate change did not merely contribute but fundamentally altered the
event’s character and impact.



1.2. Impact of COVID-19 Pandemic Restrictions on the Materials Balance Princi-
ple


1.2.1 Understanding the Materials Balance Principle


The materials balance principle, derived from the first law of thermodynamics, states that
matter cannot be created or destroyed, only transformed. In economic terms, all materials
extracted from the environment eventually return to it as waste or emissions (Ayres & Kneese,
1969). The principle can be expressed as:



R+M =P +W (1)

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