CandleFocus Glossary Editor
Environmental Economics is a field of economics which draws attention to the costs of environmental degradation and examines the economic instruments available to correct those costs. It seeks to understand the ways in which economic decisions, both private and public, affect the environment, and how environmental and natural resource constraints limit or affect economic activities. This field of economics seeks to understand and address the deleterious impacts of economic activities on the environment, and how these factors can be dealt with in an economically efficient manner.
At its core, environmental economics explores how economic systems and markets interact with the environment. It considers the economic impact of environmental damage and degradation, as well as methods to reduce or eliminate these external costs. Additionally, environmental economics seeks to place a value on natural resources, including clean air and water, and create incentives to conserve them. When environmental externalities are present, environmental economic can be employed to devise incentive- and tax-based solutions for their management or alteration.
Environmental economics is further divided into two fields: prescriptive and incentive-based solutions. Prescriptive solutions are the more traditional approach in which pollution is regulated and damages are compensated. These solutions often take the form of regulations which limit emissions, require pollution permits, and levy taxes on polluting activities. Incentive-based solutions, on the other hand look to address the issue of externalities through economic incentives and pricing instruments, such as cap and trade schemes and emissions trading.
Environmental economics is an important topic with broad, international implications. Global environmental degradation has increased in recent decades, resulting in climate change, the loss of biodiversity, and deforestation. As environmental degradation pertains to the economic interests of multiple countries, global coordination is necessary to formulate viable solutions. Environmental economists therefore look at the broader economic landscape and the various ways in which our economic systems interact with natural ecosystems. By doing so, economists are better able to comprehend the global economic impact of environmental damage, and suggest effective solutions to protect our planet.
At its core, environmental economics explores how economic systems and markets interact with the environment. It considers the economic impact of environmental damage and degradation, as well as methods to reduce or eliminate these external costs. Additionally, environmental economics seeks to place a value on natural resources, including clean air and water, and create incentives to conserve them. When environmental externalities are present, environmental economic can be employed to devise incentive- and tax-based solutions for their management or alteration.
Environmental economics is further divided into two fields: prescriptive and incentive-based solutions. Prescriptive solutions are the more traditional approach in which pollution is regulated and damages are compensated. These solutions often take the form of regulations which limit emissions, require pollution permits, and levy taxes on polluting activities. Incentive-based solutions, on the other hand look to address the issue of externalities through economic incentives and pricing instruments, such as cap and trade schemes and emissions trading.
Environmental economics is an important topic with broad, international implications. Global environmental degradation has increased in recent decades, resulting in climate change, the loss of biodiversity, and deforestation. As environmental degradation pertains to the economic interests of multiple countries, global coordination is necessary to formulate viable solutions. Environmental economists therefore look at the broader economic landscape and the various ways in which our economic systems interact with natural ecosystems. By doing so, economists are better able to comprehend the global economic impact of environmental damage, and suggest effective solutions to protect our planet.