Environmental economics

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We need environmental economics because in our society the environment has become a scarce resource. Since economics deals with tackling scarce resources, it can often be useful when dealing with environmental problems. Economics can play a role in a variety of pressing environmental fields including climate change, bio-diversity loss, and many others.


Why should I be aware of this?

Currently there is very little economic importance placed on preserving our environment. For example, energy companies do not factor in the costs of pollution clean up into their prices. There are several steps we can take to tie environmentalism to the economy including government subsidies, eco-taxes, and setting caps on pollution and creating markets where it can be traded.

How does this affect me?

To bring about real environmental change it is vital that economics be tied into environmentalism. Unless we attach significant economic value to our resources we take them for granted. When we expect unlimited fresh water to drink and find enough trees to cut down we fail to give proper value to our natural resources and end up misusing and depleting them. We can only start appreciating them when we put a monetary value to them.

All about environmental economics

The creation of pollution markets, similar to the stock market, by the European Union is a huge step forward in linking economics with the environment. The scheme consists of a carbon dioxide market which sets a cap of total carbon dioxide production and allows companies to trade credits allowing a certain amount of pollution amongst themselves.

A company can buy up a lot of pollution credits but it would not be financially viable as the cost would be too prohibitive. This is an effective system as the companies have either to upgrade their facilities or purchase extra pollution credits.

According to some estimates the worldwide market in CO2 could be worth tens of billions of dollars in a few decades. Pollution credits make the cost of pollution matter to the companies that produce it, therefore it is their best financial interest to minimize that pollution.


Eco-tax is another method of making the price of products and services reflect their full environmental cost. Eco-taxes are making industries pay, instead of using the tax payers’ money, for the cleanup of the pollutions they create. Taxing carbon emissions, dumping in landfills, and nonrenewable energy sources provides an incentive to avoid using lots of dirty energy or producing lots of waste. As things cost more people pay more attention to their use and try to minimize costs. These taxes also produce a sizeable amount of income for the government.


  • An Environmental Ethic for the Common Man