Environmental Economics – Definition

Cite this article as:"Environmental Economics – Definition," in The Business Professor, updated September 20, 2019, last accessed August 10, 2020, https://thebusinessprofessor.com/lesson/environmental-economics-definition/.


Environmental Economics Definition

Environmental economics refers to a field of economics that analyzes the financial effect of eco-friendly or environment-based policies. Environmental researchers measure what impact environmental policies have on the economic growth of a country. It enables analysts formulate feasible environmental policies and ascertain and observe the benefits of present or prospective policies.

A Little More on What is Environmental Economics

Economic growth of a nation involves environment related costs that remain unnoticed in the present market approach, and this is the fundamental logic that supports environmental economics. There are many consequent externalities such as population that lead to intense failure of market. Environmental researchers ascertain the costs involved and benefits received from certain economic standards, that even includes conducting theoretical experiments or researches on probable economic reactions that environmental exploitation may have.

Strategies associated with environmental economics

Environmental researchers strive to find out particular issues as well as the related solutions. However, they can use different strategies to solve an environmental issue of similar nature. A state that aims to clean energy have many alternatives or ways to do so. For instance, the government authorities can put a certain restriction on carbon emission levels, or they can consider using solutions that offer direct and indirect benefits such as giving organizations which follow renewable sources of energy an advantage of tax credits, or imposing taxes on companies emitting carbon gases.

These strategies are dependent on the involvement of state government, and hence, the extent to which it is tolerable turns out to be a significant political measure in ascertaining environmental economic policy. This discussion is also referred to as prescriptive versus market-based. Here, prescriptive is the situation where government takes the charge of dealing with carbon emissions in a manual manner, whereas prescriptive refers to the stage where the government would formulate objectives and offer incentives to companies, but they can choose how to accomplish the set standards.

Environmental Economic Challenges

Environmental economics also needs a special transnational policy. Economists specializing in environmental study can consider extinction of water mammals as a negative externality that needs to be focused on. Even if the U.S. government makes strict rules for the fishing sector to control this depopulation of water mammals, it won’t help until all other nations also make similar policies for their fishing industries. These serious issues have resulted in formation of several non-governmental organizations such as the International Panel on Climate Change (IPCC) that conducts yearly forums, and offers a platform to state officers to discuss and make negotiations regarding global environmental policies.

In the U.S., several political debates keep taking place regarding the policy proposals that are generated from environmental economics.The disagreement between political parties on the extent of environmental costs spent causes issues in formulating effective environmental policies. The Environmental Protection Agency (EPA) regulates a National Center for Environmental Economics that focuses on offering market-based solutions for carbon emissions. Some of the policies that they primarily emphasize on include making people aware of biofuel use, ascertaining the costs associated with climate change, and finding solutions for waste and pollution related issues.

References for “Environmental Economics”






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