Environmental Economics an Overview

There are two fields of environmentalism that are related to economics: Environmental Economics and Ecological Economics. Environmental Economics covers monetary based issues and price or cost analysis. Ecological Economics is a more multifunctional approach and looks at more than money, markets and cost/benefit as the major arbiter of the issue.

This article deals with Environmental Economics.

The basic interests of economic study lie in the concept of scarce resources, identification of costs and benefits, and comparisons between costs and benefits. Two methods of enterprise lie in market based operations and in governmental investment, research and development, infrastructure building, regulatory imperatives and control.

Environmental issues, initiatives and imperatives are a good fit with the above economic concepts. The environment as a whole can be viewed as a scarce resource. There are costs for changing the way that we use the envioronment and there are benefits from changing our ways. The best result is one which benefits the social welfare.

There are profitable business enterprises that come from marketing beneficial environmental products and services. There are costs to businesses that must adapt their operations in order to decrease their impact on the environment.

The ultimate goal of the economic approach to environmental issues is to achieve a balance between cost and benefit. Minimizing cost while maximizing benefit, however is a perfect result and is not always possible. Taking valuable land and protecting it in order to maintain it in it’s natural and undeveloped state, for example, has enormous costs which are not exactly covered by the taxpayers investment, even when weighed against the revenue from park fees and other sources.

But there are intangible benefits that the taxpayer generally agrees are worth the bill. We have the great national parks, such as Yosemite and Yellowstone. There are vast tracts of forest habitat and protected coastal, riparian and wetland areas that offer water control, hydraulic power, and recreation in all parts of the nation and in many places in the world. Hazardous and catastrophic situations are averted through the rules, restrictions and regulations that prevent industries from repeating the devastation of the past.

As a result, the myth that economies and environmental initiatives are at cross purposes or can only exist in an environment of competition is often used as a tactic to avoid investing in the technologies, compliance, research and development and conversion of operations that lead to a balance in cost versus benefit.

The taxpayers are increasingly resistant and resentful of eventually being saddled with the costs of restoring the damage that is caused by unfettered mining, logging, manufacturing, transportation, military operations and other business and government activities.

 There is thus, a rising economy of anticipated restoration and cleanup that must be considered before certain activities and processes are permitted to proceed. The zoning, planning, environmental review process and other agencies are now in place to anticipate the additional outcome and costs of environmental impact before new enterprises are allowed to proceed. There is certainly a booming business in consulting, where environmental lawyers, engineers, and other professionals are involved in completing studies for local, regional, state and national agencies and for specific projects.

In the market based instrument category, there are special environmental taxes, subsidies, transferrable or tradeable permits, such as for carbon footprints. There are also reforms. Environmental tax reforms and fiscal reforms may serve as reductions in costs or elimination of waste that free up money or serve as incentives for companies to “go green”.

One recommendation is a better definition of property rights. If a factory pollutes and is next to a residential area, does the factory have the right to pollute or do the residents have a right to clean air? The factory can either pay for cleaning the air and water, or the people can pay for the factory to not ruin the air and water. Otherwise, the right to sue or to pursue other legal claims is an option. But the confusion in the law is that property ownership give whatever rights the owner wishes to exercise, including polluting, unless specific law prohibits the action. Clarifications in this area would clear up controversy, difficulties in making civil claims and in planning in general to prevent residential areas being next to polluting businesses.

In Europe, an economic recovery plan in 2008 included green initiatives and issues. The March 3, 2010 Lisbon Strategy of the European Commission. A call for including environmental areas in summaries of the Gross Domestic Product (GDP) of countries may result in green initiatives being studied for their impact on the GDP, which is not currently being done.

The European Commission on Environmental Economics, “How Do We Use Economics In Environment Policy?”

The Lisbon Strategy For Growth And Jobs

Wikipedia, “Environmental Economics”