What Is Environmental Economics

My degree is a Bachelor of Science Degree in Economics, not a Bachelor of Arts Degree in Economics. I studied Micro and Macro Economics, and I will attempt to cover my understanding of this topic from that perspective.

Anything that economics addresses covers the cost issues, opportunity costs and the the demand for a good or service-including the Law of Diminishing returns.

Opportunity Cost
The opportunity cost is based on the knowledge that their are limited (finite) expenditures available, and money spent on one item can’t be spent on another (trade offs), for obtaining any service, in this case a better environment.

I shall not attempt to define “better” in this discussion, but will add this. There are studies available stating that this or that level of pollutant is harmful based on a study. This is where economic analysis collides with policy-driven science (aka politics).

We need to understand that the environment is a global issue, not a national issue. Pollution is fungible. Pollution is the same everywhere, in that containing it in anyone country does little good if another country is not also setting the same standard. It, for example, China is building coal-fired power plants and the U.S. is not, the economic cost of any restraint here is “nice”, but the planet is still being polluted. So in this sense, the costs in one country are lost “opportunity costs”. These expenditures could be more properly deployed in a micro-economic manner. We could use our limited finances to spend money on Defense or on Health Care, etc.

Environmental Economics has to address costs, and address lost opportunities when a choice is made. Priorities determine these expenditures. Additionally, the initial costs are higher due to economies of scale. As a pollution program expands, the costs decrease with efficiency. There are then diminishing returns, and each additional unit of cleaner air (e.g.) becomes more expensive to remove, on a per unit basis.

These costs, again, need to be weighed against the choices for most efficient use of the remaining capital available. Capital is a scarce resource.

Capital can be generated through reductions in the expense of cleaning up the damage causes by pollution, and include health care costs, reclamation projects to clean up an eco-system.

Capital can also be generated through a consumption tax for producing pollutants. This can result, as is the case in any tax, in a decreased level of production of any or several other goods and services. Tax a power plant and the power producer has to recover these expenses by raising the cost of electricity produced; or produce less electricity since this industry is heavily regulated by rating and public commissions that control consumer power bills.

In Environmental Economics all these causes and effects must be considered. The study of economics demonstrates that any economy has a chain of cause/result as well as the more famous supply/demand. Nothing happens without a ripple and or impact to the entire economy.

Environmental economics is a sub-disciplinary of economics that provides you with a better understanding of the financial impact of environmental policies.

It conducts various studies evaluating and countering the effects of environmental policies on an economy theoretically. The subject of environmental economics plays a vital role as it helps the researchers to design effective environmental policies. It deals with some of the most pressing concerns like air and water pollution, toxic products, solid waste, and global warming. Due to its full applications, the subject of environmental economics is majorly studied worldwide in the twenty-first century.

Environmental economics is responsible for monitoring the economic activities and continuously evolving policies affecting our environment. Environmental economics is a different discipline as compared to the field of ecological economics.

Thus, environmental economics specializes in determining the sources affecting our environment in different ways.

According to Semantics Scholar “Environmental economics can therefore be defined as that “part of economics which deals with interrelationship between environment and economic development and studies the ways and means by which the former is not impaired nor the latterimpeded2.” It is thus a branch of economics which discusses about the impacts of interaction between men and nature and finds human solutions to maintain harmony between men and nature. Environmental economics teaches us how to promote economic growth of nations with least environmental damage.

Environmental economists may study or develop policy recommendations relating to:

• Externalities, or unintentional effects on the environment or human health resulting from economic activity
• Permit trading, also referred to “cap and trade”. This approach was successfully used to address acid rain in the 1990s. It’s also been proposed as a policy tool to address release of the greenhouse gases that cause global warming.
• Cost-benefit analysis of environmental regulations
• The economics of biofuels, waste management, land cleanup and other environmental technologies and industries
• Valuation, which aims to assign dollar values to natural resources. Valuation also deals with nature-provided “ecosystem services”, such as erosion prevention by trees or water filtering by plants