What Is Environmental Economics?

What Is Environmental Economics?

Environmental economics is a subfield of economics which studies the use of natural resources and the effects of human activity on the environment. It employs the economic principles to address the problems that humans cause, such as pollution of the air, overfishing and global climate change. It also studies the economic benefits and costs of various management or policies that are available to solve these problems.

In this field, “negative externalities” are an important issue. This is in which market forces create too much of a product or service. If the factory produces paint for example, it will reap the profits, but also produce pollution that can be harmful to the environment and others (such sick people).

Economists try to solve this problem by instituting pricing mechanisms which compensate for negative externalities, and encourage desirable behaviour. Pigouvian tax is an example of a tax which discourages polluting industries through increasing the cost to produce pollution. Another example is the use of “cap and trade” regulations that allow an organization to purchase carbon credits and sell them, which can reduce the amount of carbon dioxide it emits.

One of the major topics of discussion in this area is assessing the economic value of natural resources that do not have a specific price like biodiversity or www.recyclefortamworth.co.uk/2023/06/16/environmental-economics clean water. In the last three decades, a variety of valuation techniques have been developed, collectively referred to as nonmarket valuation, to provide estimates of these resources.

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