We’ve all heard of economics, but have you heard of environmental economics? Environmental economics is a type of economics that focuses on the financial impact of environmental policies. An environmental economist performs studies to figure out the empirical or theoretical effects environmental policies could have on the economy. With the help of environmental economics, users can design appropriate environmental policies and analyze the merits of existing or proposed policies.
The basic argument surrounding environmental economics is that the current market model does not account for all of the environmental costs of economic growth that exist. The negative factors, such as pollution, could lead to market failure. Environmental economists analyze the costs and benefits of various economic policies in order to prevent this from happening. This analysis involves running theoretical tests or studies on possible effects that environmental degradation could have on the environment.
For each environmental issues, there are many different potential strategies that could be used to solving this issue. For example, if a state is hoping to impose a transition to clean energy, there are a few options. The government can put a strict a limit on carbon emissions, or it can take a more incentive-based approach. One example of an incentive-based approach could be offering tax credits for companies if they adopt renewable power sources.
All strategies rely on state intervention in the market, but to varying degrees. One important factor in determining environmental economic policy is the degree to which this intervention is acceptable. This debate is known as prescriptive versus market-based. The prescriptive approach is one in which the government would manually control carbon dioxide and the market-based approach is one in which the government would create goals and incentives but otherwise allow companies to do whatever they want in order to meet these goals.
A transnational approach is also crucial in the study of environmental economics. Take, for example, aquatic depopulation. If an environmental economist identifies aquatic depopulation as a result of overfishing, the United States could impose regulations on its fishing industry in an attempt to fix the problem. But if similar action isn’t taken in a number of other nations that engage in overfishing, then the problem won’t be solved. The environment is something that people all around the world have to be responsible for, which means that oftentimes, the policies implemented as a result of environmental economic studies need to be part of a global effort.
The global nature of these environmental issues has led to the rise of a number of non-governmental organization (NGO’s). One of the biggest NGO’s with this mission is the International Panel on Climate Change (IPCC), which organizes annual forums where heads of state can negotiate international policies relating to the environment.
In the U.S, there is often contentious political debate surrounding policy proposals that stem from environmental economics. Government leaders often disagree about the level of externalized environmental costs, thus making is difficult to set up substantial environmental policies. The National Center for Environmental Economics, which is overseen by the Environmental Protection Agency (EPA) emphasizes market-based solutions to environmental problems. One of these solutions is the use of cap and trade policies for carbon emissions. The policy issues that they prioritize include analyzing the costs of climate change, encouraging biofuel use and addressing waste and pollution problems.
The study of environmental economics is instrumental to our government’s ability to create environmental policies. Without environmental economics, there would not be as many efforts in our government to make the planet a healthier place.