About Environmental Economics

About Environmental Economics

Environmental Economics can be defined as the study of how humans decide on how to dispose of environmental resources. It is a domain of economics that looks at problems of the environment from an economical perspective. Environmental economists perform studies to determine the theoretical or empirical effects of environmental policies on the economy. This field of economics helps users design appropriate environmental policies and analyze the effects and merits of existing or proposed policies.

Natural resources, such as clean water are limited, because of pollution. They are also seen as free public goods. This means that if there are no rules on how to use these goods, they will be used too much. There are externalities for using these goods, and there is the problem of free riders. In this perspective, the solution is to convert these resources into economic goods, which are integrated in the market.

The basic argument underpinning environmental economics is that there are environmental costs of economic growth that go unaccounted in the current market model. These negative externalities, like pollution and other kinds of environmental degradation, could then result in market failure.

Some of the environmental resources below that man derives benefit from and need to be managed:

General: air, water, and land


  • trees or plants that supply the life-giving oxygen humans need;
  • crops that provide food to humans;
  • clean drinking water to keep human metabolism working and flush out bodily wastes;
  • metals that serve as raw materials for human ingenuity such as creation of tools, rigid structures for abode and cars for transport; and
  • oil to fuel industries that manufacture products that people need.

The main purpose of environmental economics is to attain environmental resource sustainability. It is only an instrument by which human needs and desires or wants may be addressed, as much as possible, without depleting finite environmental resources.

Environmental economists are concerned with identifying specific problems to be rectified, but there can be many approaches to solving the same environmental problem. If a state is trying to impose a transition to clean energy, for example, they have several options.

Environmental economics also requires a transnational approach. An environmental economist could identify aquatic depopulation, resulting from overfishing, as a negative externality to be addressed. The global character of such environmental issues has led to the rise of non-governmental organizations (NGO’s) like the International Panel on Climate Change (IPCC), which organizes annual forums for heads of state to negotiate international environmental policies.


Information Sources:

  1. wikipedia
  2. investopedia
  3. simplyeducate