Environmental Economics (ENV)

• Quizzes: 10

Environmental economics emerged as a distinct field in the 20th century, driven by growing concerns about environmental degradation and the limits of traditional economic models. Initially, economists assumed that nature’s resources were infinite, but the depletion of natural resources and the rising awareness of pollution highlighted the need for a new perspective. This led to the integration of environmental factors into economic analysis, aiming to quantify the economic value of the environment and its services.

Key developments in environmental economics include the concept of externalities, particularly negative ones like pollution, and the idea of sustainable development. Economists such as Arthur Pigou laid the groundwork with the “Pigovian tax,” advocating for taxes on activities that create negative externalities to correct market failures. Later, the works of scholars like Ronald Coase, who proposed market-based solutions such as tradable permits, further expanded the field.

In practice, environmental economics has influenced policy measures like carbon pricing, renewable energy incentives, and conservation strategies. It has shaped debates on climate change, resource allocation, and sustainable growth, seeking a balance between economic development and environmental preservation. The discipline continues to evolve, guiding governments and businesses toward more sustainable practices while considering the economic costs of environmental harm.