Economics for Environment- Enriching the Environment

Soaring international temperatures, thanks to the intense debate that revolves around global warming - purportedly the earth’s next disaster flick - make it a particularly contentious task.

March 10, 2014 11:23 IST | India Infoline News Service

Soaring international temperatures, thanks to the intense debate that revolves around global warming - purportedly the earth’s next disaster flick - make it a particularly contentious task. June 5, World Environment Day, is perhaps a good occasion to sit back and take stock of the state of our environment. There’s just one problem. Soaring international temperatures, thanks to the intense debate that revolves around global warming - purportedly the earth’s next disaster flick - make it a particularly contentious task.

World Environment Day was established by the United Nations General Assembly in 1972 to mark the opening of the Stockholm Conference on the Human Environment. Another resolution, adopted by the General Assembly the same day, led to the creation of UNEP.

The agenda is to give a human face to environmental issues; empower people to become active agents of sustainable and equitable development; promote an understanding that communities are pivotal to changing attitudes towardsenvironmental issues ; and advocate partnership which will ensure all nations and peoples enjoy a safer and more prosperous future. World Environment Day is a people's event with colourful activities such as street rallies, bicycle parades, green concerts, essays and poster competitions in schools, tree planting, as well as recycling and clean-up campaigns.

Natural and man-made environmental resources - fresh water, clean air, forests, grasslands, marine resources, and agro-ecosystems - provide sustenance and a foundation for social and economic development.

Mexico hosts the 2009 World Environment Day on June 5. The theme for 2009 has been chosen by UN Environment Programme as Your Planet Needs You-UNite to Combat Climate Change. It reflects the urgency for nations to agree on a new agreement at the crucial climate convention meeting in Copenhagen later in the year, and the links with overcoming poverty and improved management of forests.

The main reason is that in our society the environment has become a scarce resource. Since economics is about how to tackle scarce resources, it can often be useful when dealing with environmental problems.

One way of using economics is to ensure that the costs and the benefits of environmental measures are well balanced. Although it is difficult to estimate costs and benefits, there is an increasing demand that this is done

The Greek word "oikos," household, is the root of both "economics" and "ecology." It suggests complementarities between these disciplines. Yet economists and ecologists often miss opportunities to work together.

Effects of Economic Activities on Environment

It is a rare day when the newspaper does not cover a topic related to natural resources or the environment. The supply of electricity and water to households, farms and business; disputes between states over water rights; pollution caused by industry and traffic - these problems and many more are of growing concern to numerous and more varied groups of people.

It's a fact! too many people are using too much energy. Not only is this causing an energy crisis, almost every environmental problem-global warming, acid rain, smog, destruction of rain forests, pollution of oceans is occurring because of our tremendous energy consumption. Due to rapid modernization of our society during the past fifty years, energy use has increased dramatically. Controlling the use of energy and reducing its negative impact on our planet is presenting us with a serious problem.

The economy and the environment are well connected. No human activity can be conducted without some connection to the environment, whether the provision of clean water and food or the usage of latest version of a car.

MIT Economist Lester Thurow wrote in The Zero-Sum Society, " Environmentalism is not ethical values pitted against economic values. It is thoroughly economic". The cost of preserving environment is inherently economic as well. Equipment and labor to clean air or water, for example, have an "opportunity" cost; they could be used to produce something else. It is a normative issue in the economics term. Some economists believe that air in much of the country is too dirty because the people who make it dirty do not have the right incentives (disincentives) to make it clean.Environmental problems have often been seen as a form of market failure (Public goods and Externalities).

Globally, as also in India, there is increasing concern about the way in which humanity is pushing other species to extinction. A considerable part of this happens unwittingly.

Economist Kenneth Boulding introduced the concept of a "spaceship economy". As the finite spaceship required the interdependency of the people and systems, within the limits set by the natural system and requires efficiency in our use of resources and care in our use ofthe environment.

There are three components, which are essential towards this goal.

Adopting holistic environmental management framework for related environmental problems and solutions.

Fostering a creative combination of regulation, incentives and penalties to guide consumer, industry and the marketplace.

Research and development initiatives that emphasize the utilization, as well as the development, of energy efficiency and renewable energy technology.


The environment’s first role, then, is as a supplier of resources. Its second is as a sink, or receptor, for waste products. The environment provides the economy with raw materials, which are transformed into consumer products by the production processes, and energy, which fuels this transformation. Ultimately these raw materials and energy return tothe environment as waste products. The environment also provides services directly to consumers. The air we breathe, the nourishment we receive from food and drink, and the protection we derive from shelter and clothing are all benefits we receive directly or indirectly fromthe environment.

Policy Measures

  1. First of all, we must abolish state subsidies stimulating the additional use of natural resources by lowering prices or extraction costs. By doing this, we simultaneously reduce the stress on nature and lower the fiscal burden on public budgets. Today this refers primarily to the fields of energy use, transport, and waste disposal where the state supplies many services to the economy free of charge.
  2. In addition, it will be necessary to eliminate the indirect subsidy caused by the fiscal system that normally places high taxes on labour but exempts energy. One way to remedy this distortion of the relative prices of labour and energy is to finance the systems of social security (old-age pension schemes, unemployment insurances, Health care, etc.) by a tax on energy use instead of financing it by social charges that increase the costs of labour. On the one hand, such an ecological tax reform will lead to higher employment while on the other hand it will reduce energy consumption and thereby its destructive impacts onthe environment. Consequently, the payments for unemployment may be reduced as well as the expen

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