Why Environmental Economics Matters
“Environment” used to be a word that a child used to describe anything that surrounds him or her. Today, it has disparate connotations, it is more complex and has become a socio-economic problem. Unfortunately, the Tragedy of Commons is not a feature of one remote village in a country but is a global story. Environmental Economics is about weighing out the economic consequences of environmental degradation. The study of Environmental Economics is gaining popularity, as more stories of rapacious exploitation of natural resources occupy the front page of newspapers.
But why are we so ignorant about the environment? This is because each of us thinks that our share of exploitation is too small to affect the ecosystem. Imagine this, 5.27 billion times (roughly the adult population of the world). The result is what we see today: deteriorating forests, receding glaciers, ozone holes and increasingly hot temperatures. We are not aware of the limited capacity of Earth to self-repair. We have conveniently accepted the economic invisibility of nature and its resources. By virtue of their availability, we have mistaken their consumption cost to be as “free”. This is where we get our assumptions wrong. As world citizens, we are nearing a tipping point, beyond which the damages will be irreversible. Meanwhile, a few cities like Cape Town are approaching Water Day Zero, where taps would be cut off to the residents, at an appallingly fast rate.
What is the social cost of such adversities and who is paying it?
We are living in a world where money is the king. We must put a price on anything we want people to care about. We need to start talking in monetary terms, of the severity of environmental degradation. It has been costing us fortunes. From big ocean clean-up projects to forest restorations, we are paying dearly. This trend will be on the rise as long as exorbitant exploitation shines high.
Environmental economics has under its aegis, a dilemma that haunts every economist and environmentalist- the trade-off between economic growth and sustainability. The former is a necessary evil, can’t live without it; can’t live with it. If consumption and economic growth stagnates, it becomes a threat to government, social and financial setups. While, if the growth continues at the current speed, it will come at the expense of the environment and its resources. Many research papers address this problem through a compromise. Acknowledging contradictions and paradoxes to be a part of human life, they call for less materialistic societies.
So, what is economics’ take on this issue? Environmental economics values both- economic activity and its environmental impacts. It sensitizes the society to the consequences of misuse of natural resources which corresponds in monetary terms (the kind of encouragement everyone cares about). It talks about government policies leading to environment degradation or protection, whatever the case maybe. It acknowledges the natural resources as capital. And when this begins to happen, the natural capital will gradually pave way for Green Accounting. Green Accounting includes environmental costs and aims to account for its well-being. Companies like Hitachi Chemical and Toshiba are leading the suit.
Next, we need to rethink our cities. With rapid urbanisation in developing countries, majority of the population will begin to live in cities. The indicators of green cities include proportion of population using public transport, renewable energy sources and efficient recycling systems. Examples include Portland in USA and Amsterdam in the Netherlands.
Lastly, the countries must look after their carbon-footprints. China, USA and India are the largest emitters of carbon dioxide. Albeit, India and China’s per capita emission is much lower than USA’s. Bhutan is the only carbon negative country in the world. It is almost completely powered through water streams running down the mountains. With laws that maintain around 60% of the landmass as protected forest areas, Bhutan has set an example for other countries to follow.
The amalgamation of Economics and Environment tells us about the various policies that can be used to mitigate the environmental costs to the society. It addresses the issue of sustainability, which is the need of the hour. Economic policies enable the most efficient use of resources. They give appropriate incentives to the businesses to work towards green and sustainable operations. The Economics of Climate Change reveals that the marginalised communities are more affected than the elevated ones. Shockingly, latter’s contribution to worsening the environment is many times more than the former community.
In times like today, where news like “Exploding ice cracks on Himalayan Glaciers” keep coming up, Environmental Economics will only gain more relevance.