Environmental Economics

  Environment Economics


Environment Economics can be defined as a holistic discipline which deals with the interaction between the different economic development activities and their interacting systems like atmospheric, hydrospheric and lithospheric system of nature and socio-political and psychological system of man

Environment Economics is that part of economics which deals with the interface between environment and development

The concept originated in 1960s but gained momentum in last 3 decades

  Development and the Environment Interlinkages


  Economic Development and Environment

Economic Development

Economic growth is the increasing capacity of an economy to satisfy the needs and wants over time.

It can be also defined as increase in per capita production of goods and services with time

Measured as Gross Domestic Product (GDP) or Gross National Product (GNP)


Why Environmentalists are concern about Economics??

Is GDP real growth indicator?

  Environmental Economics Terminology

Environmental Cost - Degradation of Environmental Quality

Cost of Product

  • Internal Cost – Cost of the product
  • External Cost – Cost paid by the environment for the manufacture of that product


Production of more goods and services

Externality / Spillover Effect

Cost or benefit that is not transmitted through prices and is incurred by a party who was not involved as either a buyer or seller of the goods or services

Negative externality / External cost – when environment/society loses something due to some economic activity

Positive Externality / External Benefit – when environment/society gain something due to the activity


Positive and Negative Externality

  Carbon Footprint

A measure of the total amount of carbon dioxide and methane emissions of a defined population, system or activity, considering all relevant sources, sinks and storage within the spatial and temporal boundary of the population, system or activity of interest

The Carbon footprints include all the possible sources of GHG emission by a person. It is calculated as carbon dioxide equivalent using the relevant 100-year global warming potential 

  Water Footprint

The Water Footprint of a product is the volume of freshwater appropriated to produce the product, taking into account the volumes of water consumed and polluted in the different steps of the supply chain

Water use is measured in terms of the volume of water consumed or evaporated and/or polluted, per unit of time. A water footprint can be split into three elements:

Blue Water Footprint: refers to the volume of surface water and ground water consumed (i.e. evaporated or incorporated into the product) during production processes;

Green Water Footprint: refers to the volume of rainwater consumed (i.e. evaporated or incorporated into the product) by the product; and

Grey Water Footprint: refers to the amount of freshwater required to mix pollutants and maintain water quality according to agreed water quality standards