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ENVIRONMENTAL ECONOMICS

2023

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*We will have a Kahoot on this at the end, so be sure to pay attention!

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A Brief Synopsis

2023

Environmental economics is the study of cost-effective allocation, use, and protection of the world’s natural resources. Normal day-to-day function is dependent on our economy. Incorporating sustainable practices in into the economy can be beneficial for profits, conservation of limited resources, and many other factors.

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2023

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Externalities and Valuation

Valuation: This goes hand-in-hand with externalities. Valuation of natural resources is that they somehow impact on the utility (or well-being) of individuals, and that these individuals can identify a satisfactory trade-off between quantities of money and the environmental goods and bads they want.

Ex. calculating a waterfall’s impact on water supply

Environmental economics is extremely similar to regular economies but there are two key terms that are specific to environmental economics.

Externalities: a side effect or consequence of an industrial or commercial activity that affects other parties without this being reflected in the cost of the goods or services involved, such as the pollination of surrounding crops by bees kept for honey.

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HOW CAN YOU APPLY THIS KNOWLEDGE

PLAN AHEAD

If you choose to invest in stocks some day, keep environmental externalities and outside factors in mind. This could be a double win: one for your portfolio and for the environment.

Many people perceive climate change as an issue that is limited to environmental action. Environmental economics shows how interconnected this issue is.

Climate change will inevitably lead to multiple changes in the economy. Reflect on how supply and demand can be affected by the environment, and use this to make wise future financial decisions.

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Key Takeaways

2023

  • Environmental economics studies the impact of environmental policies and devises solutions to problems resulting from them.
  • Environmental economics can either be prescriptive-based or incentive-based.
  • A major subject of environmental economics is externalities, the additional costs of doing business that are not paid by the business or its consumers.
  • Another major subject of environmental economics is placing a value on public goods, such as clean air, and calculating the costs of losing those goods.
  • Since some environmental goods are not limited to a single country, environmental economics often requires a transnational approach.

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