Environmental Economics – Chasing Tales

From an economic point of view, pollution is an inefficiency, a “misplaced resource” that has been discarded because it has no market value.¹

The Linear Economy, which operates on a “Take-Make-Waste” principle. Raw materials are extracted, transformed into products, used briefly, and discarded. The fatal flaw is that the “Waste” component almost always represents an externality invisible to market prices.² The linear model generates massive environmental consequences. Resource extraction creates habitat destruction and biodiversity loss. Manufacturing produces pollution across air, water, and soil. The disposal phase concentrates waste in particular locations, often in low-income communities. The model also concentrates wealth and opportunity in few hands, increasing social inequality. Plastic costs appear cheap only because the price tag excludes 500 years of cleanup costs.³

Currently:

At the current rate, there will be more plastic in the oceans than fish by 2050.⁴
Over 100 billion tonnes of raw materials are extracted globally every year.⁵
More than 91% of it is wasted after a single use.⁶
Approximately 30% of all plastics ever produced are not collected by any waste management system and end up as litter in rivers, oceans, and land.⁷

This economic blindness began to crack in the 1960s. Environmental economics emerged in response to visible environmental damage documented by works like Rachel Carson’s Silent Spring. Rather than viewing environmental problems as side effects of economic activity as in traditional economics, it treats them as central questions about how we value nature, why markets fail to protect it, and what policies can correct those failures.⁸

Environmental economics asks three fundamental questions:⁹ ¹⁰

What policies can correct those failures?
How do we value nature in economic terms?
Why do markets fail to protect the environment?

Invisible Costs¹¹ ¹² ¹³
In economics, this invisible cost of pollution is called an externality.

An externality is a cost or benefit imposed on a third party who did not choose to incur it and for which the responsible party does not pay. When a factory pollutes a river, the operation generates profits for the owner, but downstream communities bear the costs through health impacts, cleanup expenses, and biodiversity loss. The market price of the factory’s product is artificially low because it fails to reflect these environmental damages, the benefits of which are private while the costs are external, invisible to market actors.

Positive externalities occur when an activity benefits others without compensation. For example, when more people adopt public transportation, road congestion decreases for all drivers, creating a spillover benefit that the road users don’t pay for. Negative externalities, such as pollution, habitat destruction, or resource depletion, are far more prevalent in discussions of environmental economics because they represent genuine welfare losses for society that the price system ignores.

While early economists like Arthur Pigou identified externalities in the 1920s, it wasn’t until the mid-20th century that the field formalised the study of how shared resources are managed, or mismanaged. Over time, the field grew and various other theories were added to the discipline, for example:

Public goods or Common-Pool Resources are non-excludable (you cannot prevent people from using them) and non-rivalrous (one person’s use doesn’t reduce availability for others). Climate stability exemplifies this problem: no single company owns a stable climate, so no single company has a financial incentive to protect it.¹⁴

The Tragedy of the Commons describes what happens when individual users, acting in their own self-interest, deplete a shared resource even though this outcome harms everyone in the long term. The atmosphere and oceans are classic examples. Each polluter has a private incentive to externalise their waste, but the aggregate effect of millions of such decisions degrades the resource for all.¹⁵

Can We Replace Nature?¹⁶ ¹⁷
A central debate in environmental economics is whether natural capital (forests, minerals, clean water) can be substituted by human-made capital (machines, technology, infrastructure). The substitutability view (weak sustainability) assumes technology can replace nature. The complementarity view (strong sustainability) argues natural capital and human capital must work together:

Substitutability / Weak Sustainability: An approach to sustainability that assumes different types of capital (natural capital like forests and metals, human-made capital like machines and buildings, human capital like knowledge and skills) are interchangeable. Under weak sustainability, losing a natural forest can be considered sustainable if the economic value generated (through agriculture or development) equals or exceeds the value of lost biodiversity. Weak sustainability assumes technological substitution—we can replace nature with machines.
Complementarity / Strong Sustainability: An approach that treats certain natural capital assets as incommensurable, meaning they cannot and should not be substituted by human-made alternatives. Strong sustainability recognises that some natural systems have critical ecological functions that cannot be replaced. A natural forest cut down and replanted elsewhere is not sustainably managed under this view because the biodiversity loss and wider ecological disruptions cannot be measured or offset.

The debate over sustainability was fundamentally altered in 2009, when a group of scientists led by Johan Rockström at the Stockholm Resilience Centre introduced the concept of Planetary Boundaries. They argued that Earth has quantitative limits, or “safe operating spaces”, that humanity must not cross.¹⁸

Planetary Boundaries¹⁹ ²⁰
Planetary Boundaries represent a framework identifying nine critical Earth system processes (climate change, biodiversity loss, ocean acidification, land system change, freshwater use, biogeochemical flows, ocean oxygen depletion, atmospheric aerosol loading, and chemical pollution) that regulate planetary stability. Crossing these boundaries increases risks of large-scale, abrupt, or irreversible environmental changes. The current status of the nine Planetary Boundaries is depicted in this visualisation by the Potsdam Institute for Climate Impact Research:

Planetary Boundaries visualised (this is the version for colour blind people)²¹

To understand why externalities pose existential threats, we must recognise that the Earth operates as a closed thermodynamic system. We receive energy from the sun, but practically no matter enters or leaves. The water, carbon, and minerals present today are the same atoms that existed millions of years ago. While companies test asteroid mining and space-based resource extraction, commercial operations remain infeasible. We are not going anywhere else, and neither is anything else any time soon.

Traditional economics assumes an implicit model of an open system where waste can vanish into a void without damaging the planet and new resources are in unlimited supply.²² ²³ Due to this, in traditional economics, environmental externalities don’t matter.²² In reality, extraction depletes stocks, and waste accumulates until organisms recycle it or it decomposes into usable molecules. This closed-loop reality means that all environmental externalities eventually cycle back, imposing costs on the system that produces them.

Ecosystems provide services worth far more than human-created capital. The real economic value of ecosystem services includes provisioning services (food, water), regulating services (carbon storage, water purification, disease control), supporting services (nutrient cycling, pollination), and cultural services (aesthetic, recreational, spiritual value). These services are valued at over $150 trillion annually, which is approximately twice global GDP, yet most remain invisible to the financial market.²⁴

When ecosystems collapse from pollution or overexploitation, the cascading effects are severe. Freshwater species populations have declined by 83%²⁵ in fifty years. Research demonstrates that losing 40% of key species can trigger collapse of 40% of remaining species throughout the system: ecosystems don’t gradually decline but flip to new, often irreversibly degraded states.²⁶ ²⁷ These ecological transformations represent enormous negative externalities that the economic system counts at no cost for the polluter.

Regime Shifts
When a planetary boundary is crossed, the Earth system risks undergoing a regime shift—an irreversible transition to a new, less hospitable state.

Systemic Financial Risk: These physical risks are becoming material financial risks. Current projections suggest that unmitigated boundary breaches could cause profit losses of 5-25% by 2050 for unprepared sectors. More dangerously, the “tipping point” in nature creates a “tipping point” in the economy, where insurance markets fail because risks become uninsurable (e.g., no one will insure property in a zone of permanent wildfire).²⁸
Non-Linear Damages: Traditional Cost-Benefit Analysis (CBA) struggles here because it assumes linear damages (e.g., 2 degrees of warming is twice as bad as 1 degree). However, crossing a tipping point (like the collapse of the Amazon rainforest or the West Antarctic Ice Sheet) causes damages to spike asymptotically to infinity, representing an existential threat rather than a marginal cost.²⁹

The efficiency trap³⁰ ³¹
In 1865, economist William Stanley Jevons observed a counter-intuitive trend in his book The Coal Question: James Watt had introduced a vastly more efficient steam engine that required less coal to do the same amount of work. Logic suggested that coal consumption would drop. Instead, it skyrocketed.

This is the Jevons Paradox: Because the new engine made energy cheaper, making it profitable to use steam power in thousands of new applications where it was previously too expensive. Increases in efficiency often lead to increases in overall consumption, rather than decreases.

Circularity
If Earth is a closed system, our economy must become one too. The circular economy is a fundamentally different way of thinking about production and consumption. Instead of extracting → making → disposing, the circular model aims for continuous circulation.

The Ellen MacArthur Foundation, which pioneered much of the circular economy theory, defines it as follows: “A circular economy is an economic model aimed at minimising waste and maximising resource efficiency. It focuses on reusing, repairing, refurbishing, and recycling existing materials and products to create a closed-loop system that reduces impact on the environment.”³²

At its core, the circular economy operates on a radical premise: there is no such thing as waste. Circularity isn’t just about recycling more; it’s about redesigning civilisation so that the concept of “waste” becomes obsolete. It mimics biological cycles where the waste of one species becomes food for another.

The more traditional concept of the circular economy rests on three complementary principles, often called the “Three Rs”:³³ ³⁴

Reduce: The most fundamental principle. Use less. Design products that require fewer materials. Choose quality over quantity. The environmental benefit of not using a material in the first place is greater than the benefit of recycling it later.
Reuse: Keep products in use for their original purpose as long as possible. A bottle is reused for storage. Clothing is worn by multiple people across time. Furniture is repaired and maintained rather than discarded when fashion changes. Reuse requires durability—products must be built to last.
Recycle: When a product reaches the end of its useful life, its materials are recovered and transformed into new products. But recycling is the least preferred option in the circular model, coming only after reduction and reuse. Why? Because recycling requires energy, and recycled materials often degrade in quality (a process called “downcycling”).

However, there are other Rs too:³⁵ ³⁶ ³⁷

Refuse: Refuse to buy what is not required.
Repair: To repair is to fix something that is broken and return it to working condition, and it extends products’ lives.
Refurbish: Refurbishment is the professional process of restoring a used product to like-new condition through cleaning, testing, repair of worn components, and quality assurance.
Remanufacture: Remanufacturing is the industrial process of returning end-of-life products to like-new condition, often exceeding new product quality. Unlike refurbishment (which typically involves minor repairs and cosmetic restoration), remanufacturing involves complete disassembly, assessment of every component, replacement of worn parts, cleaning, reassembly, and testing.
Recover: Resource recovery is the process of extracting materials from used products and waste, converting waste into valuable inputs for manufacturing new products. Instead of garbage going to landfills, its materials are recovered and re-entered into production cycles.
Regenerate: Regeneration is the final and highest aspiration of circular economy: not just reducing harm, but actively improving ecosystems, building natural capital, and leaving the world richer than you found it.

Circular principles include design for durability and repairability to extend product lifespans, material selection to enable recycling, take-back programs where manufacturers manage end-of-life, and remanufacturing to extract value from used products.³⁸

Industrial ecology formalises this concept by analysing material and energy flows through industrial systems. The goal is to create industrial ecosystems where output from one facility becomes input to another, mimicking natural food webs where energy and matter cycle through trophic levels. Successful industrial ecology requires partnerships among industries to exchange byproducts and shared infrastructure for waste processing.³⁹

The transition from linear to circular creates fundamental business model changes. Instead of maximising production volume, circular firms optimise product lifespan, material recovery, and service delivery. Instead of profit from disposal, revenue comes from extended use and material recapture.³⁸

From an environmental economics perspective, the circular economy represents internalising all externalities by forcing companies to account for their entire product lifecycle. When manufacturers know they’ll eventually manage end-of-life—or when cost of future pollution regulations is incorporated into today’s decisions—they’re incentivised to eliminate waste at design stage rather than manage it at disposal stage.

Pricing Nature
To fix the market failure, we first need to measure the damage. Forcing the market to account for costs previously external-to-firm decision-making by making polluters pay for environmental damage, market prices finally reflect true social costs. This can occur through multiple mechanisms: taxes, regulations, cap-and-trade systems, liability rules, or disclosure requirements. When externalities are internalised, the price of polluting goods rises to reflect their true cost.⁴⁰

The foundational principle that whoever causes pollution or environmental damage must bear the cost of preventing, mitigating, and repairing that damage is called the Polluter Pays Principle (PPP). Formally articulated by the OECD in 1972 and incorporated into the Rio Declaration in 1992, PPP creates economic incentives for polluters to reduce their damage. It shifts responsibility from the public (who would otherwise pay cleanup costs) to the private parties who profit from pollution.⁴¹ For this, we first need to be able to find the monetary value in question:

Replacement Cost Method:⁴² A valuation approach that estimates the value of an ecosystem service by calculating what it would cost to replace that service with human-made technology. For example, if replacing a wetland’s filtration service with a treatment plant costs $2 million, the ecosystem service is valued at $2 million.
Direct Valuation:⁴³ A method that estimates environmental value by asking people how much they would be willing to pay for environmental improvements (like cleaner water) or willing to accept as compensation for environmental losses. For example, surveys can estimate how much people value a protected forest by asking their willingness to pay for conservation. This captures existence value—what people value simply knowing something exists, even if they never use it.
Hedonic Pricing (Indirect Valuation):⁴³ A method that estimates the value of environmental attributes (clean air, clean water, scenic views) by analysing how they affect market prices. For example, homes near clean lakes or parks sell for more; the price difference reflects the value of the environmental amenity.
Travel Cost Method (Indirect Valuation):⁴⁴ A method that estimates the value of environmental amenities (national parks, beaches, forests) by analysing how much people spend to visit them. The travel costs (fuel, lodging, time) are used as a proxy for environmental value.
Avoided Cost Method:⁴⁵ A cost-based valuation approach that estimates ecosystem service value by calculating the costs that would be incurred if those services were lost. For example, the value of wetlands for flood protection can be estimated by calculating the property damage that would occur without the wetland’s protection.

Internalisation
After we’ve found the cost of pollution, the next step (once politically convenient) is to internalise the costs to those who pollute. This part of the post discusses some accepted measures.

1. Tax-Based Instruments⁴⁶ ⁴⁷ ⁴⁸
Pigouvian taxes, named after the previously-mentioned economist Arthur Pigou, are a direct approach to internalisation. A Pigouvian tax sets a fee equal to the marginal (in economics, marginal means additional) external damage at the socially optimal output level. For example, a carbon tax places a cost on CO2 emissions equivalent to climate damages. This transforms polluters’ incentives: with the tax in place, reducing emissions becomes cheaper than paying the tax, so firms invest in efficiency and cleaner technologies.⁴⁹

The advantage of Pigouvian taxes lies in flexibility. Rather than mandating specific pollution control technology, taxes allow firms to find the most cost-effective way to reduce emissions, whether through process changes, technology adoption, or output reduction.

However, implementing Pigouvian taxes presents challenges. Accurately estimating the monetary value of marginal external costs proves extremely difficult, particularly for long-term, diffuse environmental impacts like climate change. Additionally, poorly designed taxes can be regressive, disproportionately affecting low-income households. Well-designed tax systems can mitigate this through revenue recycling (using tax revenue to fund renewable energy research, reduce other distortionary taxes, or provide carbon dividends to citizens).

The double-dividend hypothesis suggests that revenue-neutral substitution of environmental taxes for income taxes yields two benefits: a better environment (the first dividend) and a more efficient tax system by reducing distortionary income taxation (the second dividend).⁵⁰ ⁵¹ While theoretically appealing, empirical evidence shows mixed results depending on multiple economic and policy factors.⁵⁰ ⁵¹

2. Cap-and-Trade Systems⁴⁸ ⁵² ⁵³ ⁵⁴
Cap-and-trade (also called Emissions Trading Schemes or ETS) represents an alternative market-based approach to internalisation. Regulators set a total cap on allowable emissions and distribute permits to polluters either for free or through auction. Firms must either reduce pollution or buy additional permits from other firms. Crucially, the cap declines over time, forcing progressively stricter emissions reductions.

The trading mechanism generates a two-fold benefit. First, companies that can reduce emissions cheaply have financial incentive to do so, then sell surplus permits to polluters facing higher abatement costs. This ensures that emissions reductions occur where they’re cheapest—society achieves the environmental target at minimum economic cost. Second, as the cap tightens, permit scarcity increases, creating financial pressure for innovation and investment in clean technologies.

Comparing cap-and-trade to carbon taxes reveals important trade-offs. Cap-and-trade provides environmental certainty—the government guarantees a specific pollution level through the cap—but costs fluctuate with market conditions. Carbon taxes provide cost certainty—polluters know exactly what they’ll pay per unit—but environmental outcomes depend on market responses. Under uncertainty about abatement costs, taxes work better when marginal benefits are relatively flat; cap-and-trade works better when they’re steep.

Cap-and-trade faces political and practical challenges. It requires sophisticated bureaucratic capacity to determine which companies get covered and how many permits to allocate. The system struggles to cover small polluters as only large facilities typically participate while taxes apply at the emission source (fuel) and thus reach both small and large users. Additionally, international trading risks creating environmental “hot spots” where permits concentrate pollution in particular locations, raising environmental justice concerns.⁵⁵

India’s approach offers a developing-country model. India’s Carbon Credit Trading Scheme, notified in 2024-2025, uses an intensity-based baseline-and-credit system covering nine energy-intensive industrial sectors. Entities that overachieve their emissions intensity targets earn Carbon Credit Certificates; those falling short must purchase or surrender certificates. The scheme also includes a voluntary domestic crediting mechanism allowing non-covered entities to register emission reduction projects.

3. Extended Producer Responsibility⁵⁶ ⁵⁷ ⁵⁸ ⁵⁹
Extended Producer Responsibility (EPR) shifts waste management liability from governments to manufacturers. By holding producers responsible for their products’ entire lifecycle—from material extraction through end-of-life disposal—EPR incentivises design changes that reduce waste at source.

Under EPR, manufacturers can implement reuse, buyback, or recycling programs, or delegate responsibility to Producer Responsibility Organisations (PROs) paid for used-product management. This shifts the burden from government to private industry, obliging producers to internalise waste management costs in product prices and ensure safe handling.

EPR functions as a powerful design incentive. When manufacturers know they’ll pay for disposal, they redesign products to use fewer materials, improve recyclability, avoid toxic substances, and extend product lifespans. Successful EPR implementation requires clear regulations defining which products are covered, what producers must fund, and how compliance is verified.

4. Market-Based Instruments Compared60 61
Research comparing different internalisation mechanisms reveals nuanced trade-offs. Market-based instruments (taxes, permits, subsidies) achieve environmental goals by altering the fundamental market framework and letting firms minimise costs. Choice-based instruments (eco-labels, voluntary certifications) let firms meeting criteria signal their qualifications to consumers, allowing consumers to express environmental preferences.

Empirical analysis shows that emission taxes prove more effective than voluntary environmental programs at enhancing environmental quality and welfare. While eco-labels capture additional consumer surplus from environmentally conscious buyers, taxation more effectively curtails emissions from inefficient firms by changing all firms’ incentives. Command-and-control regulation—mandating specific technologies or performance standards—typically costs more than market-based approaches but provides certainty about pollution outcomes.

In developing countries, command-and-control remains the predominant approach because regulations are easier to design initially using existing administrative apparatus. However, they often prove economically inefficient and prone to weak enforcement. Market-based instruments promise greater efficiency but require sophisticated governance structures, robust monitoring, and developed markets—typically scarce in developing nations. Effective environmental management likely requires hybrid strategies combining command-and-control for baseline standards with market mechanisms for achieving further improvements.

5. Command-and-Control Regulation⁶² ⁶³ ⁶⁴ ⁶⁵ ⁶⁶
Command-and-control regulation involves governments directly prescribing environmental standards and mandating compliance. The approach includes technology-based standards (requiring specific pollution control technologies), performance-based standards (setting pollution limits without specifying methods), and permits and licensing systems.

The clarity of command-and-control is its primary strength. Rules are explicit, leaving little ambiguity about compliance requirements. This predictability enables businesses to make precise investment decisions in pollution control. For regulators, assessment against specific benchmarks is straightforward.

However, command-and-control exhibits significant limitations. The uniform standards ignore that firms have different abilities to reduce pollution—what’s cheap for one firm may be prohibitively expensive for another. The approach provides no incentive to exceed standards, even if doing so would be cost-effective. Inflexibility about how to reduce pollution means the most efficient abatement pathways may be blocked by regulatory requirements.

Effective command-and-control requires strong institutional capacity for monitoring and enforcement. Many developing countries lack the resources for consistent inspection and credible penalties, enabling regulatory capture where polluting industries exert undue influence on regulatory bodies.

6. Information Disclosure as Policy⁶⁶ ⁶⁷ ⁶⁸
A third policy wave emerged beyond command-and-control and market mechanisms: information disclosure regulation. The U.S. Toxics Release Inventory (TRI), established in 1986 following the Bhopal industrial disaster, requires manufacturing facilities to publicly report annual toxic chemical releases to air, water, and land.

TRI operates on the premise that public information creates stakeholder pressure. When communities learn about facility emissions, they can pressure companies through reputation damage, consumer choices, or political action, creating incentives for pollution reduction without direct government mandates. The system is cost-effective because enforcement relies on stakeholder pressure rather than government agency capacity.

Research on TRI effectiveness reveals that responsiveness to disclosure varies. Establishments located near corporate headquarters perform better than isolated facilities, suggesting that internal expertise access and sensitivity to reputation in areas with multiple company facilities enhance response. Facilities far from headquarters, large plants in rural areas, or isolated operations may need additional incentives or resources to improve in response to disclosure alone.

7. Voluntary Environmental Standards⁶⁹ ⁷⁰ ⁷¹ ⁷²
Voluntary environmental standards represent commitments organisations adopt beyond legal requirements. These range from ISO 14001 environmental management systems certification to sector-specific standards like Forest Stewardship Council (FSC) certification for forests or Marine Stewardship Council (MSC) for fisheries.

Credibility requires external verification by independent third parties. This process adds weight to environmental claims and provides assurance to stakeholders that standards are genuinely met. However, voluntary standards face limitations: they reach only willing participants; stringency varies across programs, creating opportunities for firms to “venue-shop” across programs requiring lower standards; and participation often hinges on credible threats of future mandatory regulation rather than genuine environmental commitment.

Empirical research on FSC and similar standards reveals mixed outcomes. While standards aim to promote sustainable practices, effectiveness varies across global contexts, with weak governance structures and social capital challenges limiting success in some regions.

8. Payments for Ecosystem Services⁷³ ⁷⁴ ⁷⁵
Payments for Ecosystem Services (PES) represent a market-based approach to conservation. PES schemes compensate farmers or landowners for managing land to provide ecological services—carbon sequestration, watershed protection, biodiversity conservation, pollination services. A transparent system offers conditional payments to voluntary providers who maintain ecosystem functions.

PES advantages include cost-effectiveness. By offering fixed payment for service provision, individuals who can provide the service at or below that price have incentive to enroll, while those with higher opportunity costs do not. This self-selection ensures cost-effective service provision relative to mandatory approaches requiring same actions from all.

However, PES faces challenges, particularly for public goods. When ecosystem services benefit society broadly (like climate stability), individuals lack financial incentive to provide them without compensation. Converting latent demand into actual funding requires compulsory mechanisms—taxation or government payment—to overcome free-rider problems. Additionally, PES programs raise concerns about commodification of nature, potentially privatising commons and reducing indigenous land rights.

9. Mitigation Banking and Conservation Offsets⁷⁶ ⁷⁷ ⁷⁸ ⁷⁹ ⁸⁰ ⁸¹
Mitigation banking provides another market-based internalisation mechanism. Under the U.S. Clean Water Act Section 404, developers cannot discharge pollutants into waters without compensation. Rather than each developer creating individual compensatory mitigation, centralised mitigation banks allow developers to purchase credits from banks that restore or preserve wetlands or streams elsewhere. Before a 404 permit is issued, applicants must first avoid and minimise impacts; any remaining unavoidable impacts must be offset through compensatory mitigation, which can be accomplished via permittee‑responsible mitigation, in‑lieu fee programmes, or purchasing credits from a mitigation bank. Mitigation banking has evolved as an alternative to project‑by‑project mitigation, allowing developers to buy credits from centralised banks that have already carried out restoration/enhancement activities, which can be faster and administratively simpler for permittees.

This system incentivises restoration over preservation. Mitigation banking regulations reward restored wetlands with more credits than preserved ones, reflecting greater ecological value from restoration. Developers benefit from faster, cheaper compliance; ecosystem managers benefit from predictable funding for restoration; communities benefit from ecosystem protection even if harm occurs elsewhere.

Mitigation banking principles extend to conservation more broadly. Tradable permits for endangered species habitat, conservation easements where landowners voluntarily limit land use in exchange for tax reductions, and habitat credits create markets in environmental services. These approaches rely on Coasean bargaining—if property rights are clearly defined and transaction costs are low, polluters and victims can negotiate mutually beneficial agreements without government intervention.

10. Liability Rules and Environmental Compensation⁸² ⁸³ ⁸⁴
Some jurisdictions implement strict liability for environmental damage, requiring polluters to pay compensation regardless of fault. This differs from fault-based liability requiring proof of negligence. The Polluter Pays Principle underpins this approach, making polluters bear responsibility for restoration, remediation, and third-party compensation.

India’s National Green Tribunal has developed frameworks for environmental compensation, imposing penalties on industries violating environmental regulations. Compensation includes assessment costs, restoration costs, and compensation for direct and indirect damages to human health, property, flora, fauna, and ecosystem functions.

A Contextual Note on Climate Justice
We cannot equate the carbon produced by a family burning wood to survive the winter with the carbon produced by a millionaire flying a private jet. One is a symptom of energy poverty and a lack of alternatives—a victim of the system. The other is a symptom of excess—a beneficiary of the system.

The poorest 50% of the world is responsible for 10% of global emissions while bearing the greatest harm from climate impacts.⁸⁵ ⁸⁶ Meanwhile, a private jet can emit 2 tonnes of CO₂ in a single hour, which is more than an average person in many developing nations emits in an entire year.⁸⁷ ⁸⁸ ⁸⁹ ⁹⁰ Treating survival emissions as equal to luxury emissions is morally corrupt.

Sources

Tag: Environmental Economics

The invisible costs of pollution

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