The Role of Economics in Environmental Management
Economics plays an important role in the sustainability of the environment.
Economic theory logically explains reality observations. For instance, the behavior of consumers and firms can be comprehensible together with the decisions at the marketplace. This can also be applicable in engaging the economic theory to analyze the environmental problem’s sustainability and why they are often experienced. Consumption and production are sources of natural pollution since they draw with them by products. This is a source of pollution to the environment, meaning that the decisions that compromise economic activities are disastrous to the environment.
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The current acceptable system for measuring economic activity is the National Accounts, which is a United Nations endorsed program. Barron, Perlack & Greenwood (2009, 121) indicates that ignoring the economic value of natural resources contributes to the society’s acknowledgement of economic growth for coming generations, for instance, increase in economic spending on medication is tantamount to increased toxic chemical leak. This economic expenditure values the health of the inhabitants without considering the sustainability of the ecosystem (Barrow 1999). Sustainability is the maximum level of depletion that an economy can hold for efficient substitution of natural resources with fabricated assets for exhaustible resources according to the economist’s concept, while an ecological concept views sustainability as the ability of an ecosystem to maintain their biological and physical functioning systems after disturbance. While the major characteristic of sustainable growth is the increase in economic indicators like GNP per capita, sustainable development defines the quality of life indicators that encompass how mainstream economists come to resilience in opting for social and economic prosperity.
According to Freeman, Haveman & Kneese (1984, p. 132), resilience is the extent to which a social-ecological system can withstand disturbance before moving to a different state controlled by induced processes. For a socio-ecological system to reap from the fruits of sustainable growth and development, regulation is mandatory. However, without enforcement, regulation is ineffective, and the ensuing perception is that regulation often erodes the existing property rights, while the mandate of legislation is not necessarily to improve the environmental conditions. Resilience aims at molding ecosystems and economic systems into resistant virtues to catastrophic changes. Recognizing that resilience is often a shortcoming to a depleted environment, economists argue in support of an environmentally adjusted revenue measure.
For such a consideration, if SNA allows for a decline in physical capital, so should it observe the devaluation of natural resources that relate to economic activities. For instance, the use of pesticides does not only yield good harvest, but lead to natural pollution by inducing toxics to the ecosystem. Thus, Kolk (2000) affirms that the basic approach that links economics to environmental management is the modification of an ecosystem into sustainability, without loss of economic gains. Sustainability is either weak or strong sustainability by grouping. Weak sustainability assumes unlimited substitution possibilities between different forms of capital, while strong sustainability is the vital component of an environmental system. In strong sustainability, the population is inversely proportional to the natural capital, while in weak sustainability, the constant factor lies i the quotient of the sum of the man made capital, human capital, natural capital and social capital with the population (Nath, Roberts & Madhoo, 2010, p.
212). Environmental pollution is either natural or human induced. Natural pollution arises from non-artificial processes in nature, which may include ocean salt spray or pollination, while human induced pollutants are anthropogenic residuals associated with consumption and production. The cycle of environmental pollution emanates from a basic consumer, who makes use the pollutants to be. The general scope of environmental damage ranges from local pollution, which is categorically the urban smog, while regional pollution, which may involve acidic deposition (Barrow 1999, p.54).
Global damage has global implications like the ozone depletion. The economic criterion for risk management in approach to environmental sustainability encompasses allocation of efficiency that puts the need for resources to be relevant such that benefits equal the costs. On the other hand, the equity criterion details the fairness of the risk burden to the environment across segments of the society.The standard microeconomic premise stipulates that competitive market mechanism lead to scarce allocation of resources, meaning that there are minimal externalities accounted for in the market. This means that the market will provide for an economically efficient level of conservation. Allocation of resources in a competitive market is an upward trend for the market supply while it is significantly a downward trend for the market demand.
The conditions that inspire competitive markets are the presence of many buyers and sellers, low costs of transactions and good information systems (Ryding, 1994). Once these conditions prevail, the market is termed as being competitive, and non-prevalence of the same vastly affects the competitiveness. By coincidence, if a market does not lead to efficient economic outcome, then the situation is termed as market failure. However, economists advocate policy instruments that advocate market solutions to overcome market failure, for instance, pollution allows for traded through market or tax on emissions equivalent to social cost, while environmental economists use monetary values as a measure of economic efficiency. The socially efficient level of sediment predicts the implications of the zero sediment, the impact of the sediments and the cost of damage and reduction of the sediments.
The Marginal Abatement cost MAC is equals the Marginal damage Function. This is predictable from the graph of the cost of abatement and cost of damage versus the sediment. While the abatement cost is the additional cost associated with reducing the amount of additional pollution, and is a downward slope, the marginal damage function estimates the additional damage caused as the emissions increase. This significantly is an upward trend showing a direct proportion of emissions and the level of damage. The general issues that confront policy makers are the estimation of values for externalities both positive and negative, and determine their critical limits. It is also the role of the policy makers to identify and equate MAC to MDF, and avoid unintended consequences by designing the cost of externalities.
The detailed graphing system that shows the basic relationships of equity between the MAC and MDF show the major evidence of the social cost when abatement is less than optimal. Thus, Nijkamp (2004, p. 132) points out that environmental economics, which entails welll use of the environment for economic returns without depletion of the natural resources, stipulates facilitative mechanisms that encourage the environmental users to meet the natural resource duty care (Ryding 1994). The mechanisms also encourage the flow of new and useful information on marketing incentives and community engagement. This means that compliance with facilitative policy is voluntary. Therefore, environmental policy planning should involve the interdependence of all the society segments including the government, the society and the scientific community.
Each group has the mandate to formulate the decisions about addressing the environmental risk and developing essential environmental policies. This will harness effective management of the environment for subsidized economic ends. Scientific research is also essential for curbing natural pollution, for instance global warming. Scientists have the role in studying the spectroscopic phenomena around the radioactive rays responsible for this nature of destruction to the environment, in order to come up with counter radiations, made in space, to nullify this effect. On the other hand, environmental policy planning should be categorically be the role of both the private and the public sector, for instance, in the United states, the Environmental Protection Agency acts as a liaison between the private and the public sector. It was created from existing federal agencies but now operates as an independent agency as stated in its mission statement (Oates `1996, p.
162). The policies designed to induce change include tax incentives, subsidies, fees and grants. The positive moves towards economic management of the environment should involve payments for the provision of ecosystem services, which go a long way towards encouraging the spirit of self-rendering to the noble work of management of the ecosystem. However, this requires government scrutiny to minimize unintended consequences. The incentives should be popular to discourage limited uptake of the conservation tasks.
This creates awareness of the society, which will forge ahead to provide service to the environmental conservation sectors for incentives in return. The incentives should also be fair by explicitly encouraging transparency for it to target the intended funding recipients to avoid distorting the environment of operation of other producers in the industry.Nath, Roberts, & Madhoo (2010) assert that the financial provision for environmental management should be allowed for a limited period of time and clearly set to provide motivation, but not for full funding for on ground works, implying that the funding should act in the form of a circuit breaker. It should be also essential that there is no funding of private beneficiaries. The administration costs for the incentive programs should be minimal in order to affirm full support to the environmental conservation course (Nijkamp, 2004).
This will attract more into the middle management level, who are the hand men in this profession instead of funding those at the periphery of management, who are entitled to perform less on the groundwork. Above all, the mechanisms to address environmental issues should be facilitative, coercive, endowed with inducements, designing of normative policies and regulatory tiering, which suggest a combination of regulation, moral suasion and good structure of the incentives to coerce, encourage and reward environmental management. This will be the basic role, which essential economics can play to environmental conservation for those living now and for generations to come.