Concept of environmental economics

Environmental economics

Environmental economics is a form of progressive economics that seeks to account for various forms of market failure to improve market outcomes in the future and lead to more widespread benefits among people.

Environmental economics looks at environmental policies of a country and how they impact the local and global economy, either positively or negatively.

One major cornerstone of environmental economics is examining 'market failure'.

Market failure

This is when a market fails to generate the maximum social welfare, mainly due to imperfect knowledge among the members of the market.

Market failure exists due to the man-made gap between what a private individual does given the market price and what society would want them to do to protect the environment. This implies wastefulness or inefficiency, e.g., externalities and the failure to produce public goods.