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Free «Economic Approaches to Environment Problems» Essay Sample

1 Introduction

1.1 Background

Environment refers to the natural things that surround the human life. The environment affects humanity and all other living things in all ways. Therefore, it exists for supporting life of both humans and animals. It has mechanisms, which it creates balance in life through. These mechanisms are not human controlled. However, the environment is a subject to degradation through pollution and excessive usage of some resources. This means that some resources that are over-exploited would eventually end up being exhausted; thus, life would not run normally. Also, some activities, which are harmful to the environment, cause harmful effects on the living things in the world. Thus, there is a need to develop ways, in which the environment can be maintained in a way that it would be conducive to living.

Basically, environmental problems emanate from human activities. They are, therefore, considered to be man-made. Economics makes studies on human behavior, while putting into consideration the rationality aspect of human beings. Humans, therefore, develop economic ways, in which to manage the environmental problems, so as to have sustainable development.



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Environment management has, therefore, appeared as one of the emerging issues affecting the world globally. Consequently, institutions and organizations all over the world have taken upon themselves to develop the ways, which they can control and manage the environment pollutants in. This is necessary, since excessive pollution would lead to the exhaustion of some resources, such as energy, and can also cause other hazardous effects, such as global warming resulting from the depletion of the ozone layer.

Economic approaches to the environmental problem touch on the economic measures taken by the governments and institutions in order to control environmental degradation. They involve those measures and policies that are taken to control air, water, and all other components of the natural environment. These economic approaches usually touch on the issues of costs and benefits evaluations of the activities that lead to the environment pollution or degradation. This, thus, means that economic policies on the environment problem are the issues that touch on the daily operations that an organization undertakes. They are measures that can be taken to reduce the negative effects on the environment, but still allow the daily operations of the institution to continue running. They include alternative energy sources, and ways of handling waste and other toxic substances emitted by an institution.

In production of products or services there also arise extra products, which are not accounted for in the production plan. They are referred to as externalities. Externalities can be both of benefit or cost to the environment depending on their impact. Positive externalities are beneficial, whereas negative externalities are costs to the environment. The negative externality costs include wastes from production. 

1.2 Objective of the study

The concept of economic policies has been identified as one of the approaches that can be used in order to control environment depletion. It has encouraged more environment-friendly practices in place of the reckless activities practiced earlier in absence of controls.

This study aims at identifying the applicability of the economic approaches to control environment pollution. It seeks to elaborate the ways the economic approaches have been employed in an attempt to curb environment destruction, so as to allow sustainability within the universe. This can be divided into several specific objectives as follows:

  1. To identify the approaches that have been applied in the environment management;
  2. To evaluate the applicability of these approaches in the environment management;
  3. To identify other economic policies that can be applied in the environment management.

1.3 Problem statement

The research problems focus on identifying the economic approaches on the environmental problem that have been applied. Economic approaches have been widely applied globally as a result of increased environmental hazardous activities being undertaken by various firms.

1.4 Research question

  • How have the economic approaches been applied in environment management?
  • How efficient are they in their intended goal?
  • Which other economic policies can be employed in addition to the existing ones?

2 Literature review

For many decades economists have been trying to develop the ways, in which they can integrate the activities of market-based mechanisms in solving the environmental problems. Pigou (1920) suggested the use of corrective taxes, so as discourage the undertaking of activities that generated negative externalities. Dales (1968) demonstrated how the use of transferable property rights could be used to encourage protection of the environment at lower costs than use of the conventional standards. These two methods were applied in America in an attempt to reduce the effects of pollution.

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Transferrable property rights mean that a firm cannot be allowed to emit pollutants, unless it owns the rights that equaled or exceeds the firm’s emissions. Corrective tax also held the firms liable for any amount of pollutants they emit. These two mechanisms forced firms to cut down on their production of environment hazards; thereby, achieving the goal.

Environmental economics deals with market failure to allocate the resources in an efficient way. Neoclassical economists argue that ecological and social values are not accounted for fully by the market prices, which are an indication of the market failure. It occurs, when the market fails to allocate the scarce resources, so as to generate the most favourable social welfare (Shogren, 2007). In relation to the environment, market failure occurs, when the available natural resources in the environment are not enough to meet the needs. For example, excessive usage of oil, as a source of energy, would lead to the exhaustion of the resource; thus, making it inadequate to meet the needs.

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Governments have tried to reduce the negative effects on the environment in several ways. One of the ways, in which they have done this, is by introduction of the pollution tax. The pollution tax helps to control the amount of waste that a company remits to the environment, such as toxic fumes. The tax makes the producers reduce the amount of pollutants that they dispose into the environment, since the more they produce, the larger the amount of tax that they have to pay is. It, therefore, helps to internalize the costs of producing a negative externality to the environment.

Another measure that has been taken is encouraging the use of recyclable materials. These are the materials, which can be re-used for the same purpose that they have already been used for. Individuals have been encouraged to make use of materials, which can be recyclable. This will help to reduce over-exploitation of the natural resources in production of similar materials. It also lowers the cost of production of these materials.

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So as to save the natural sources of energy available, which include oil and electricity, other sources of energy have been identified and applied. These sources, which include solar energy and natural gas, act as substitutes to the natural oil, which is derived from coal. The sources include solar energy and natural gas, which including the University of Massachusetts has substituted the place of oil. These sources are also environment-friendly, since they do not remit more hazardous effects on the environment, as compared to oil.

3.1 Research methodology

The research applies qualitative methods to analyze the effects of economic approaches on the environmental management attempt. The qualitative information acquired will help evaluate the applicability of the policies.

In the University of Massachusetts, certain measures have been taken, so as to conserve on energy, which is mostly generated from oil. Oil has become a rare commodity in the world. Massachusetts has turned to the use of natural oil, which is much cheaper and also has less powerful effects on the environment. Burning natural gas releases five to ten times less sulphur, as compared to oil. This has acted as an energy conservation measure and also as control of environmental pollution.

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The government has put certain regulations in order to control the production of non-recyclable materials. This helps in conservation of resources, which could have been used to make more of those items. It has also encouraged using the decomposable wrappers, which can be easily decomposed. Non-decomposable material is hazard to the environment. Regulations prevent the production of such materials; thereby, safeguarding the environment from pollution. In the institutions, such as The University of Massachusetts, containers that are associated with items, such as foodstuffs and laundry packaging, are usually collected and taken to Springfield Materials Recovery Facility for the recycling purposes.

Corrective taxes and transferrable property rights have also been applied in the control of the level of pollution by an industry. The negative externalities have been internalized by use of a tax that has been equalized to the amount of pollutant that a firm emits. The firms, therefore, are forced to reduce the amount of a product that they produce, and consequently to reduce the amount of pollution created by production. Property rights are given to the firms that do not make heavy pollutants. Thereby, firms that create pollutions that have major effects are barred from emitting pollutions, where they do not have rights to. Those with rights are also bound to produce within a given limit.

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3.2 Analysis

From the qualitative research carried out it is evident that economic approaches are productive in controlling the effects of pollution on the environment. These measures have been successfully applied in the control and bore desired results.

Introduction of a tax on amount of pollution creates revenue for the government. which is used to resolve the pollution created. The revenue collected is used to correct the negative effects of the externality. This helps to create equality by acting as a balance to the external costs created by pollution. This also applies to the application of property rights in control of pollution and environmental resources depletion. Property rights will give rights to a given firm to use a certain resource, and will provide the limits, within which the firm can pollute. They are, therefore, limited in the level of pollution by the legal means, which in case of a breach of the agreed terms, leads to the legal action being taken on the firm.

There is a call for the individuals to manage the biodegradable material well in order to avoid releasing toxins into the environment. These materials include foodstuffs and garden waste. The University of Massachusetts has been actively involved in training and application of means of decomposing these materials, which, when well-decomposed, are used as manure and still produce biogas, which is used as a source of energy in the institution. This is a way of substituting the natural oil and be environment-friendly, since it does not cause pollution to the environment.

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4 Recommendations

Environmental management is an essential issue that has emerged recently and requires to be incorporated into the day to day operations of an individual. This is done through the different techniques, which align with the operations.

Economic approaches have been applied successfully in an attempt to control the environmental degradation. Some approaches generate wealth and at the same time reduce the amount of pollution caused by the firms.

Some resources that are scarce are faced with the possibility of exhaustion. Thereby, other sources of the same resource should be identified, so as to avoid complete exhaustion of the resource. For example, other sources of energy, such as solar energy, are more economical, as compared to oil as a source of energy. Other sources of energy should be applied. Just like the University of Massachusetts has implemented the use of natural gas in place of oil products, other universities should also adopt use of other sources of energy, such as solar energy in their operations, as a way to reduce exhaustion of the resource.

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However, there are areas, where it is not possible to apply the economic measures of a corrective tax and property rights. These measures fail due to the inability of them to measure the level of pollution empirically. This calls for measures, which barn pollution, in place of the economic measures. It will, hence, assist in the process of environment management to facilitate sustainability.

There is a call for the individuals to manage the biodegradable material well in order to avoid releasing toxins into the environment. These materials include foodstuffs and garden waste. The University of Massachusetts has been actively involved in training and application of means of decomposing these materials, which, when well-decomposed, are used as manure and produce biogas, which is used as a source of energy in the institution. This is a way of substituting the natural oil and be environment-friendly, since it does not cause pollution to the environment.

Other universities should also implement ways, in which to handle their biodegradable waste products, such as food materials. They should encourage the use of biodegradable plastics and also develop ways to deal with such waste materials, so as to reduce pollution.


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