Through the name, we can very easily make out that environmental economics is concerned about environmental issues. Economics is a subject that studies the allocation of scarce resources, business and market functions, and the flow of money. Environmental economics is the application of the principles of economics. It includes the development and management of natural and environmental resources. 

The basic dispute supporting natural financial matters is that biological accommodations have money-related worth. There are ecological costs of monetary advancement that do not count in the current market model. Clean water, air, wildlife survival, and the general climate are some of the environmental facilities. 

Overuse of these environmental facilities creates pollution or other environmental destruction that shows market failure. Thus, environmental economists assess the cost and profit of certain economic strategies and policies that are made to correct these problems. The two types of strategic tools used in environmental economics such as perspective and market-based. Here the government sets goals but otherwise allows private sectors to meet these goals the way they wanted. 

The Link between the Economy and the Environment

Here, in this part, we will try to understand the link between the economy and the environment. The economy can be divided into two sectors: production and consumption. The environment is used as a:

• As a Natural Resource Input – Land, water, and raw materials are the main important inputs in every industry production. These resources vary according to the location thus, affects the country’s economy. Natural resources are extracted from the environment. This is used as inputs for another production sector but in this process, the waste products are also generated. 
• As a Supplier of Environmental Goods – Economic benefits come from the consumption of the flow of services that are coming from environmental goods. Services and tourism sectors are associated with the environment. As a result, such things lead to an increase in the economy of the country.
• Waste Sink – This refers to the capacity of the environment to absorb the waste products produced by the industries’ production and consumption and convert them into harmless useful products. That’s the point about which we are most concerned. The environment is used as a waste sink of chemicals, pesticides, lubricants, etc. Thus, policies are made to remove all these chemicals from the environment. This process requires funds hence environment and economy are interlinked. It is an economic issue because the methods by which environmental pollution can be decreased are themselves assets utilized. Further, it additionally diminishes the worth of certain assets that society has available to it.

The Environment has become the fastest-growing field of study in economics. Nature plays a significant role in the formation of economic processes and economic value. Hence it is essential to increase the awareness of the interconnection between the economy and the environment.

Scope of Environmental Economics

• Economy Environmental Analysis – It mainly concerns the implications of economic activities on the environment and industries, firms, and the economy as a whole.
• Welfare Approach – This particular discipline emerged to resolve environmental problems by adopting an ethical approach and working towards an economic welfare framework.
• Clean Technology – Existing technology causes environmental pollution thus environmental economists are working towards the development of technology that uses eco-friendly resources and energy rationally and protects the environment.
• Conservation Policy – The longstanding establishment of natural financial aspects lies in protecting financial matters which will, in general, underline the effect of monetary exercises on interest for useful assets and energy assets. It proposes the ideal technique for the usage of normal assets in a levelheaded way.
• Finding a Balance – This aspect works on balancing economic development and environmental quality. Environmental economics focuses on exploring socio-economic possibilities that reduce pollution and work on uplifting living standards.
• Environmental Values – Ecological qualities are monetary qualities. It is significant for the general public to preserve its restricted assets in light of a legitimate concern for monetary effectiveness and welfare.

Limitations of Environmental Economics

The challenges in modern society are whether to maintain environmental quality or to increase industrial production which creates conflicts of interest between potential gainers. The economic problem is the allocation of resources in the context of externalities. Human activities like excess exploitation of resources and waste products depend on the ecological conditions of an economy that influence environmental quality.  

Conclusion –

Environmental economics manages monetary and administrative parts of contamination and regular assets. It interfaces between people and their actual environmental factors. It contemplates the effect of contamination on individuals and recommends public use of assets in a legitimate manner so that there might be an increment in friendly social welfare or minimization of social expenses. This discipline is drawn more from microeconomics than macroeconomics as it primarily includes why and how people make decisions that lead to consequences for the natural environment.