Environmental Economics

This post is part of the series Eleanor on the Environment.

As the world becomes more aware about the changing climate and the responsibilities taken to preserve it, governments are stepping in. There are a few ways that environmental economists are stepping in to take their part in fighting climate change. Green taxes, environmentally beneficial subsidies, and eco-labeling are all ways that can fight climate change from an economic perspective. 

Green taxes is a fun word for eco-friendly taxing. It is when taxes are used to sway the market towards greener products. This could take the form of taxing people for their carbon emissions. It could also look like tax breaks given to environmentally friendly spending. For example in 1999 Germany raised their taxes on environmentally harmful products and have seen great successes in lowering carbon emissions since then. Another example is if tax breaks were given to electric car owners, it would incentivise people to purchase an electric car. Taxing large corporations can also be very powerful. If we were able to tax a certain amount for every ton of carbon emitted by large companies, that money could be used to rehabilitate the earth. There are some disadvantages to green taxes. Oftentimes it is challenging to determine how much to tax on products. It is also extremely difficult to get people on board with government interference in the economy. Some people see this tactic as a threat to capitalism and their freedom. However, without regulation large corporations will continue to use harmful systems and people will continue to purchase unsustainable products. This cannot continue. 

Environmentally beneficial subsidies is a sum of money granted to a company to keep their products competitive on the market. Currently subsidies are often given to businesses that work in agriculture, fossil fuels, highway transportation, water supplies, forestry, and fisheries. These all, have a great impact on the environment. If subsidies are shifted from unsustainable companies to sustainable ones there will be more incentive to become environmentally conscious. This shift will bring more sustainable goods to the market and help them compete with the “cheap” goods being produced unsustainably. The difficulties with this idea is that many large corporations lobby with politicians, preventing these subsidies from getting off the ground. Additionally if a “sustainable” company is granted a subsidy, without regulation it would be easy to continue environmentally harmful practices. This means that if subsidies are granted it is important to also fund regulation systems for each business, so that they are held accountable. 

Eco labeling is a great way to help sustainable shopping for consumers. Eco labels are a seal of eco-friendly approval from a credible source. The official US eco label is called the “Green Seal.” The Green Seal has been around for 30 years and continues to certify products as healthy for the environment. Eco-labeling is good because it is an easy way for consumers to know what might be healthy versus not, when shopping quickly. Consumers like efficiency, and many people if not most will not do an environmental background check on their products before buying. The main issue with eco labeling is that it comes with “greenwashing.” Greenwashing happens when a good or products are falsely marketed as eco-friendly. Eco-labeling is vulnerable because anyone could stamp the word “sustainable” on their product and sell it without any thought of sustainability in their mind. Although challenging, consumers should strive to know their seals so that shopping sustainably comes easy. 

The U.S. Green Seal

These three solutions only scrape the surface of what can be done for the environment through the help of the economy. It is also important to understand the roadblocks that may be stopping these solutions from succeeding. Actively voting, researching, and shopping are all things that could help these solutions come into action. 

Reference List:

Miller, G. Tyler, and Scott Spoolman. Living in the Environment: Principles, Connections, and Solutions. Stamford, CT: Cengage Learning, 2015. 

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