Economic Impacts on Environmental Policies

ECONOMIC IMPACTS ON ENVIRONMENTAL POLICIES
One of the “Ten principles of Economics”(Mankiw) says that “People faced trade-off” and one important
example of trade-offs in modern society is between a clean environment and a high level of income.In
every coutry are laws that require firms to reduce pollution raise the cost of producing goods and services.
Because of the higher costs, these firms end up earning smaller profits, paying lower wages, charging
higher prices, or some combination of these three. While pollution regulations give us the benefit of a
cleaner environment and the improved health that comes with it, they have the cost of reducing
the incomes of the firms’ owners, workers, and customers. How should the government intervene in order
to reduce pollution and, meanwhile, to maintain, at least, the income of firms?
Environmental policy refers to environment, the physical ecosystems,resources, quality of life, health,
biodiversity, and policy, defined "course of action or principle adopted or proposed by a government,
party, business or individual"(Oxford Dictionary). In other words, environmental policy try to solve the
problems which arise from human impact on the environment. The most issues are related to air and
water pollution, waste management, ecosystem management, biodiversity protection, the protection of
natural resources, wildlife and endangered species, and the preservation of these natural resources for
future generations.
Environmental policy is designed to tackle market failures, by controlling pollution, regulating
resource use and protecting and managing the natural environment in order to achieve a more
efficient use of resources in the economy, maintaining the environmental assets which people
value and which support a healthy economy and society, while reducing the costs to people
and businesses of environmentally damaging activities.

Environmental policy affect the way in which economic activity develops because of the influence
how are use the resourses and how they are allocated. Environmental resources have important
impacts on the economy, through the provision of ecosystem services such as the provision of clean
air and water, the regulation of the climate and protection from floods and hazards. These ecosystem
services are essential for supporting economic activity. Certain sectors such as tourism and
agriculture are particularly dependent on the quality of the environment and on the ecosystem
services it provides.


The activities which are linked to the environment have an economic significance when it is about
their contribution to employment an GDP. Economic assessments of environmental policies
must take account not only of their direct effects, but also the indirect and often longer term
impacts through economic multiplier effects, innovation, changes in trade, resource and product
substitution and wage and price adjustments.

These linkages between the economy and the environment are influenced by environmental
policy, which seeks to influence environmental management activity, as well as by key economic
drivers such as innovation, competition, the efficiency of resource use, and the development
of new markets.
In order to implement environmental policies governments used a number of different types of
instruments like economic incentives and market-based instruments such as taxes. But there are
environmental issues with many different aspects which means that should exist a several policy
instruments to adequately address each one.
It is very important to consider that we are very responsible for what happened around us because
human impact with respect to environment can be negative, and healthy ecosystems and
environments provide vital goods and services to humans and other organisms.