If someone asked us whether clean water, air, or forests have an economic value, a lot of us would say that these natural resources transcend monetary value. But in today’s world where everything, including a nation’s development, is measured in economic terms, then it only makes sense to add natural resources such as timber from forests as inputs and environmental pollution as externalities in the economic model of a nation or industry.
And this is how the branch of the economy called “environmental economics” was developed. So, South Sudan should consider the value of natural resources and their importance to the country’s development.
Environmental economics is primarily concerned with the impact of economic activities on the environment and its implications for the individual firm, industry, and the economy as a whole. Economists have formulated economic-environment models to explain the various economic activities and their external effects. This field of economics helps users design appropriate environmental policies and analyze the effects and merits of existing or proposed policies.
The basic argument underpinning environmental economics is that environmental amenities (or environmental goods) have economic value, and there are environmental costs to economic growth that go unaccounted for in the current market model. Environmental goods include things like access to clean water, clean air, the survival of wildlife, and the general climate. Environmental goods are usually difficult to fully privatize and are subject to the problem known as the “tragedy of the commons.”
Destruction or overuse of environmental goods, like pollution and other kinds of environmental degradation, can represent a form of market failure because it imposes negative externalities. Environmental economists thus analyze the costs and benefits of specific economic policies that seek to correct such problems, which also involves running theoretical tests or studies on the possible economic consequences of environmental degradation.
Environmental economists are concerned with identifying specific problems to be rectified, but there can be many approaches to solving the same environmental problem. If a state is trying to impose a transition to clean energy, for example, they have several options. The government can impose a forcible limit on carbon emissions, or it can adopt more incentive-based solutions, like placing quantity-based taxes on carbon emissions or offering tax credits to companies that adopt renewable power sources.
So there is a tradeoff: a cleaner environment, but economic costs. The central questions in environmental economics concern this tradeoff: if environmental protection is costly, how much should we spend on pollution control? Is it worth reducing pollution to zero, or should we accept some level of pollution because of other benefits associated with it? Like in South Sudan, for example, the economy relies a lot on oil, but that industry is polluting our environment and putting human life in danger, as well as rendering some of the land unusable in the future.
And while there is no way oil can be explored and drilled with no pollution at all, other countries have managed to reduce the pollution caused. Is that a compromise that the country would be willing to pursue? Is oil drilling at the maximum minimum pollution possible?
Another question in environmental economics is this: in making these decisions, how can we compare the benefit of a “clean” environment with the cost of pollution control? Unlike many of the conventional goods and services that contribute to household living standards, clean air and other environmental goods do not have market prices, so we need to find some other way to work out how much they are worth. What techniques are available to help us do this, and how reliable are they?
We also need to ask ourselves if government intervention in the economy is needed to reduce pollution, or can we rely on the market economy to get us to the optimal outcome? This is important because laws and regulations that are passed by the government set the standards for the industries and various sectors to follow. For example, can a law be passed saying that for every tree cut, two should be planted on its behalf? That way, the economy continues while deforestation is halted, and climate change is mitigated.
And finally, if we do agree that government intervention is imperative to cut back on pollution and mitigate climate change disasters, then what form should government policies take to cut pollution? Do we have a polluter’s pay principle that sometimes comes in too late after the pollution has already taken place? Do we participate in the global carbon emissions trade as a country? Will fines and jail terms work? Maybe tax tariffs?
But this does not mean that environmental economics is solely a national project. The same way environmental issues transcend national borders is the same way it does as well. Because the nature and economic value of environmental goods often transcend national boundaries, environmental economics frequently requires a transnational approach. For example, an environmental economist could identify aquatic depopulation, resulting from overfishing, as a negative externality to be addressed.
The United States could impose regulations on its own fishing industry, but the problem wouldn’t be solved without similar action from many other nations that also engage in overfishing. The global character of such environmental issues has led to the rise of non-governmental organizations (NGO’s) like the International Panel on Climate Change (IPCC), which organizes annual forums for heads of state to negotiate.
Another challenge relating to environmental economics is the degree to which its findings affect other industries. As explained earlier, environmental economics has a broad-based approach and affects several moving parts. More often than not, findings from environmental economists can result in controversy. Implementation of solutions proposed by environmental economists is equally difficult because of their complexity. Sometimes, rich industrialists could lobby the government to not pass some laws that do not favor them.
All in all, as a growing economy and with the benefit of having developed nations that went ahead of us that we can learn from, environmental economics is an important sector that cannot be ignored. We need to develop and grow, but we should be able to do this while taking care of our environment at the same time. It is for this reason that South Sudan Environmental Advocates (SSEA), together with Sweden Base CLENA Sustainable Future, exists. To partner with institutions, the government, NGOs, UN Agencies, industries, and communities that are committed to a healthier environment.
-Philip Ayuen Dot
YFOP Communications Team Member
Juba, South Sudan