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Environmental Economics is concerned with the impact of the economy on the environment, the significance of the environment on the economy, and the appropriate way of regulating economic activity so that a balance is achieved among environmental, economic and other goals. The field of environmental economics had its beginnings in the early 1950s but it really took off in the 1970s and has been gaining importance ever since.

There is often a misconception that ecological and environmental economics are the same. Ecological economics is the field of study that deals with the relationships between ecosystems and economic systems. It adopts a more biocentric view when compared to environmental economics where the view is more anthropocentric. In ecological economics, the intrinsic value of environment plays a large role whereas in environmental economics, goods are viewed in terms of instrumental value. As we shall see, this will be dealt in the forthcoming sections. Environmental economics provide policy makers with a practical view of environmental costs and benefits of their proposed action to protect the environment. 

The chief sub-areas of environmental economics are as shown. 

Environmental Valuation is concerned with the analysis of methods for obtaining empirical estimates of environmental values, such as the benefits of improved river water quality, or the cost of losing an area of wilderness to development. Externalities mainly deal with the damages caused by them, and the means of minimizing it. Environmental regulation involves the government trying to induce a polluter to take socially desirable measures to control pollution by making use of a variety of policy instruments. 

Sustainable development is the core of environmental economics. It is chiefly concerned with non-declining consumption over time and focuses on development so as to meet the needs of the present generation without compromising the needs of the future generations. Sustainability is often considered as the goal of environmental economics.


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