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Environmental Economics: Key Theories
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Command and Control Regulations
Environmental policies that set specific limits for pollution emissions and/or specific pollution control technologies that must be used.
Environmental Equity
The fair treatment and meaningful involvement of all people, regardless of race, color, national origin, or income, with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.
Environmental Risk Assessment
A process used to estimate the potential impact of chemical substances, technologies, or activities on human health and the environment.
Free Rider Problem
A problem that occurs when those who benefit from resources, goods, or services do not pay for them, which results in an under-provision of those goods or services.
Hotelling's Rule
An economic rule that predicts the rate at which the price of a non-renewable resource will rise over time, equivalent to the interest rate.
Bioeconomic Models
Mathematical models that describe the dynamic interactions between economic decisions and biological processes, often used for fishery management.
Precautionary Principle
A principle that advocates taking proactive action to prevent harm to the public or the environment, where scientific findings are not yet conclusive.
Environmental Impact Assessment (EIA)
A process whereby the potential environmental impacts of a proposed project are measured and the plan is made to mitigate those impacts.
Externality Theory
A theory that defines an externality as a cost or benefit for a third party who did not agree to the particular action causing the cost or benefit.
Sustainable Development
A development paradigm that seeks to meet the needs of the present without compromising the ability of future generations to meet their own needs.
Ecological Footprint
A measure of how much area of biologically productive land and water an individual, population, or activity requires to produce all the resources it consumes and to absorb the waste it generates.
Cap and Trade System
A market-based approach to controlling pollution by providing economic incentives for reducing emissions of pollutants.
Ecosystem Services
The many and varied benefits to humans provided by the natural environment and from healthy ecosystems.
Circular Economy
An economic system aimed at eliminating waste and the continual use of resources by reusing, sharing, repairing, refurbishing, remanufacturing and recycling.
Coase Theorem
A legal and economic theory stating that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own.
Marginal Abatement Cost
The cost associated with eliminating a unit of pollution.
Polluter Pays Principle
An environmental policy principle demanding that the polluting party pays for the impact caused to the environment.
Integrated Assessment Models (IAMs)
Models that integrate knowledge from two or more domains into a single framework; these are often used for assessing climate change risks and response strategies.
Tragedy of the Commons
A theory that describes how individuals acting independently and rationally according to each's self-interest behave contrary to the best interests of the whole group by depleting a common resource.
Resource Scarcity
The economic theory that limited natural resources will pose a limit on economic growth and may lead to depletion and environmental degradation.
Environmental Justice
A social movement and field of study that examines the fair distribution of environmental benefits and burdens across various groups, often focusing on marginalized communities.
Natural Capital
The world's stocks of natural assets which include geology, soil, air, water, and all living things that provide humans with goods and services.
Environmental Kuznets Curve
A hypothesized relationship between environmental quality and economic development: as income increases, environmental degradation first increases and then decreases.
Green Accounting
A type of accounting that attempts to factor environmental costs into the financial results of operations.
Energy Return on Investment (EROI)
A ratio of the amount of usable energy acquired from a particular energy resource to the amount of energy expended to obtain that energy resource.
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