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Chapter 19
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IntroductionIn modern society we are used to dealing with money for everything we need, want, or wish. The market economy teaches us that everything can be bought and sold. So what about environment? To take an example from what the forest gives us, it is obvious that such resources as fish, game, berries, and timber have a price. In addition we may ask what the forest is worth when it come just to enjoying it. This is also possible to estimate in terms of money. The figures for all these resources when added together for a whole country are very large compared to the gross national product. Pollution and many other kinds of environmental impact destroy part of the natural resources. Pollution thus has a cost. It reduces the output of timber, berries, or fish from the forests, and it may reduce the pleasure of visiting the forest as well. In principle it is possible to exactly calculate the cost of the impact of pollution, but many difficulties need to be overcome before a final figure can be arrived at. Even if we can estimate the size of the decrease of production during a year it is difficult to specify the amount of damage that was caused by the pollution in a particular year. It is also difficult to specify all impacts of a polluting substance, e.g. on health, destruction of materials, decrease in property value, etc. As mentioned some values can not be measured in economic terms, and monetary equivalents can only be estimated. It is important for several reasons to know the value of the environment and the cost of pollution. We may compare the cost of abatement, that is treatment, with doing nothing and find out for instance if it is good business to clean air. Governments use estimated costs of pollution in their taxation and environmental policy. Today the cost of pollution and the value of the environment are being introduced in green budgets in several countries in Europe. It may seem obvious that those who use a service, such as the environment, should pay for it, as is done for all other services in society. However even if there is near consensus on this point, the so-called polluter pays principle, is far from being applied everywhere. The reasons are many but in particular it is difficult to connect a specific loss of environmental value to a specific polluter. More often it is the victim, the one who loses value due to environmental damage, who pays. Still market-based economic policy instruments are introduced in many countries in Europe today to fight pollution. When these function well, pollution is diminished with the largest possible economic efficiency. It is now clear that environmental concern is becoming a major part in the economy in modern society and amounts to several percent of the GNP. In this chapter the economics of the environment and environmental impacts are discussed, as well as the many economic instruments used to cure poor environmental performance.
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