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An environmental economist studies the environmental significance of economic decisions, using theories of economic analysis. From projects to policies, these economists will examine the current or potential use of resources and advise the public, governments, and business leaders on the resulting environmental effects. Environmental economists are also involved in reformulating analytical economic models, as well as developing new ones to deal with complex issues related to environmental economics. This process also includes discovering ways to assign economic value to the environment and discerning how that value correlates with the broader economy.
Working for the government or a business organization, environmental economists may work to assign an economic value to a piece of land so that leaders can evaluate a business proposal. Part of this evaluation will include determining the environmental impact of the development in economic terms. An environmental economist may also work directly with government leaders in formulating or evaluating public policy where trade and the environment intersect during economic decision-making.
Regardless of the specific job, an environmental economist typically performs these tasks using traditional cost-benefit analytical models. These economists use these models to verify policy and design decisions. These models involve weighing all the potential benefits and the associated costs. With traditional economics, it is fairly simple to assess tangible costs, such as the potential effect on tax revenue or the profitability of a proposed project. However, assessing environmental impact involves many other intricate nuances.
Environmental economists can often find themselves entering uncharted territory. An environmental economist may need to assign value in new ways that are not yet effectively shaped by the economic theory of the day. At this juncture, the economist will have to develop new theory and new models to effectively assess the situation and assign value. The situation may also require a reappraisal of current theory and adjustments to economic evaluation tools.
Attributing value to the environment presents many challenges. The main challenge is that assigning a monetary value to the environment is an illusory process. To illustrate, an economist who is concerned about the associated environmental costs may need to calculate the cost of clearing land for a development project. Among these dilemmas is attributing costs to things like the impact of soil erosion, habitat destruction, potential pollution, quality of life for nearby residents, and perhaps even contributions to climate change. Above all, an environmental economist must accurately measure these costs to properly convey the benefits and obstacles of such development.
So these economists are multifaceted. They consult with many other professionals, such as environmental scientists, to accurately identify and quantify the economic impact. The job doesn’t end with data collection and analysis; the required data may not even exist. Instead, environmental economists must develop new models and theories together with other professionals. Subsequently, they must disseminate this information to a wide range of people, sometimes even the public, when the environmental effects of a proposed economic situation are dire, regardless of the profit potential for the parties involved.