Environmental economics is a branch of economics that focuses on how our actions impact our natural environment. When we use natural resources, we’re using something that belongs to the planet; so it is important to understand how to use them in a way that benefits both us and the planet. Environmental economics helps us make decisions about how we use these resources.
RPA’s work routinely involves the application of environmental economics to inform decision-making on policies, regulations, programmes and projects. Although the decision contexts may vary, such as chemicals, marine environment, flooding and erosion, and climate change, the tools and general principles applied are consistent.
The overall objective of applying environmental economics in decision making is to ensure that all impacts are included in the final decision-making process. This is achieved by expressing all impacts in a common unit, ideally monetary, which allows for direct comparison of all impacts as part of a wider cost-benefit analysis of the options. This approach enables decision-makers to compare the costs of an action with the broader environmental costs and benefits, all valued in monetary terms. Without the valuation component, such comparisons cannot be made adequately, and environmental costs, benefits, or the ecosystem services affected may not be given sufficient weight in a decision.
RPA applies a range of different tools to assessing environmental impacts (positive and negative) of interventions. Increasingly, we look to capture benefits across a range of capitals; not just natural capital but also produced capital (economic) and human and social capital. These apply similar principles, often based on benefits transfer approaches, with the aim being to capture as many of the benefits as possible to ensure that decision-making is based on the best available evidence.