An environmental economist studies the environmental significance of economic decisions, using theories of economic analysis. From projects to policy, theses economists will scrutinize the current or potential use of resources and will advise the public, governments and business leaders on the resulting environmental effects. Environmental economists are also involved in the reshaping of analytical economic models as well as developing new ones to tackle complex issues related to environmental economics. This process also includes figuring out ways to assign economic value to the environment and discerning how that value correlates with the larger economy.
Working for the government or a business organization, environmental economists might work to assign economic value to a tract of land, so that leaders can evaluate a business proposal. Part of that assessment will include determining the environmental impact of the development in economic terms. An environmental also economist might work directly with government leaders in crafting or evaluating public policy in which trade and the environment intersect during economic decision-making.
Regardless of the specific job, an environmental economist usually accomplishes these tasks using traditional cost-benefit analytical models. Such economists employ these models to ascertain both policy and project decisions. These models involve weighing all potential benefits and associated costs. With traditional economics, it is fairly straightforward to assess the hard costs such as the potential effect on tax revenues or the profitability of a proposed project. Assessing the environmental impact, however, involves many other intricate nuances.
Often, environmental economists might find themselves entering uncharted territory. An environmental economist might need to assign value in new ways not yet effectively modeled under economic theory at the time. At such a juncture, the economist will have to develop a new theory and new models to effectively assess the situation and assign value. The situation also might demand reassessing current theory and tweaking the tools of economic assessment.
Assigning value to the environment poses many challenges. The main challenge is that assigning monetary value to the environment is an elusive process. To illustrate, an economist who is concerned with associated environmental costs might need to figure out the cost of clearing the land for a development project. Among those quandaries is assigning costs to things such as the impact of soil erosion, habitat destruction, potential pollution, quality of life for nearby residents and maybe even contributions to climate change. Above all else, an environmental economist must accurately measure these costs to appropriately convey the benefits and hindrances of such development.
Therefore, such economists are multifaceted. They consult with many other professionals, such as environmental scientists, to accurately identify and quantify economic impact. The job doesn’t end with collecting and analyzing data; the data required might not even exist. Instead, environmental economists must develop new models and theories in conjunction with other professionals. Thereafter, they must disseminate that 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 invested parties.