Environmental pricing reform
Encyclopedia
Environmental pricing reform (EPR) is the process of adjusting market prices to include environmental costs and benefits.
An externality
(a type of market failure
) exists where a market price omits environmental costs and/or benefits. In such a situation, rational (self-interested) economic decisions can lead to environmental harm, as well as to economic distortions and inefficiencies.
Environmental pricing reform can be economy-wide, or more focussed (e.g. specific to a sector or environmental issue
such as climate change
. A "market based instrument" or "economic instrument for environmental protection" is an individual instances of Environmental Pricing Reform. Examples include green tax-shifting (ecotax
ation), tradeable pollution permits, or the creation of markets for ecological services.
A similar term, "ecological fiscal reform" differs in more narrowerly dealing with fiscal (i.e. tax) policies, and arguably in its focus on ecology
instead of environment
.
An externality
Externality
In economics, an externality is a cost or benefit, not transmitted through prices, incurred by a party who did not agree to the action causing the cost or benefit...
(a type of market failure
Market failure
Market failure is a concept within economic theory wherein the allocation of goods and services by a free market is not efficient. That is, there exists another conceivable outcome where a market participant may be made better-off without making someone else worse-off...
) exists where a market price omits environmental costs and/or benefits. In such a situation, rational (self-interested) economic decisions can lead to environmental harm, as well as to economic distortions and inefficiencies.
Environmental pricing reform can be economy-wide, or more focussed (e.g. specific to a sector or environmental issue
Environmental issue
Environmental issues are negative aspects of human activity on the biophysical environment. Environmentalism, a social and environmental movement that started in the 1960s, addresses environmental issues through advocacy, education and activism.-Types:...
such as climate change
Climate change
Climate change is a significant and lasting change in the statistical distribution of weather patterns over periods ranging from decades to millions of years. It may be a change in average weather conditions or the distribution of events around that average...
. A "market based instrument" or "economic instrument for environmental protection" is an individual instances of Environmental Pricing Reform. Examples include green tax-shifting (ecotax
Ecotax
Ecotax refers to taxes intended to promote ecologically sustainable activities via economic incentives. Such a policy can complement or avert the need for regulatory approaches. Often, an ecotax policy proposal may attempt to maintain overall tax revenue by proportionately reducing other taxes...
ation), tradeable pollution permits, or the creation of markets for ecological services.
A similar term, "ecological fiscal reform" differs in more narrowerly dealing with fiscal (i.e. tax) policies, and arguably in its focus on ecology
Ecology
Ecology is the scientific study of the relations that living organisms have with respect to each other and their natural environment. Variables of interest to ecologists include the composition, distribution, amount , number, and changing states of organisms within and among ecosystems...
instead of environment
Natural environment
The natural environment encompasses all living and non-living things occurring naturally on Earth or some region thereof. It is an environment that encompasses the interaction of all living species....
.
See also
- Environmental accounting
- Environmental economicsEnvironmental economicsEnvironmental economics is a subfield of economics concerned with environmental issues. Quoting from the National Bureau of Economic Research Environmental Economics program:...
- Environmental enterpriseEnvironmental enterpriseEnvironmental Enterprise refers to environmentally friendly/compatible business. Specifically, an environmental enterprise is a business that produces value in the same manner which an ecosystem does, neither producing waste nor consuming unsustainable resources. The concept is rooted in the...
- Environmental financeEnvironmental financeEnvironmental Finance is the use of various financial instruments to protect the environment. The field is part of both environmental economics and the conservation movement....
External links
- Redefining Progress - http://www.rprogress.org/
- Sustainable Prosperity - http://sustainableprosperity.ca/
- Green Budget Germany - http://www.foes.de/en/
- OECD/EEA database on instruments used for environmental policy and natural resources management - http://www2.oecd.org/ecoinst/queries/index.htm