What is Environmental Economics?

What is environmental economics? What is the purpose of environmental economics? This article defines the concept in view of sustaining environmental resources.

Students of environmental science will find themselves dealing with environmental economics concepts in their senior years while taking the environmental science course. Thus, it pays to learn the basics of the subject for greater understanding and the application of the tools of economics. As the word connotes, environmental economics is about the economics of the environment. But what, specifically, is economics and what is the concern about environmental economics?

First things first; it will be easier to understand the subject by defining some terms for common understanding. Let us define what is economics then before proceeding to the definition of environmental economics.

Definition of Economics

Harper [1] defines economics to literally mean “household management.” This word was derived from Latin oeconomia and from Greek oikonomia meaning “household management.” Further, Quizlet.com[2] defines economics as the study of how and why individuals and groups decide about the use and distribution of valuable human and non-human resources. That’s the longer definition. For simplicity and for our purposes, and based on the latter definition, economics can be defined simply as the study of how humans decide on how to dispose of resources.

Economics considers resources, whether human or non-human, as scarce or finite, and these are not in abundance. When resources are scarce and tend to get depleted, then people must maximize its use. And when people need these resources badly, then these are valuable resources. Economics then deals with management of scarce resources.

Now, we’ll focus our attention on environmental resources and define environmental economics.

Definition of Environmental Economics

Drawing out from the definition of economics, we can define environmental economics as the study of how humans decide on how to dispose of environmental resources. At this juncture, the focus of management is mainly on environmental resources.

But what consists of environmental resources? To make clear this concept, I enumerate some of the environmental resources below that man derives benefit from and need to be managed:


air, water, and land


  • trees or plants that supply the life-giving oxygen humans need;
    environmental economics
  • crops that provide food to humans;
  • clean drinking water to keep human metabolism working and flush out bodily wastes;
  • metals that serve as raw materials for human ingenuity, such as the creation of tools, rigid structures for abode and cars for transport; and
  • oil to fuel industries that manufacture products that people need.

Of course, the list could go on. There are so many other environmental resources that you can think of that are used to satisfy human needs and wants.

Ideally, all human needs and wants should be fulfilled, but this is far from reality.


That’s because human needs and wants vary. Needs may be fulfilled but wants are virtually without limit. This situation becomes problematic because environmental resources have limits. Thus, both resources and human needs and wants must be managed in order to attain a certain level of balance between human needs and the availability of resources to fill that need.

So what has environmental economics got to do with human needs and wants?

The main purpose of environmental economics is to attain environmental resource sustainability. It is only an instrument by which human needs and desires or wants may be addressed, as much as possible, without depleting finite environmental resources. The processes or tools applied through economic valuation as one tool of environmental economics that make clear options for decision making.

Related Readings

Willingness to pay example: Drivers’ WTP to reduce air pollution

Economic valuation: What is change-in-income technique?


[1]  Harper, Douglas (November 2001). “Online Etymology Dictionary – Economy“. Retrieved October 27, 2007.

[2] Quizlet.com. Definition of economics.

© 2013 January 11 P. A. Regoniel | Updated December 7, 2022

One Response

  1. Psychologist Gary Dumais March 13, 2017