How environmental economics can change our approach to tackling climate change

Environmental economics plays a crucial role in achieving sustainable development by exploring the complex relationship between the environment and the economy. The field is incredibly important in addressing climate change and fostering a sustainable future.

Protecting ecosystems and biodiversity is essential for long-term sustainability. And while more sustainable practices in agriculture, forestry, and water management should be adopted to ensure healthier ecosystems, one of the most important areas to address is often the flow of information, according to Nobel Laureate and development economist Michael Kremer. However, ensuring that information about the environment gets into the hands of those it affects most directly is complex, he says.

“Most of the poorest people in the world today are still farmers and they have very small amounts of land,” says Kremer. “Their livelihoods are very dependent on things like the weather, on pests that can come in. Often, they don't have full access to scientific information on this. They’ll have a lot of traditional information that they've picked up from their parents, from neighbors, and while that could be very valuable information, there's challenges.”

“Now that weather is changing,” he continues. “That means that the knowledge that communities have developed over generations about when to plant, for example, might no longer be right.”

Kremer also highlights a common misperception: the notion that economic growth and addressing climate change are incompatible. “From an economic standpoint, there are things we can do that won't stop economic growth,” he says. “Part of what we need is new technologies. If we put in appropriate incentives, we can develop new technologies that can help improve our climate at lower economic costs in the future.”

What role does technology play in reshaping climate strategies? Technological advancements not only have the power to revolutionize industries, but they can also reshape our approach to climate change mitigation.

If we put in appropriate incentives, we can develop new technologies that can help improve our climate at lower economic costs in the future.

Collectively, there is a need to consider the global impact of climate change, particularly on developing countries. The disproportionate vulnerability of these nations and the urgent need for action to better protect them must be acknowledged according to Kremer.

When considering the impact of climate change on developing countries, he highlights that these nations often bear the brunt of its consequences due to their geographical locations in hot regions. He also emphasizes that both historically and currently, high-income countries have contributed the most to carbon emissions.

“If we think about what drives climate change as the total amount of carbon that's been emitted, not the annual amount, but the total amount, that's overwhelmingly driven by high income countries,” he says. “From the point of view of a developing country, it doesn't make sense to reward the countries that have been polluting a lot by them having a higher share of the acceptable carbon allocations going forward. We shouldn’t expect developing countries to bear most of the burden of this.”

Recent international efforts have not been entirely equitable, as high-income countries have not made concrete commitments to abandon coal and other fossil fuels. To create a fair system, Kremer suggests initial carbon allocations that correspond more closely to current emissions, followed by a transition toward equal allocations for every individual globally. Tradable carbon reduction mechanisms, along with financial transfers from high-income to lower-income countries, could also play a role in achieving this balance.

We shouldn’t expect developing countries to bear most of the burden of this.

Environmental economics offers a pathway to sustainable development by bridging the gap between economic growth and climate action. It requires aligning economic incentives, supporting technological innovation, and empowering communities. It’s crucial to incorporate these ideas into policies, practices, and everyday choices.

By embracing sustainability as a guiding principle, we can protect our environment, improve the well-being of communities, and ensure a more prosperous future for generations to come.