What Is Green Economics?
Green economics is a methodology of economics that supports the harmonious interaction between humans and nature and attempts to meet the needs of both simultaneously. Green economists may study the impact of alternative energy sources, sustainable agriculture, wildlife protection, or environmental policies.
KEY TAKEAWAYS
- Green economics refers to an economics discipline that focuses on devising an approach that promotes harmonious economic interactions between humans and nature.
- It has a broad canvas that incorporates means of interaction with nature and the methods used to produce goods.
- Green economists may study the economics of alternative sources of energy, materials, food, or other industrial processes.
- Green economics is closely related to ecological economics but is different because it is a holistic approach that includes political advocacy of sustainable solutions.
- Some critics believe that “green” economic solutions are counterproductive, due to unexpected impacts on the natural environment.
Understanding Green Economics
There are a few different definitions of a green economy. In 2011, the International Chamber of Commerce (ICC) stated in its “10 Conditions for a Transition Toward a Green Economy” that a green economy is one “in which economic growth and environmental responsibility work together in a mutually reinforcing fashion while supporting progress and social development.”1 One way that green economics has made its way into the mainstream has been by way of consumer-facing labels indicating a product or a business’ degree of sustainability.
Green economic theories encompass a wide range of ideas all dealing with the interconnected relationship between people and the environment. Green economists assert that the basis for all economic decisions should be in some way tied to the ecosystem and that natural capital and ecological services have economic value.
Interpretations of Green Economics
The term “green economics” is a broad one, and has been co-opted by groups ranging from green anarchists to feminists. Broadly speaking, it encompasses any theory that views the economy as a component of the environment in which it is based. The United Nations Environment Programme (UNEP) defines a green economy as “low carbon, resource-efficient, and socially inclusive.”2https://495a9c0589ebb2a75e04432c9e1ea3a0.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html
As such, green economists generally take a broad and holistic approach to understanding and modeling economies, paying as much attention to the natural resources that fuel the economy as they do to the way the economy itself functions.
Broadly speaking, supporters of this branch of economics are concerned with the health of the natural environment and believe that actions should be taken to protect nature and encourage the positive co-existence of both humans and nature. The way that these economists advocate for the environment is by making an argument that the environment plays a pivotal role in the economy and that the health of any good economy is essentially determined by the health of the environment it is an essential part of.
Human influence is unequivocally to blame for the warming of the planet and some forms of climate disruption are now locked in for centuries, according to a report from the U.N. Intergovernmental Panel on Climate Change. “This report must sound a death knell for coal and fossil fuels before they destroy our planet,” said United Nations Secretary-General António Guterres.
Criticism of Green Economics
While the idea of an equitable economy powered by renewable energy sources is alluring, green economics has its share of critics. They claim that green economics’ attempts to decouple economic growth from environmental destruction have not been very successful. Most economic growth has occurred on the back of non-renewable technologies and energy sources.
Weaning the world from these energy sources requires effort and has not been an entirely successful endeavor. The emphasis on green jobs as a social justice solution is also fallacious, according to critics. The raw material for green energy in several cases comes from rare earth minerals mined in inhospitable conditions by workers who are paid cheaply.
An example of this is electric cars, whose batteries may be made from raw materials mined from fragile rainforests and regions wracked by civil war.3 Another criticism of green economics is that it is focused on a technological approach to solutions and, consequently, its market is dominated by companies with access to the technology.
There is a wide range of green mutual funds and index funds that invest in environmentally-conscious companies.
Green Economics vs. Ecological Economics
In many ways, green economics is closely related to ecological economics in the way that it views natural resources as having measurable economic value and in how they focus on sustainability and justice.4 But when it comes to the application of these ideas, advocates of green economics are more politically focused. Green economists advocate for a cost accounting system in which the entities (government, industry, individuals, etc.) who do harm or neglect natural assets are held liable for the damage they cause.
How Can Green Technology Affect the Economy?
Green technology refers to a wide range of developments and techniques, from alternative energy and fuel sources to sustainable agriculture and wildlife conservation. Overall, green technologies seek to reduce the negative impacts of human activity on the natural environment. This can support sustainable economic activities, although critics may say that green technology is less efficient than non-green alternatives.
How Did the Green Revolution Affect Economics?
The Green Revolution refers to a series of innovations that greatly increased agricultural output and efficiency throughout the world. This resulted in substantial increases in the world population and, consequently, in increased pollution and consumption of natural resources.
What Is the Green Paradox in Economics?
The green paradox is a counterintuitive and controversial idea first suggested by the economist Hans Werner-Sinn in 2007. It states that any policy that seeks to gradually reduce fossil fuel consumption will have the unexpected effect of accelerating the use of those fuels in the near term. This is because fossil fuel companies will seek to extract more profits from fossil fuels in the present, knowing that these profits will not be possible in the future.5Compete Risk Free with $100,000 in Virtual CashPut your trading skills to the test with our FREE Stock Simulator. Compete with thousands of Investopedia traders and trade your way to the top! Submit trades in a virtual environment before you start risking your own money. Practice trading strategies so that when you’re ready to enter the real market, you’ve had the practice you need. Try our Stock Simulator today >>