Economics of Climate Justice: 4 Terms to Know

Originally published at https://www.consultqb.com on April 20, 2021.

Environmental issues cross disciplines: they’re rooted in science, chronicled in history, captured in art, and interpreted in law. As lifelong learners, we connect these subjects, and as people on a planet in jeopardy, we are affected by them.

Environmental justice is “the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation and enforcement of environmental laws, regulations and policies”.

Enter, Economics.

The harm plaguing our landscape threatens human existence. Deserted farmlands, inner-city slums, and eroding coastlines are just a sample of places where injustices occur. And the effects of degradation and exploitation are far from natural: how do we ensure that all who are exposed to pollutants, spills, and more are represented in legislation? In urban planning? In multinational operations?

Yes, that economics: an academic discipline known for finding efficient market outcomes through its theories and models. In some analytical applications, economics puts equity on the sidelines as more of an afterthought. So how exactly can economics fit with climate justice?

Using Economics to Explain Climate Justice

In a world intent on communicating the business case for environmental commitments, we often forget that justice validates the triple bottom line: people, planet, profit. Economics contributes to exchanges between people and the planet, too.

You don’t need a PhD to dive into the economics of climate justice. Here are four terms to know:

1. Information asymmetry

Defined: when parties involved in decision-making each have different levels of knowledge about one another and the consequences.

Applied: toxic waste produced from coal-powered electric plants is called coal ash, and it is stored near the facilities in ponds and pits, most of which are unlined. An ongoing mapping effort at Earthjustice reveals the water contamination and disproportionate harm from coal ash on low income and/or BIPOC communities. We receive power from these facilities, unaware of the impacts that coal ash ‘disposal’ has on health and the environment.

2. Discounting

Defined: calculating the future value of a good, today. This type of valuation reflects the human tendency to focus on the short-term ahead of the long-term.

Applied: mitigating greenhouse gas (GHG) emissions is a central area of environmental policy. Using discounting, we can mathematically recognize people who will inherit the effects of present GHG emissions. Valuations with lower discount rates place more value on future generations. With the uncertainty of GHG reductions at play, Resources for the Future has explored setting a declining discount rate for environmental regulations; this way, those who yet to exist can be accounted for in valuations.

3. Externality

Defined: a benefit or harm that affects a third party outside of a transaction. A positive externality is a benefit received that isn’t paid for. A negative externality is a harm and typically comes from a failure to account for a good’s total costs of production.

Applied: the changes in temperature and precipitation brought on by climate change affect crops, the prominence of pests, and the amount of pesticides needed to fight them. Pesticide application is part of the agricultural activities that contribute to GHG emissions: nearly 25% of global, human-caused GHG emissions from 2007 to 2016 came from agriculture, forestry, and associated land use. However, pesticides are notorious for negative consumer health effects. In a study that adjusted the market prices of pesticides to account for those negative externalities, farmers’ preferred pesticide application amounts for corn and soybeans decreased as a result.

4. Tragedy of the commons

Defined: the overconsumption of a non-exclusive resource that, when used up, decreases others’ ability to access it. Classic examples include irrigation systems, pastures, and fisheries.

Applied: we take marine life out of oceans and gift our garbage and carbon emissions in return. The emissions impact of fish trawling is comparable to that of global air travel. Globally, 60 million people work in fishing and fish-farming, and this dependence is concentrated in developing countries. Mismanagement of our common oceans affects the livelihoods of all who depend on the resource.

Conversations about the environment are made stronger with input from other areas of study, whether it be economics or something else. Economics and climate justice complement each other, and this list of terms is just the start.