HL.b Environmental Economics

Environmental Economics is only applicable for students enrolled in Higher Level (HL) ESS.

Guiding questions

How can environmental economics ensure sustainability of the Earth’s systems?
How do different perspectives impact the type of economics governments and societies run?

Knowledge statements for HL ESS only

HL.b.1 Economics studies how humans produce, distribute and consume goods and services, both individually and collectively.

HL.b.2 Environmental economics is economics applied to the environment and environmental issues.

HL.b.3 Market failure occurs when the allocation of goods and services by the free market imposes negative impacts on the environment.

HL.b.4 When the market fails to prevent negative impacts, the polluter-pays principle may be applied.

Here’s how carbon cap-and-trade markets aim to offset the market failures that contribute to climate change.

HL.b.5 “Greenwashing” or “green sheen” is where companies use marketing to give themselves a more environmentally friendly image.

HL.b.6 The tragedy of the commons highlights the problem where property rights are not clearly delineated and no market price is attached to a common good, resulting in overexploitation.

HL.b.7 Environmental accounting is the attempt to attach economic value to natural resources and their depletion.

HL.b.8 In some cases, economic value can be established by use, but this is not the case for non-use values.

HL.b.9 Ecological economics is different from environmental economics in that it views the economy as a subsystem of Earth’s larger biosphere and the social system as being a sub component of ecology.

HL.b.10 While the economic valuation of ecosystem services is addressed by environmental economics, there is an even greater emphasis in ecological economics.

HL.b.11 Economic growth is the change in the total market value of goods and services in a country over a period and is usually measured as the annual percentage change in GDP.

HL.b.12 Economic growth is influenced by supply and demand, and may be perceived as a measure of prosperity.

HL.b.13 Economic growth has impacts on environmental welfare.

HL.b.14 Eco-economic decoupling is the notion of separating economic growth from environmental degradation.

HL.b.15 Ecological economics supports the need for degrowth, zero growth or slow growth, and advocates planned reduction in consumption and production, particularly in high-income countries.

HL.b.16 Ecological economists support a slow/no/zero growth model.

HL.b.17 The circular economy and doughnut economics models can be seen as applications of ecological economics for sustainability.

Pages for the current ESS syllabus will remain active through the last exams scheduled for 2025.

Happy learning!