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Environmental Economics

The degradation of the environment has several consequences : depleting the natural capital, affecting health, creating imbalances in ecosystems, deteriorating landscapes, etc. These consequences have direct and indirect economic repercussions. The costs, if not taken into consideration, could also be obstacles to the sound development of an enterprise, a city or a country.

Environmental economic studies facilitate the measurement of the degradations resulting from the activities of the entity under study (enterprise, industrial activity, city, country), and then recommendations can be made according to the results. The commissioners of the study will decide the allocation of priorities and take the necessary measures. Thus an environmental economic analysis, based on several indicators, will determine the situation of the environment on a specific date and then regularly repeat the analysis. It is then possible for the beneficiary of the analysis to monitor the progress of their environmental performance and compare the results in time in order to work toward an optimal management on all levels. By improving the eco-efficiency of the beneficiaries, the Env-Econ studies will help enterprises reduce their environmental impact and its consequences on the welfare of the population.

Methodology


An entity under study in an environmental economic analysis is considered as a "living organism" in the sense that, through its various activities, it ingests and transforms resources, produces goods, emits waste and exerts pressures on ecosystems.

Taking into consideration the complexity of this metabolism and the numerous elements with which it interacts, the consequences of the activities of the entity are estimated in terms of Costs of Damages and Inefficiencies (CDI) and Costs of Remediation (CR). When determined in monetary terms, these impacts become then directly comparable to other economic referents, such as Value Added (VA).

When joining CDI (considered as potential benefits) to CR, a CDI/CR ratio can be built and used as a benefits/costs ratio. An economically effective remedial action means that total benefits should prevail over costs; that is the B/C ratio should be greater than 1. The ratio measures the profitability of the remedial action.

Costs of Damages (CD)

Costs of damages to the environment are defined as a welfare loss, from an economic point of view of a community or a country. Such a welfare loss will have consequences on health, loss of profits or loss of environmental services.

Costs of Inefficiencies (CI)

Costs of inefficiencies in using resources are related to economic losses as waste or resources. These losses can vary from excessive water leakages in distribution networks to the lack of savings in energy use or the unavoidable losses of materials during a production process.

Costs of Remediation (CR)

Costs of Remediation represent the necessary spending to protect the environment by preventing or remedying to the deterioration. These costs will help restore an acceptable environmental quality for the community. The necessary measures are highly variable since they depend on the needs of the entity under study: prevention (organizing awareness sessions), improving infrastructures, optimal use of resources, etc.

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