Valuing the Environment and Its Impact on Formulating Environmental Policies

37 Pages Posted: 23 Aug 2014

See all articles by Seck Tan

Seck Tan

National University of Singapore (NUS) - Lee Kuan Yew School of Public Policy

Date Written: August 21, 2014

Abstract

The aim of this paper is to demonstrate the significant differences that would emerge in policy formulation, when environmental capital is explicitly accounted for in macroeconomic analyses. These differences are illustrated with reference to two Organisation for Economic Co-operation and Development (OECD) economies, namely Australia and Canada. The main analytic framework considered is a factor utilization function, which traditionally deals with labor and manufactured capital. The development of a three-factor function in terms of labor, manufactured capital and environmental capital enables the display of mistaken notions of economic performance. That is in the absence of environmental capital, policy makers overstate the performance of labor and manufactured capital. The recognition of mistaken level of economic performance with reference to labor and manufactured capital in standard macroeconomic analyses enables the identification of policy avenues to protect and enhance environmental capital. As illustrated in this paper, the implications of developing and applying environmental-macroeconomic framework for formulating environmental and climate change policies are significant.

Keywords: macroeconmics general, valuation of environmental effects, climate change, sustainability; environmental accounts and accounting

JEL Classification: E00, Q51, Q54, Q56

Suggested Citation

Tan, Seck, Valuing the Environment and Its Impact on Formulating Environmental Policies (August 21, 2014). Lee Kuan Yew School of Public Policy Research Paper No. 14-26, Available at SSRN: https://ssrn.com/abstract=2484931 or http://dx.doi.org/10.2139/ssrn.2484931

Seck Tan (Contact Author)

National University of Singapore (NUS) - Lee Kuan Yew School of Public Policy ( email )

469C Bukit Timah Road
Oei Tiong Ham Building
Singapore, Singapore 259772
Singapore

HOME PAGE: http://lkyspp.nus.edu.sg/faculty/seck-tan/

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