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Climate change

Claire Balboni

Unprecedented economic growth over the past century has led to huge strides forward in human welfare, but at the same time transformed humans into an important influence on the environment.

This has put intense pressure on the earth’s shared natural resources: for instance, biodiversity is declining faster than ever before in human history and over 90% of the world’s population live in areas where air quality exceeds World Health Organization guideline limits.

Global climate change has been described as “the greatest market failure the world has ever seen”

Global climate change has been described as “the greatest market failure the world has ever seen” and poses significant risks to human welfare as well as the natural world. These effects are projected to intensify over time unless drastic action is taken to reduce emissions. The international community has set ambitious goals to curb climate change but there is fierce debate over appropriate targets and how these can be achieved as populations and economies continue to grow rapidly.

Environmental economists aim to contribute to this debate by trying to improve our understanding of the appropriate balance between using and protecting the earth’s resources, and advising policymakers on how policy can help to induce people to use these resources appropriately.

Image of Clare Balboni

For example, they study how theory can help us to understand polluting behavior in terms of externalities – consequences of one agent’s actions that affect others but for which the agent is not charged – and design policies to try to address these externalities. They provide methods that allow policymakers and others to value the benefits of those dimensions of environmental quality that may not have a price in the market. They help to design policy instruments and incentives that can influence people’s behaviour in order to address environmental problems through pollution control and the conservation of shared natural resources.

This is an area that has received increasing focus in recent years as our understanding of climate change and its consequences has advanced; economic theory and modelling techniques have provided the tools to study these topics; and new data sources such as satellite and remote sensing measurements have proliferated rapidly, allowing us to study some of these issues at a fine resolution and a global scale.

My research focuses on topics in environmental economics, trade and development. For instance, I study whether large infrastructure investments should continue to be strongly concentrated in coastal areas given projections for future environmental change, and how far extensive forest fires in Indonesia may be driven by the fact that those setting fires do not internalize the full damage risk if others own the land damaged by a spreading fire.

Other issues: Inequality | Education

Image credit: Slash-and-burn forest clearing along the Rio Xingu in the state of Mato Grosso, Brazil. ISS Crew Earth Observations experiment, public domain.