What is Green Economics?

Green economics is a methodology of economics that supports the harmonious interaction between humans and nature and attempts to meet the needs of both simultaneously. Green economic theories encompass a wide range of ideas all dealing with the interconnected relationship between people and the environment. Green economists assert that the basis for all economic decisions should be in some way tied to the ecosystem, and that natural capital and ecological services have economic value.

Key Takeaways

  • Green economics refers to an economics discipline which focuses on devising an approach that promotes harmonious economic interactions between humans and nature.
  • It has a broad canvas that incorporates means of interaction with nature to methodology for goods production to social justice.
  • It is closely related to ecological economics but is different from it because it is a holistic approach that includes political advocacy of sustainable solutions.

Understanding Green Economics

The term green economics is a broad one (it's a term that's been co-opted by groups ranging from green anarchists to feminists), but it encompasses any theory that views the economy as a component of the environment in which it is based. The United Nations Environment Programme (UNEP) defines a green economy as "one which is low carbon, resource efficient and socially inclusive."

As such, green economists generally take a broad and holistic approach to understanding and modeling economies, paying as much attention to the natural resources that fuel the economy as they do the way the economy itself functions.

Broadly speaking, supporters of this branch of economics are concerned with the health of the natural environment and believe that actions should be taken to protect nature and encourage the positive co-existence of both humans and nature. The way that these economists advocate for the environment is by making an argument that the environment plays a pivotal role in the economy, and that the health of any good economy is essentially determined by the health of the environment it is an essential part of.

While the idea of an equitable economy powered by renewable energy sources is alluring, green economics has its share of critics. They claim that green economics' attempts to decouple economic growth from environmental destruction have not been very successful. Most economic growth has occurred on the back of non-renewable technologies and energy sources.

Weaning the world, especially developing economies, from them requires effort and has not been an entirely successful endeavor. The emphasis on green jobs as a social justice solution is also fallacious, according to some. The raw material for green energy in several cases comes from rare earth minerals mined in inhospitable conditions by workers who are paid cheaply.

An example of this is electric car maker Tesla, whose car batteries are made using raw materials mined from Congo, a region wracked by civil war. Another criticism of green economics is that it is focused on a technological approach to solutions and, consequently, its market is dominated by companies with access to the technology.

Green Economics and Ecological Economics

In many ways, green economics is closely related to ecological economics in the way that it views natural resources as having measurable economic value and in how they focus on sustainability and justice. But when it comes to the application of these ideas, advocates of green economics are more politically focused. Green economists advocate for a full cost accounting system in which the entities (government, industry, individuals, etc.) who do harm to or neglect natural assets are held liable for the damage they do.

There are a few different definitions of a green economy. In 2012, the International Chamber of Commerce (ICC) stated in their Guidebook To The Green Economy that a green economy is one "in which economic growth and environmental responsibility work together in a mutually reinforcing fashion while supporting progress and social development." One way that green economics has made its way into the mainstream has been by way of consumer-facing labels indicating a product or a business' degree of sustainability.