The environment is categorized as an economic issue because of the negative impact that production and economic expansion has on the environment, which is an important problem that follows economic growth. Pollution and the degradation of natural resources are pressing issues that have to be accounted for in economic decisions related to production and resource allocation. The earth’s ecosystems have to cope with the smoke, sewage and chemical waste, greenhouse-gas emissions, nuclear fuel, and many other types of pollutants. These become an issue in economics not solely because they damage the environment, but because they are often externalities which contain costs that are not reflected in the market prices we experience. That is to say we do not accurately pay the full price that accounts for the costs to the environment, since the environment bears the cost and they do not impose on us to necessarily pay! Hence, we see government initiatives such as taxes on gas, taxes on less fuel-efficient cars, and composting to account for these externalities.
Up until the 1800s, the earth’s population was one billion and since then has increased at a growing rate¹. The growing population means that earth’s natural resources are being consumed at a much larger rate than centuries before, causing a strain on the environment and resource exhaustion¹. Often these long run considerations are also not accounted for in the signal we get from the market price. This leads to overconsumption and in the long run may lead to the depletion of the world's resources under a timeline that we would not actually prefer. Considerations of the environment in economics largely seeks to deal with these negative externalities that adversely affect the environment.
1. Ragan, Chrisopher. Macroeconomics/Christopher T.S. Ragan, Richard G. Lipsey. – 13th Canadian ed.