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Costs of Inaction on Key Environmental Challenges

image of Costs of Inaction on Key Environmental Challenges

Countries today face numerous environmental policy challenges, such as climate change, air and water pollution, natural-resource management, natural disasters and environment-related hazards. The costs of not responding to them can be considerable, in some cases representing a significant drag on OECD economies. Estimation of these costs can be an important part of identifying areas in which policy interventions are required, as well as of establishing priorities for future action. There is, however, considerable uncertainty associated with all stages of “costing” the impacts of  environmental and resource degradation. Even when the costs of inaction are deemed important, identifying the areas where environmental policies need to be strengthened still requires careful comparison between the marginal costs of inaction versus action. This report provides introductory perspectives on the costs of inaction and discusses some of the future problems likely to be encountered in this very complex area.

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Costs of Inaction with Respect to Air and Water Pollution

This Chapter summarises the results of a number of valuation studies give some indication of the costs of inaction with respect to air and water pollution. Health costs often represent 80% or more of total estimated social costs in valuation studies, particularly when important intangible costs such as those associated with “pain and suffering” are included. These adverse health impacts have significant economic implications, including reduced labour productivity and adverse impacts on public finance. The costs arising through degraded ecosystems are also important, affecting productivity in resource-based sectors, property markets and material damages. These have direct effect on the economy, even if the impacts are not always fully recognised. Therefore, to the extent that degraded environmental conditions contribute to illhealth, inaction with respect to air and water pollution is an issue of macroeconomic significance.

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