Costs of Inaction on Key Environmental Challenges

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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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When assessing the “costs of inaction” with respect to environmental concerns it is important to first define the meanings of the terms “inaction” and “costs” which are to be applied. This chapter makes the case for the use of an assumption of “no new policies beyond those which currently exist” as the basis for its discussion of “inaction”. With respect to “costs” both market and non-market impacts are considered, but it is pointed out that in some cases it is difficult to obtain reliable estimates of the costs of environmental impacts that are not reflected (directly or indirectly) in market prices and national accounts. The criteria used for the selection of the different environmental areas addressed are then discussed.

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