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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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Summary and Conclusions

Estimating the costs of inaction on key environmental challenges is important because it allows policy-makers to better understand the nature and scope of these challenges, making it easier to decide when (and how) to intervene with policy. This is particularly important in the environmental field, because so many of the impacts of inaction in this field are not reflected in markets. This review has indicated that the costs in many areas are considerable. However, a number of methodological issues complicate such assessments, including: uncertainty and imperfect information; thresholds and irreverisbilities; the substitutability of natural resources and the environment; the treatment of the (very) longrun and distributional concerns; and, endogenous adaptation to changing conditions.

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