On Environmental Economics: Commentary by Clare Balboni

Researcher looking at monitors with environmental economics data.

A strong evidence base is key for informing environmental and climate policy.

Series: Solving Climate | Humanistic Perspectives from MIT

In this ongoing series, MIT faculty, students, and alumni in the humanistic fields share perspectives that are significant for solving climate change and mitigating its myriad social and ecological impacts. Clare Balboni is the 3M Career Development Assistant Professor of Environmental Economics at MIT and an affiliate of MIT’s Center for Energy and Environmental Policy Research. Her research centers on environmental economics, trade, and development economics. In this conversation with MIT-SHASS Communications Balboni describes the burgeoning influence of economics in understanding climate, energy, and environmental issues as well as informing related policy.

Q: In what ways are the research, insights, and perspectives from economics significant for addressing global change and its myriad ecological and social impacts?

Balboni: There is tremendous and growing interest in environmental questions within economics. Economic models and methods can help to enhance our understanding of how to balance the imperative for continued growth in prosperity and well-being — particularly for the world’s poorest — with the need to mitigate and adapt to the environmental externalities that this growth creates.

Environmental economists have taken advantage of economic tools and methodologies, and the rapid proliferation of new data sources, to study how local pollutants and greenhouse gas emissions affect a huge range of outcomes spanning such areas as mortality, health, agriculture, labor productivity, income, migration, education, crime, and conflict. Building a strong evidence base on the consequences of environmental quality, and developing techniques for measuring environmental benefits and harms, is key in informing the design of emissions reduction policies.

"There is tremendous and growing interest in environmental questions within economics. Economic models and methods can help to enhance our understanding of how to balance the imperative for continued growth in prosperity and well-being — particularly for the world’s poorest — with the need to mitigate and adapt to the environmental externalities that this growth creates."

Another important contribution of economics is to provide robust analysis of policies that aim to tackle environmental externalities through, for instance, taxation, tradable emissions permits, regulation, and innovation policy. Recent work provides rigorous empirical evidence evaluating key environmental policies and considering important aspects of the design of economic instruments; this work builds on a long-standing body of literature within economics studying environmental policy instruments.

A growing body of empirical work in environmental economics focuses on particular issues relating to environmental quality and instrument design in developing countries, where energy use is increasing rapidly; political economy considerations may raise distinct challenges; and where both local pollutant concentrations and projected climate damages are often particularly acute.

Q: When you confront an issue as formidable as climate change, what gives you hope?

Balboni: I draw hope from the rapidly increasing focus and attention on environmental questions across fields in economics, across disciplines in the social and natural sciences, and more broadly in the academic, policy, and popular discourse. Given the scale and breadth of the challenge, it is critical that this combined focus from a range of perspectives continues to advance this important agenda.

portrait of MIT environmental economist Clare Balboni