Nature's wages: A factor‐based alternative approach to environment‐economy integration

Abstract

Following the popularization of the term “sustainable development”, a large literature on environment‐economy integration has emerged, almost all of which addresses the output side of the economy, emphasizing Pigovian taxes or Coasian reassignment of property rights. The idea is advanced of treating environment as a factor of production under an explicit analogy with Labor. Implementation of the concept would be through a negotiated “Environmental Service Charge” (ESC). A simple mathematical model is developed to show that under certain circumstances the welfare properties of the factor approach are equivalent to Pigovian taxes. These circumstances do arise in an important set of practical situations and it is further argued that often the ESC approach has significant administrative advantages.

Notes

Environmental Studies, Innis College, University of Toronto, 2 Sussex Avenue, Toronto ON M5S 1J5, Canada.

Also: Ontario Energy Board, 24 lh Floor, 2300 Yonge Street, Toronoto ON M4P 1E4, Canada