Environmental economics is primarily concerned with the impact of economic activities on environment and its implications for the individual firm, industry and the economy as a whole. Economists have formulated economy-environment models to explain the various economic activities and their external effects.
The main objective of environmental economics is to maintain a balance between economic development and environmental quality. In order to achieve it, environmental economists have to explore the various socio-economic possibilities to reduce pollution and uplift the standard of living of the people. This objective gained momentum after the publication of the Report on Limits to Growth.
Environmental economics aims to tackle environmental problems from an economic welfare framework. The welfare framework covers scarce resources and market failures due to property rights and ethical aspects of different problems of pollution. Thus it suggests the best possible means to tackle the environmental problems.
Environmental issues are about resources. The neo-classical economists have analyzed the use of various resources like fisheries, forests, fossil fuels and water in a rational manner and with environmental values. In fact, environmental values are economic values. It is important for the society to conserve its limited resources in the interest of economic efficiency and welfare.