abatement cost
The cost of securing a reduction in pollution. The abatement cost can be quoted as a cost per unit or the total cost of achieving a given target. The marginal abatement cost should be equated to the ...
carbon tax
A tax or surcharge on the sale of fossil fuels (oil, coal, and gas) that varies according to the carbon content of each fuel, and is designed to discourage the use of fossil fuels and reduce ...
Coase theorem
A concept often invoked in the economic analysis of law. Named after the Nobel laureate Ronald Coase (1911– ), it defines an “efficient” outcome as one in which the net sum of social wealth is ...
Commons
The concept that the major resources of the planet (land, air, and water) are commodities to which all people have equal right of access and use, and which no one has a right to spoil.
compensation for externalities
The payment of compensation by those causing adverse externalities to the victims. There are two different points involved here. The economic benefit of ‘making the polluter pay’ is that it creates ...
congestion
A situation when too many consumers are trying to use the same impure public good simultaneously, and, as a result, the benefit to each user of this public good is reduced. Examples of impure public ...
consumption externality
An externality that affects the utility level of an agent, or the marginal utility of this agent's own consumption. An example of a negative consumption externality is noise from a neighbour's ...
cost-benefit analysis
A study of the relationship between the service or production costs and the health gain achieved for an individual or group.
creative destruction
A model of economic growth driven by quality-improving innovations that make old technologies or products obsolete. Current innovations exert a positive externality for future research and ...
ecocentric management
Management that treats environmental issues as a core business concern, rather than an externality. Recognizing the relationship that the firm has with the natural environment, it regards taking full ...
environmental economics
A branch of economics that takes into account the current and future monetary costs and benefits of environmental systems, human welfare, and biodiversity. See also cost–benefit analysis, ecological ...
fiscal federalism
The division of revenue collection and expenditure responsibilities among different levels of government. The central, or federal, government is usually free to choose tax instruments, and its ...
free ride
The situation in which an economic agent benefits from the expenditure of others without making a contribution. A free ride is a type of externality and a source of market imperfection. An important ...
full cost pricing
The pricing of commercial goods (such as electric power) in a way that includes not just the cost of production but also the cost of externalities created by their production and use (which includes ...
fundamental theorems of welfare
The two theorems that describe the efficiency properties of a competitive equilibrium. The First Fundamental Theorem of Welfare Economics states that (in the absence of any market failure) a ...
internalization
In accounting, the process of including in financial balance sheets the cost factors which were previously either not calculated (for example the cost of environmental damage) or met by society at ...
market cost
The cost that a consumer pays to purchase a particular good or service, which usually fails to take into account environmental degradation and other externalities. See also true cost.
market failure
A situation in which a market does not operate efficiently. Factors that may cause market failure include the possession of market power by transactors, externalities, or information problems. See ...
merit goods
Goods or services whose consumption is believed to confer benefits on society as a whole greater than those reflected in consumers' own preferences for them. A good may be classed as a merit good if ...
network externality
An externality derived from being connected to other economic agents, for example through a telephone system or the internet. The concept also applies to social networks. The larger the proportion of ...
