The environmental impacts of economic activity icon

The environmental impacts of economic activity

НазваThe environmental impacts of economic activity
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1. /11.04.2012/Alenkina A_tezy.doc
2. /11.04.2012/Alenkina N_tezy.doc
3. /11.04.2012/Aseeva_tezy.English.doc
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N. Alenkina, a 1th year student,

Faculty of Economic, College of technologies and design of Taras Shevchenko Lugansk National University,

O.V. Yefremenko, scientific and language supervisor

These are a lot of environmental problems, such as the greenhouse effect, pollution of rivers and oceans, and overfishing. We are increasingly aware that we contribute to these problems and that they have direct consequences for ourselves, affecting our lives, health and well-being. In most cases however, our awareness of these issues depends on their presence in the media. Low levels of awareness of economy–society–environment interactions are one of the main barriers to sustainable development. Businessmen who are not aware of their impact on the environment, cause costs which are borne by other social groups (external costs). Analogous costs are also caused by consumers who do not analyze the consequences of their decisions on their surroundings.

Markets do not always function well and in the case of some products and services, they do not even exist. Both situations are known as market failures and they are listed among the most important reasons for the overexploitation of ecosystem services. Indeed, as we saw in the previous section, there are no markets for many ecosystem services. This occurs when no property rights have been defined for many crucial elements of the environment, for example the atmosphere. In other cases, such as the oceans, property rights are not defined or enforced well enough to prevent overexploitation. In such cases, when one of the parties to a transaction is missing, this is equal to the lack of a market. Thus, without the proper definition of property rights, we cannot solve problems with the use of a free market, a solution traditionally preferred by economists.

External effects which may result in environmental degradation provide another example of market failure. If an element of the environment that receives pollution has no owner, or if its owners do not enforce their rights, the polluters may abuse this situation. Thus, they overuse the regeneration service of an ecosystem, while others who would like to use the related production function lose out. For example, those who pollute cause costs for those who use the river for fishing or a source of drinking water. The latter lose benefits related to fishing and water, pay the costs of treating illnesses caused by the consumption of polluted products from the environment, and potentially also pay the costs of restoring the river. External costs include lost benefits and expenses made to remove the consequences of external effects.

External costs are not reflected in the prices of goods and services traded in the market. Thus prices, the most important element of a market mechanism, provide signals based on which buyers of those products and services are likely to make decisions potentially contrary to their preferences.

So, the negative environmental impacts of economic and social activity often entail costs which are not paid by those who caused them but by others, the victims of environmental degradation.

Indeed, economic and social activity can have negative environmental impacts. For example, the increased use of land for the cultivation of some crops, which leads to depletion of land or to excess of their filling of the artificially created fertilizers. In Ukraine there are examples of complete destruction of plantations of some varieties of grapes in the period of the struggle with alcoholism, the consequences of which were included in the price of the goods a few years later. Such destruction impact on the environment, economy and society of the country. This was the prerequisite for the appearance in Ukraine charge for the development of viticulture, horticulture and hop growing. The payers of this charge have become entrepreneurs, which sell alcoholic beverages. Thus, this charge not only helped and helps to develop the viticulture and create new plant crops in the environment, but also to neutralize the negative impact of the environment as a result of past years.

In my opinion, despite the existence in Ukraine of a large number of socially-responsible companies, which claim to care about the environment, internalization of external cost is enforced not by their sincere desire, but because of the pressure of state regulation of this problem. Enterprises advertise the amount of money that they invest in the purifying constructions or in protection of nature, but initially they do it only because of the requirements of the law. In Ukraine the example of the internalizations of external cost can be showed through the control of the environmental impact of enterprises’ activity. As for me, in Ukraine doesn’t exist enterprises’ self-control of internalization of external costs. For today only government can control payment for the negative environmental impacts by those who caused them. But regardless of who reimburse expenses or lost income, no one would be able to give their true evaluation.


1. Anthony A. Leiserowitz, Robert W. Kates, and Thomas M. Parris. Do Global Attitudes and Behaviors Support Sustainable Development? Environment. – 2005, Volume 47, Number 9, P. 22–38

2. Challenges of Sustainable Development in Poland //


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