An introductory note on the environmental economics of the circular economy

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This paper provides an introduction to some of the fundamental principles and approaches in environmental economics which are of significance to achieving an integrated sustainability science. The concept of a circular economy, introduced by the late David Pearce in 1990, addresses the interlinkages of the four economic functions of the environment. The environment not only provides amenity values, in addition to being a resource base and a sink for economic activities, it is also a fundamental life-support system. Environmental economists have suggested that, taking these four functions as an analytical starting point, unpriced or underpriced services should be internalised in the economy. In Europe significant advances have been achieved in the pricing of externalities by means of truly interdisciplinary analysis which accounts in detail for the environmental consequences. The monetary estimates reached as a result of such interdisciplinary research are gradually being applied to the economic analysis of environmental policy priorities. Although such figures provide only a partial and incomplete picture of the environmental costs at stake, they support and inform the analysis of the virtues of a circular economy for individual resources as well as for sustainability as a future trajectory.

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