Al-Amn Magazine

ENVIRONMENT G Taki ng on cha l l enges How s teps to protect env i ronment and cu t ri ch–poor d i v i de i nteract overnments around the world are grappling with the challenges of environmental degradation and economic inequality. But until now, there has been no comprehensive analysis of how these two problems are interrelated, and how policies to protect the environment and reduce the rich–poor divide complement or hinder each other. The study “The Economics of Inequality and the Environment” looks at this interaction with a literature analysis. It was co-authored by the Potsdam Institute for Climate Impact Research (PIK) and has been published in the Journal of Economic Literature. The study identifies the theoretical mechanisms underlying the interplay between the environment and income inequality, and takes stock of the empirical evidence on the strength of these mechanisms. The conceptual starting point is “social welfare”—the sum of individual utility—which policymakers strive to maximize. This utility is derived from goods and services, from leisure, and from environmental quality. The core idea is that environmental policy doesn”t just influence the third component, but all aspects of welfare. This is because environmental policy measures also change people”s economic situation via prices and incomes—and usually differentially for the rich and the poor. “This concept has very concrete implications, for example in climate policy,” says PIK researcher Ulrike Kornek, Professor of Environmental and Resource Economics at