Environmental economics

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Environmental economics is a domain of economics that looks at problems of the environment from an economical perspective. Natural resources, such as clean water are limited, because of pollution. They are also seen as free public goods. This means that if there are no rules on how to use these goods, they will be used tooo much. There are exterrnalities for using these goods, and there is the problem of free riders. In this perspective, the solution is to convert these resources into economic goods, which are integrated in the market. This will lessen the problem of free-riding, and give incventives to use these goods sparingly. An example for this is a tax which is tied to pollution.