The Environment as a Production Input: A Tutorial

Production is often affected by environmental conditions. For example, rice harvests might be damaged by infiltration of saline water from neighboring shrimp farms, fish catch might be reduced by the loss of spawning grounds when mangroves are cut down, and timber harvests might fall as a result of damage from acid rain and other forms of air pollution. In all these cases, environmental quality is acting as a nonmarket, or unpriced, production input. Damage to the environment reduces the supply of this input, and as a result production falls. Conversely, programs to improve environmental quality can benefit environmentally sensitive forms of production by raising the supply of such inputs. These production-related benefits can be among the most important benefits generated by environmental improvements. [SANDEE Working Paper No. 32-08] URL: [http://www.sandeeonline.org/uploads/documents/publication/744_PUB_complete_paper.pdf]