Planet: Why We Need to Rethink Economic Value

When we talk about the climate crisis and the environment, three contrasting narratives often emerge.

The first — perhaps the most widespread after recent international political upheavals — is a populist vision, according to which environmental protection is a luxury that only elites can afford to worry about, while immediate economic problems are the priority for most people.

The second is the one shared by many economists, who have often treated nature as a mere production input or an externality that needs to be managed, rather than as an essential component of the economic system.

The third — often expressed by environmentalists — sees nature as immeasurable in economic terms, arguing that its value goes beyond any monetary measurement and that any attempt to quantify it risks trivializing its importance.

Rethinking the value of the planet means reconciling these opposing viewpoints and recognizing that the economy and the environment are not two separate worlds. On the contrary, they are deeply intertwined: economic choices influence the climate and ecosystems, and environmental impacts have direct and measurable consequences on the economy, productivity and wellbeing of people, especially those that are economically vulnerable.

It is not just a matter of being aware of these interconnections, but of structurally incorporating them in economic reasoning. It means resorting to economic tools to safeguard the environment and design an ecological transition that puts people at the center.

Economics helps us understand how much it costs to do nothing

Climate change entails huge economic costs, aggravated by the increase in the frequency and intensity of extreme weather events. Heatwaves, forest fires and floods place huge stress on people, ecosystems and key sectors of the economy such as agriculture. In Europe, river floods cause losses of more than €5 billion per year, while the damage caused by forest fires is estimated to be around €2 billion per year.

The impact is bound to be even more severe in areas with already hot climates, compromising food security, destabilizing value chains and increasing migration flows.

Furthermore, these costs are not distributed equally: In Europe, low-income households and southern regions are particularly vulnerable, facing higher prices for essential goods such as food and energy. This regressive effect amplifies existing inequalities, making climate adaptation all the more urgent.

Economics can come to the rescue

One of the most effective tools to reduce emissions is the emissions market, already in place in Europe. This system puts a price on carbon, recognizing that every ton of CO₂ emitted has a real cost to society. It is not a market of indulgences, where you pay to be able to pollute, but a mechanism that incentivizes companies to reduce their emissions and takes into account the different technologies and production methods available. The European Union’s large-scale experiment with carbon trading has influenced other countries: China, for example, has established its own carbon market and has recently expanded it to include key sectors such as cement, steel and aluminum. Another crucial instrument is the Carbon Border Adjustment Mechanism (CBAM), which places a tariff on imports to ensure a level playing field for the competition between European companies, which operate in a context where the social cost of emissions is acknowledged, and those operating in countries where climate requirements are less restrictive. Unlike the protectionist tariffs that are often threatened in current geopolitical debate, the CBAM has an environmental function: it imposes a carbon price on imported emission-intensive products, such as steel and cement, so that they meet the same environmental standards which European goods must meet. This tool stimulates more sustainable manufacturing practices on a global scale.

These tools are based on a simple idea, but one that is often obscured by the confusion surrounding climate debates: Put a price on something bad, such as polluting emissions, and use the receipts for socially useful objectives. Public revenues generated by carbon markets and the CBAM can be used to support the most vulnerable households, mitigating the impact of higher energy costs, and invest in innovation, so as to make Europe more competitive in the ecological transition. These are pragmatic policies, which transform the problem into a lever for growth, while demonstrating how economics can be a fundamental tool for addressing the climate challenge.

All the rest is noise.