Chapter 14 evaluates the challenges of SDG 13: Climate Action, which emphasizes the urgent need to combat climate change and its impacts. Two global pollution problems are compared: chemical emissions deplete the ozone layer, which shields us from harmful ultraviolet radiation, and greenhouse gases trap heat, contributing to global climate change. International cooperation and action effectively addressed the emission of ozone-depleting substances. In contrast, current policies to reduce human greenhouse gas emissions are inadequate for limiting global warming to below 2°C, threatening a significant reduction in economic welfare and well-being, especially in developing regions. The social cost of carbon measures future damages associated with a ton of greenhouse gas emissions, discounted to present value, which can inform how much we should “pay” to reduce emissions today. The various policy options for combating climate change, including removing existing policy distortions and addressing prevailing market failures, are explained, and the costs and benefits of reducing greenhouse gas emissions through technology- and nature-based solutions are discussed.

Chapter 1 explains how economics plays a crucial role in sustainable development, affecting the well-being of current and future generations. Economics explores how scarce resources are allocated and distributed and analyzes the trade-offs in decision-making. The stock of capital assets, or economic wealth, in an economy determines economic opportunities and individuals’ standard of living and prosperity. Economics recognizes that the economy is embedded in nature and that natural capital contributes to economic welfare in three ways: natural resources provide inputs to production, the environment assimilates waste and pollution, and ecosystems provide essential goods and services. A pessimistic view is that environmental scarcity will limit economic growth, leading to economic collapse. An optimistic perspective is that human creativity, innovation, and technological advancements can avert environmental scarcity, allowing economies to prosper. Economics can help guide society toward a more optimistic development path by creating incentives and safeguards for sustainable use of the environment.

Chapter 12 evaluates the challenges of SDG 15: Life on Land, which aims to protect and restore terrestrial ecosystems, sustainably manage forests, combat desertification, halt and reverse land degradation, and stop biodiversity loss. The proximate and underlying drivers of deforestation and biodiversity loss that have led to the drastic decline of plant and animal species, threatening “biological annihilation,” are explained. Ending nature’s underpricing can be achieved by eliminating harmful subsidies, charging for environmentally damaging products, and enforcing regulations that can help protect forests and biodiversity. Increased investments in the conservation and restoration of forest ecosystems can be achieved through market-based tools such as biodiversity offsets, ecosystem service payments, debt-for-nature swaps, green bonds, and sustainable supply chains. Rethinking the international framework for an agreement on global forest and biodiversity conservation and restoration strategies may involve fostering the involvement and investment of the private sector, which has substantial revenue to gain from forest ecosystems and biodiversity conservation.

Chapter 8 evaluates the challenge of SDG 2: Zero Hunger, which aims to meet the food needs of an increasing global population while safeguarding the food needs of the poor and promoting sustainable agricultural land use. The interaction between rural poverty, natural resource degradation, and food insecurity in developing countries is a vicious cycle. Increasing agricultural production to meet the rising global food demand is constrained by the limited availability of fertile agricultural land suitable for expansion. It requires significant increases in production per unit of agricultural land already in use rather than expanding the land under agricultural production. However, the high costs associated with agricultural intensification make increasing sustainable agricultural production a real challenge. Removing or re-orientating environmentally harmful subsidies in agriculture and identifying new and innovative policies to boost sustainable agricultural intensification is required, especially in developing countries with fragile and limited fertile agricultural land.

Chapter 7 explains the range of policy tools decision-makers can use to correct incentives for an oversupply of environmental “bads” and an undersupply of environmental “goods” in markets. There are two critical steps to address the underlying causes of environmental mismanagement. Step 1 involves removing existing policy distortions. Step 2 explains how policy options can be used to correct market failures and compares and contrasts these options. Market-based instruments provide incentives for producers and consumers to reduce or eliminate negative environmental externalities through markets, prices, and other economic means, e.g., Coase Bargaining solutions, cap and trade, taxes, and subsidies. Regulatory-based (command and control) instruments rely on setting a standard, such as emissions or technology adopted, backed by penalties to modify economic behavior. In the absence of government intervention to correct market failures, private sector measures, such as liability, information disclosure, and voluntary agreements, have a role in correcting environmental problems.

Chapter 6 discusses the “cost-benefit analysis” (CBA) framework for decision-making, aiding project and policy selection and acceptance. Environmental impacts may occur today, over several years, and sometimes well into the future, requiring discounting future costs and benefits, which raises important ethical considerations. Often, the environmental impacts of projects and policy decisions are not known for certain, and there may be uncertainty about the incidence, scale of the effects, and the probability of their occurrence. Thus, adopting or rejecting a project or policy requires addressing the uncertainty and risk surrounding environmental impacts. Equity issues can also be considered in CBA, as the distributional effects on those who bear the costs and receive the benefits of a project or policy decision are often different. Successfully adopting and implementing projects and policies, in the long run, relies on how costs and benefits are distributed among the stakeholders impacted by them. A case study of mangrove conversion for shrimp farms in Thailand illustrates the implementation of CBA in the real world.

Chapter 15 evaluates the challenge of SDG 17: Partnership for the Goals, which aims to address global issues related to sustainable economic development and reviews how alternative indicators reflect progress toward global sustainability. Although there have been recent advances in areas such as development aid, remittance flows, and technology access, international development funding remains a significant challenge. Global challenges like institutional inertia and vested interests, alongside private sector opportunities for sustainable economic development, are examined. Economics plays a vital role in acknowledging critical planetary limits and boundaries. This requires establishing global partnerships and international environmental agreements, improving how we secure and invest wealth from natural resource exploitation using Sovereign Wealth Funds, creating and correcting global markets, and raising funding for global public goods. Additionally, economics can help analyze ways to stimulate global innovation, increase private sector involvement, and implement safety nets like Universal Basic Income to reduce extreme poverty during environmental crises.

Chapter 10 evaluates the challenges of SDG 7: Affordable and Clean Energy, which aims to ensure access to affordable, reliable, sustainable, and modern energy for all. The scarcity of non-renewable minerals and energy resources presents a critical global challenge that could constrain economic growth and well-being. Various ways to measure natural resource scarcity are evaluated, and an economic analysis of the optimal extraction of exhaustible resources over time is established. Policies to address future demands for mineral and energy resources while balancing the environmental impacts of extraction and use are discussed. For example, substituting non-renewable energy with renewable energy sources poses economic and environmental challenges. Concerns over supply constraints and reliance on critical minerals have prompted calls for self-sufficiency, reducing reliance on imports of essential raw materials, and creating incentives to enhance recycling, recovery, and reuse, especially of rare earth elements. In addition, developing new technologies to improve end-use efficiency can support the decoupling of dependency on non-renewable resources from economic growth.