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The driving forces that put pressure on the environment and the natural resource base are under the influence of macroeconomic policies. Monetary and fiscal policies, for example, determine growth rates and the direction of structural changes in every economy. These economic policies condition the actions of all economic agents, from the largest corporations, to the smallest household. They help shape decisions about technology choice and resource management at the micro level. This is why the importance of macroeconomic policies on environmental stewardship and in shaping environmental change cannot be ignored.

Even the International Monetary Fund recognizes that macroeconomic policies are critical in deterring or avoiding patterns of growth that damage the environment. The Stern Review on the Economics of Climate Change provides yet another example of how macroeconomic policies are receiving more attention in environmental debate. Yet, little research has been done on the precise ways and transmission mechanisms through which these policies affect the environment. It is possible that this lack of attention arises from the fact that the transmission mechanisms don’t always appear to be clearly identified. Also, the chain of events linking macroeconomic policies to their impacts on the environment may appear to be long. Typically, only the proximate causes of the environmental damage are seen (for example, slow investment rates that prevent clean technologies from being introduced or social marginalization and poverty that may lead to the destruction of traditional production systems), while the ultimate causes (tight monetary and fiscal policies causing slow growth and inequality) are seldom considered. Another possible explanation for this lack of attention is the state of flux in which macroeconomic theory finds itself today, making it difficult for applied economists to rely on solid theoretical references.