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Environmental economics, a body of techniques to analyse environmental problems and make policy prescriptions, is challenging conventional economic thinking in countries at all stages of development. In the UK, the Secretary of State for the Environment has publicly accepted the main ideas in the Pearce Report, and has indicated that these ideas will find expression in this year's White Paper on the Environment. The Report makes a strong case for the use of the market to value and price environmental services. This Briefing Paper examines the basic ideas in environmental economics, considers their particular relevance to developing countries, and looks at their implications for development policies and aid. The paper summarises the new importance of environmental issues by quoting the UK Environment Secretary Chris Patten: 'The environment is our new aid imperative, replacing perhaps some of the ideological and strategic arguments for aid which were often used to justify it in the Cold War years'.