Sri Lanka is endowed with a rich profile of natural resources, which is composed of numerous productive physical and biological assets. The Agriculture sector, the largest single source of employment in the economy, relies on land and water resources to a great extent while forest and fisheries resources also are supporting the livelihoods of a significant section of the rural masses. Sri Lanka is also gifted with a considerable wealth of economically valuable mineral resources which are scattered throughout the country. In addition the country is identified as one out of eighteen global hotspots of biological diversity, reflecting the importance and vulnerability of biological assets in the island.

Like many developing economies, recent attempts to achieve a higher rate of economic growth have brought this rich heritage of environmental resources under stress. The large scale disturbances to the natural system commenced during the early 19th century by the British colonial rulers, who opened up vast tracts of ecologically sensitive forest areas in the central highlands for commercial plantations. It was intensified after political independence and deepened with sweeping changes in economic development strategy that took place in mid-seventies. Today, the island nation has faced a complex set of environmental issues that include land degradation in various forms, deforestation and loss of bio-diversity, indoor and outdoor air pollution, pollution of water sources, pollution by pesticides, mis-management of solid wastes and over-exploitation of biological resources. In addition, being an island located in a lower latitude region of the globe, the country can be expected to face significant impacts due to incidence of global warming and associated changes in climate too. Therefore, Sri Lanka is presently confronted with the challenge of finding a sustainable path for achieving her development goals.

The mandate of the Environmental Economic Policy (EEP) Unit is to help identify sustainable solutions to environmental challenges faced by the nation within the overall mission of the IPS. The Unit conducts research with a long term vision towards achieving its objectives. Accordingly, it has identified its broad research themes to include a wide section of environmental problems faced by the country and sets its agenda to cover these broad areas by research projects undertaken by the Unit.