Fast fashion’s economic model of rapid turnover and low-cost production comes at a steep environmental price, with growing calls for systemic change to reduce its hidden costs.

The fast fashion industry imposes significant negative externalities—costs not reflected in retail prices but borne by the environment and society. Overproduction and overconsumption strain global resources, contributing to carbon emissions, water depletion, and mounting textile waste. These harms are exacerbated by short product lifespans and low resale value, limiting circular reuse. To internalise these externalities, economists suggest market-based interventions such as carbon taxes on supply chains or subsidies for recycling and upcycling technologies. Such tools can shift industry incentives and support a transition to a more sustainable, circular economy.

How does fast fashion affect the environment? - Economics Observatory

1. Explain the negative externalities associated with the fast fashion industry.

2. Using a marginal social benefit (MSB) and marginal social cost (MSC) diagram, assess how negative externalities in the fast fashion industry cause overproduction and overconsumption. Discuss the implications for allocative efficiency and social welfare.

3. Evaluate TWO policies that could be used to reduce the negative externalities associated with fast fashion.