A Blockhead's environment bar shows how the world around it affects the character.
Weather can affect a Blockhead's environment. During rain or snow, a Blockhead can become cold or wet. At night, in an unlit cave, or in any other dark place, the environment bar will go down. When any of those things are happening a Blockhead will either want shelter or more light. When the environment bar goes down, a Blockhead's happiness bar does as well, which slows down a blockhead's actions, such as crafting and mining. It may also block full recovery of energy when sleeping without a bed.