Environmental EconomicsAn Introduction

By

Dr. (Mrs.) Vandana DwivediSr. Lecturer, Dept. of Economics

P.P.N. CollegeKanpur.

Definition of Environmental Economics

According to T Eugine,

“That part of economics which deals with inter-relationship between environment and economic development and studies the ways and means by which the former is not impaired nor is the latter impeded.”

Services of the Environment

1.Material Resources, which provide the input for man’s productive activities. These resources can be classified into:

Renewable( forest, water

etc.)

Non-renewable(minerals, fossil

fuels, etc.)

Cont.

2. The wastes are cleaned up by the environment.3. The environment provides life-support services such

as maintenance of genetic diversity and stabilization of the ecosystem.

4. The environment provides us with various environmental services like providing space for recreation & scenery & wildlife for aesthetic enjoyment.

Economy – Environment InterlinkagesMaterial Balance Model*

The Environment R (Raw Material)

Production Sector

R=F+W1

Household Sector

F=W2

R=W1+W2 (Input=Output)

W1 & W2 = Waste from Prod. and Household Sector , F=Final Product

* by Alen Kneese and R.V. Ayres.

Cont.In the production sector, R= F + W1R= units of raw material from the environmentF= units of the final productW1= amount of waste in the production process

In the household sector, F = W2W2=units of waste in the household sector by consuming all the F units of

the final product like packaging, by-products etc.

Hence , in the economy, R = W1 + W2

The entire mass of inputs (raw materials) equals the entire mass of output (waste). This is the

“Material Balance Model”.

Environmental Segments

LITHOSPHEREHYDROSPHEREBIOSPHEREATMOSPHERE

Scope of environmental economics

Economic Growth&

Environmental Balance

Pollution Control & Environment

Conservation of

Resources

Atmospheric Pollution due to Industrial DevelopmentAcid Rain When sulpher & nitrogen burns & meet with oxygen become sulphur-di-oxide & nitrogen-di-

oxide when it meets with droplets of water becomes sulphuric & nitric acid and create acid rain. It damages plants by destroying their leaves, poisons the soil and changes the chemistry of lakes and streams

Greenhouse Effect or Global Warming

The atmospheric gases (like CO2 , N2O, Methane & to a much lesser extent ozone) absorbs a large percentage of the infrared radiation that is emitted by earth’s surface. A portion of the infrared radiation absorbed by the atmosphere is then re-radiated back towards the earth’s surface to make it difficult for heat to escape into space, so that temperature of lower atmosphere becomes hospitable for living beings. But an increase in the CO2 content of the atmosphere( by air pollution activities ) may result in more of the outgoing earth radiation being absorbed in the air & a warming of earth’s atmosphere. This warming effect is known as Greenhouse Effect.

Ozone Layer Depletion This layer in the stratosphere protects the earth from harmful ultraviolet radiation from the sun. Release of CFCs from aerosol cans, cooling systems and refrigerator equipment removes some of the ozone, causing “holes”; to open up in this layer & allowing the radiation to reach the earth. It causes skin cancer and has damaging effects on plants and wildlife.

Sustainable Development

The aim of environmental economics is to promote sustainable development. It is defined as,

“Sustainable development is development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs.”

World Commission, 1983

The question is what we are going to leave for our future generations ?

The barren landsVehicles but no petrol

Can it be recognized as development? Is this development that can be sustained?

Factories with no power to run them

Mountains of concrete and jungles of sky touching building

Tools for Promoting Sustainable Development

1. Assign environmental costs to resources under use.2. Use price as a tool to avoid waste of resources.3. Allocation of environmental resources based on true costs and real

benefits.4. Resource conservation through environmental management 5. Material Substitution (ex. copper sheet can be substituted by

aluminum etc.).6. Product Life Extension (ex. use & throw consumption pattern of many

goods should be postponed).7. Recycling (industrial waste & by-products can be profitability

recycled).8. Pollution Taxes9. Waste Reduction through technological efficiency.

Sustainable Industrialization

Sustainable industrialization requires integrating environmental considerations at every stage of decision making in the supply chain of the product. The product goes through five stages in the following sequence before it is available for use:

Material Extraction Primary Processing Design & Manufacture Distribution Use Disposal

Every transformation generates environmental impacts which should be considered by the management/decision makers.

Guidelines for Sustainable Industrial Processes

1. Use of low & non waste technologies.2. Transformation of as much material as possible into the

marketable product.3. Increasing the life of the products, i.e., producing more

durable products.4. Upgrade used products by making components available.5. Recovering components & recycling materials when

products cease to be useful.6. Using toxic chemicals only as a last resorts.

Challenges to Companies

• To make products that are eco-friendly with minimum impact on people & the earth.

• To introduce processes that minimize the use of raw materials & energy, reduce waste and prevent pollution.

• To adapt practices that build concern for the earth into the whole apparatus of business, industry and commerce, by consciously avoiding damage, monitoring impacts & having consultations with local communities and the public at large.

Conclusion

• I would like to conclude this lecture with the famous saying of Alfred Kahn,

“ Environmental values are economic values; it is in principle just as important, in the interests of economic efficiency and therefore economic welfare, to conserve our limited natural resources, to make wise and sparing use of our limited clean air, water and living space, as it is to economize in the use of labour and capital.”

You have to decide whether development means affluence or whether development means peace, prosperity and happiness. Sunderlal Bahuguna