Finding Inter-relationship between Environment and Economy: 10 Takeaways

10 enviro-economic problems and solutions of our times

By Rasika Nachankar

If we continue with this current rate of consumption it will result in depletion of resources, environmental degradation and it will also hamper economic growth. So, now the question is — How should we deal with it? What is the way out?

Is there any relationship between environment and economy? Yes, absolutely! Our economic activities hugely depend on the environment for raw materials like minerals, food, wood, cotton etc. The environment also acts as a sink for pollution, emissions and wastes, such as carbon dioxide, which originates from human activities. But, the fact is that the rate at which we are consuming our resources currently, is beyond the Planet’s capacity to sustainably regenerate its resources. If we continue with this current rate of consumption it will result in depletion of resources, environmental degradation and it will also hamper economic growth. So, now the question is — How should we deal with it? What is the way out?

Our recently concluded National Conference on Energy, Environment, and Economic Growth: Emerging challenges was a unique dialogue that recognized that humanity is at a major crossroads, where Economic progress now depends on the stability of Earth Environment. We will take a look back at session one which was “Interrelationship between Environment and Economics’’. The session was very helpful in understanding various problems in environment and economics and the solutions for building a synergy them. Synergy means — if we combined the value and performance of two things then it will be greater than the sum of two individual outcomes. Let's now look at the 10 Takeaways from the session.

  1. Limitless economic growth has serious environmental consequences
    The global economy has grown enormously ever since the industrial revolution and this has been the root cause of exploiting all natural resources exponentially. The expanding global economy has enabled wealth and that wealth has given rise to escalating consumption. The processes like raw material extraction, infrastructure building, and product manufacturing, use and disposal result in increasing human ecological footprint. The ever-rising human footprint has given rise to the ecological crisis, and similarly increasing carbon emissions have led to the climate crisis. These crises can be directly linked to the drive for ‘limitless economic growth’ which leads to unsustainable resource demand.

2. Zoonotic diseases can be a threat to economic stability and human health
The current rate of loss of biodiversity on land in this age of the ‘Anthropocene’ (Age of the Humans) is estimated to be 100 to 1000 times faster than it was during any preceding geological era before the arrival of the Homo sapiens. What has happened is that global warming, climate change and the destruction of the natural world due to deforestation and massive land use has driven wildlife into contact with humans due to the immense loss of habitat. As a result of this, many new zoonotic diseases (like SARS, MARS, COVID-19, Ebola), linked to the transmission of microbes from animals and other life forms to human, have emerged. And due to diseases our economy and health are severely affected.

3. There is a vast difference between the ways in which economists and ecologists operate
One of the reasons for not having synergy today is the stark difference between the way economists and ecologists operate. For example, ecologists focus more on systemic thinking and look at maintaining biological and physical diversity and ecosystem productivity. On the other hand, economists are interested in maintaining economic growth with all available resources. This difference in priorities is triggering environmental problems and will continue to do so in the future.

4. Economy must look at nature as an operating system
Currently, our economy looks at nature as a provider of inputs and sink for the waste. But alternative economy must respect and understand that nature is a dynamic operating system rather than a provider of inputs. More importantly, it is also an enabler of life-sustaining capacity and ecosystem services which are critically essential to the economy. So the economists must look at nature as a dynamic system. And if any one of its services or assets is declining, then the economists must raise the red flag.

5. Climate Change Mitigation and Adaptation are extremely necessary but not full-proof
The tools on which we are banking on like adaptation and mitigation, have serious caveats. Adaptation to climate change impacts is a local and private good and often accepted, as the benefits are going to come to the specific country and to its people. However, it is not always effective as it may not be feasible to restore all of life or nature after disasters. Whereas, climate change mitigation (reducing carbon emissions) is more of a global public good with no specific beneficiary, and that makes it very difficult for everybody to comply with it. Besides, there are many negative externalities that remain unaddressed by any of these tools.

6. Environmental indicators must be a part of measuring a country’s economic development
We have to look at suitable environmental indicators like the quality and renewability of air, water, soil, carbon sink, pollution abatement, and healthcare spending as a proxy for well-being. These costs of non-renewable means should then be reduced from the GDP (gross domestic product) of the country. Similarly, for ecosystem services, we can look at Bio-indicators (like keystone species), forest cover, species populations and community studies. If we want to have nature as an operating system then we can no longer think only of human beings we have to include all other life forms.

7. We should measure country performance on the basis of the Net worth of the Nation instead of GDP
Currently, we are comparing the nations on the basis of the rate of growth of GDP. Instead of this, we need to compare on the basis of the net worth of the nation. All the five capitals — natural, social, human, produce and financial should be considered while evaluating the net worth of the nation. Out of these five capitals first three capitals- natural, social and human capital should make up the net worth of a nation. And the remaining two — produced and financial capital should focus on distributive efficiency too and not just economic growth.

8. It is crucial that economy operates within safe operating limits for Zero Eco-Imbalance
The imbalance, between the carrying capacity of the biosphere and the human demand and appropriation for economic human activities, is increasing. To reduce this imbalance, the growth rate of population and per capita income must reduce and this would require a change in the preferences and structure of the society. It would also require a redistribution of wealth and drastic changes in the ethical and value system. We must aim for the universal and equitable sharing of rights to global resources, for the development of all.

9. Our resource demand and pollution levels must flat-line
As long as we have rising resource demand, and it keeps on growing exponentially, it will be unsustainable. Also, if the pollution — soil, water, and air keep on growing, it will be unsurvivable. So, the minimum requirement for genuine sustainability is that our resource demand must flat-line and that’s the only way to make our systems sustainable. In addition, all of the pollutions must be extinguished to the maximum level that is possible… That will be survivable and this is what we really require.

10. Our development models must recognize that ‘Man lives in Nature’
The development model should emphasize ‘rational demand’ and not chase ‘unlimited consumption’. Today, we don’t have the luxury to spoil nature and retrofit it in the future, as we have done for such a long time. We have already reached the tipping points which will trigger catastrophic impacts. We need to build a lifestyle of balance, satisfaction and care for nature.

It is now clear that the only way forward is to build synergy between the environment and the economy. And for that, we must take the required actions with due cooperation and consultation between ecologists and economists to sustain our economic and environmental well-being. And given the urgency, this decade is the only opportunity we have!

Rasika completed her Master’s in Environmental Science. Currently she is working as a research intern with CCP. She is interested in working in the Climate Change and Air Pollution sectors.

PS — Pune International Centre organized an Online National Conference on 22–23 January 2021! It was a first of its kind initiative to open up a discussion on Climate Economics in India and promote the effort to synergize Economy and Environment. Visit our Website to know more.

CCP aims to make citizens better aware about Climate Change and proactively make cities like Pune Carbon Neutral at the earliest. #ClimateAction

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