The Hindu Business Line : Growth and environment protection: Is there a trade-off?

Global economic growth has taken its toll on the environment through greater emission of greenhouse gases resulting in global warming. To mitigate this we must ensure there is an opportunity cost on resource use and also step up research on finding substitutes for fossil fuels.

M.Y. Khan

The environment functions as a supplier of resources as well as a receptor for waste products resulting directly from production, or from consumption when individuals put out their garbage.

The entire globe has been involved with the issue of environment. Over the last two decades various fora have reflected heart felt concerns to stop the annihilation of natural resources and to control global warming.

Kyoto Negotiations have been mired in political rhetoric rather than in finding ways to reach a consensus on the mechanism to eliminate or at least to mitigate global warming. Environmental agreements should be addressed to issues of climatic changes linked to the nation state’s governance, natural resources management policies, economic growth and people in the country.

UN reports recommend rich countries to reduce greenhouse gas emissions by 80 per cent by 2050, whereas developing countries will have to reduce them by 30 per cent by 2050. However, coping with climatic change is a complex issue. One has to look at various dimensions of climatic changes due to gas emissions.

The problem boils down to protection of environment and improvement in natural resources by achieving the targets recommended by the UN reports. More important from our perspective, are the effects of human activity on the environment and the consequences of these on human welfare.

Take the example of generation of electricity. Extraction of fossil fuels to be used as an energy source reduces the stock of such fuels. Again burning of these fuels to release energy, releases carbon dioxide (CO2) and sulphur dioxide (SO2), both of which pollute the environment and thus reduce economic well-being of the people despite energy being a critical input of manufacturing activity. The nation should develop some device to neutralise the adverse impact of gas emissions.

Emission control

Wastes are sometimes biologically and/or chemically processed by the environment. For instance, organic emissions to an estuary of large river from a distillery are broken down by natural processes into their chemical components. Whether this results in a harmful effect on the estuary or not depends on a number of factors such as volume of waste relative to the volume of water in the river, the temperature of the water and its rate of replacement. The estuary therefore may have a limited assimilative power for processing the waste.

As the quantity of waste increases, the process of breaking it into components uses more and more of the oxygen dissolved in water, reducing the ability of the estuary to support marine life. The message is that only a limited quantity of waste can be dissolved. As such waste treatment should be done near its emission point.

Again there are some inputs which cannot be transformed into harmless, or less harmful substance. Such inputs, are termed as ‘cumulative’ and ‘conservation’ pollutants, and include metals such as lead and cadmium, and man-made substances such as PCBs (polychlorinated biphenyls) and DDT (dichloro-diphenyl-trichloro-ethane).

If PCBs are discharged into water, then they are not broken down by either chemical processes (oxidation) or through biological processes by micro-organisms. Instead, they get deposited in the mud at the bottom of the estuary, or in fish or invertebrates.

But such reckless consumption of resources leads to depletion of resources. Thus there is a conflict between the production of economic goods and environmental inputs used in production of such goods and services. The process of economic development and growth has been cited as a cause of global warming.

Greenhouse gases such as carbon dioxide, methane, nitrous oxide, hydro-flourocarbons, fluorinated compound and sulphur hexa-fluoride are generated by burning fossil fuels in power plants, textile factories, automobiles, transport, steel plants and metal melting plants.

It is not easy to reduce such emissions. If industries grow faster, the climate will warm still faster. Thus, if economic growth results in an increase in iron and aluminium extraction to meet increased demand, more iron waste, bauxite processing waste and scrap metal will be returned to the environment.

Atomic resources are used not only for human welfare and growth, but for defence purposes also. However this generates radiation. Testing of atomic weapons in the air and sea not only destroys life but also pollutes the air and water resources.

Agricultural impact

One more glaring example of the relationship between environment and growth is agricultural output from land. India’s land contributes nearly 26 per cent of the national output. But intensive cultivation of land by using chemicals is destroying the quality of soil, despite resulting in relatively higher yields.

So what should be the quantitative trade-off between sustainable economic growth and the use of natural resources? The concept of sustainable growth includes not only growth of per capita income but also economic and social development.

Some years ago, the International Union for Conservation of Nature and Natural Resources framed a strategy for achieving sustainable development through conservation of natural resources.

This definition was later used by World Commission on Environment and Development. The Commission observed that “sustainable development is development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs”.

Future resources

The authorities and other organisations concerned with environment should give prominence to the inter-temporal aspect of economic activities and their impact on the environment and the future resource base. There could be optimal growth, in which opportunity costs of environmental pollution and of resource use today play a role and, hence, there has to be a price tag today for extraction of resources that would be denied to future generations.

Quantitative growth, with zero price for environmental degradation, leads to overuse, that is, too small a resource stock is passed on to future generations. Proper pricing of natural resources is a precondition to protect the environment from overuse.

We can also encourage a strategy of substitution for the future generation. We should focus efforts to developing technologies that use substitutes for exhaustible and finite environmental resources, using physical and human capital, which does not decrease over time in its capacity to produce ideas.

Since sustainability will be determined by new technologies resulting in minimal use of environmental assets and less pollution generation, we have to set up research laboratories and invest in the skills to develop them.

If natural resources become less important for growth, economic activity can grow and production is less restricted.

Technical processes can be devised indigenously to eliminate emission-intensive production techniques and to introduce cleaner techniques to minimise use of emission producing inputs.

Finally, we should demand, as citizens, that the safeguarding of domestic natural resources is mandated by strict policies, and should oppose, tooth and nail, deforestation and pollution of rivers.

(The author is Chairman of Inter-connected Stock Exchange of India Ltd. His e-mail: my.khan@rediffmail.com)