 Good afternoon, I look forward to interacting with you all spread over the length and breadth of the country and wish you all a very happy World Environment Day. What an auspicious day for me to begin, especially since I am interested in talking about economic activity and we are trying to see how nations can manage themselves by fostering economic development by and at the same time preserving the environment. People called it preservation, conservation, management and several of this. So in this entire series that during which I am going to have interaction with you, given my background of training in economics, I am going to be talking to you about 3 major dimensions that is the interplay between economy, environment and development. So let us start the enquiry from now onwards. I do not think there will be any dispute among us in terms of why do we need to do this. In fact, right in the inaugural session, my colleague Professor Sethi and Professor Patsar, we both discussed with you about you know how exactly we can look at it and why do we need to look at it etc. But I thought I will just add 2 more dimensions to the discussion that we have had with the inaugural. One is, I call them as need of the hour. One is, there is a growing recognition of the need to formulate strategies for sustainable development all over the world, whether this is especially after the world summit in 1992 at Rio de Janeiro. So when most countries came prepared with the rudimentary draft and then they started working on it, they said Rio plus 10, Rio plus 20 and now they are planning for Rio plus maybe 30 or 50 and everyone's objective is to see how exactly they can place the economy on the part of sustainable development. What is important is to place the economy on the sustainable development, part of the sustainable development. Once it is placed then it is supposed to take care. In 1950s when we embarked on plan development, we, Indian economy, we wanted to place the economy on growth path where we actually called it steady growth path. So we still want the you know growth path to be steady but at the same time sustainable. The word sustainable we perhaps learn much later. The word sustainable was there earlier but in a very very different context, it is basically the ability for you to sustain the steady growth path but now they are talking in terms of environmental sustainability. So there is a growing determination of it, all countries across the world are trying to see how exactly they can place the economy in terms of sustainable growth path. This is true for developed countries present day OECD countries as well as the developing countries. OECD by which I mean the Organization for Economic Cooperation Development or you call it Group 7 or Group 8, the countries are classified in terms of the levels of per capita income. So these are the countries which also need to worry about it like developing countries. But there is often a debate about whether it is good to be a late starter. Do you have a disadvantage of being a late starter? In fact when about 13 years back when I was with Cambridge for a brief while I learnt and met this gentleman Professor Hajun Chang who just then published a book titled Kicking Away the Ladder. So then there was a talk by him about the book so I wanted to go and listen to him as a developer economist. He said the developed countries have all laid a ladder and used a ladder to grow. But none of them want the present day developing countries to use the same ladder to climb up. So once they have climbed up they want to kick away the ladder. So there are others or followers the late starters do not follow that. So he was very critical of the developed countries which is kicking away this and he is a co-author with Joseph Stigler who is a Nobel laureate in economics when he declared that here. So I said can't we really take it as a boon that the ladder is not available to us. Now much later people like Professor Partha Dasgupta was very well known environmental economist and others argued that developing countries can actually benefit being late starters especially because they can make proper planning and perspective about ideal mix of the use of resources, preservation of their environment and achieve economic development. What is the problem that the world is facing today? The developed countries have got the maximum problem not the developing countries fortunately because they are using certain paths of development where they can't cut down on carbon emission for example or they are basically spending lot of money researching about finding out alternate technologies which are environmentally benign and also they can't really they are finding it very difficult to identify what is the optimal resources, optimal rate of exploitation of resources. Since developing countries are late starters they can plan for it right from beginning and therefore it can be taken as an advantage and they can really talk about it. But of course it is not without concern so developed countries are willing to share so it is not that for benevolent they want to give this money for carbon trading and others is because they are unable to cut and since the GHG gas emissions are you know really wanting so they want developing countries to practice all this so that and they are willing to transfer resources or share the cost of it with the developing countries. So that is exactly where it comes from because they are unable to cut down. But the moment you start looking at formulating a strategy for development especially sustainable development what happens here is you must understand that there is an interrelationship between economic activity and the environment. Now this economic activity therefore we have to also you know start before I thought I will definitely start the you know discussion with you first with what exactly is interrelationship between economic economy and the environment. Can the economic development take place without harming the environment or is it necessary and sufficient condition that is necessary and sufficient to exploit the natural resources and destroy the environment in order to be you know going on high growth path proceeding on high growth path to achieve economic development is that really required we will inquire into that you know certain answer we will definitely see what are the pathways available. But today we are also at the crossroads where it is 20 years since the beginning of WTO World Trade Organization 163 countries in the world have signed WTO everyone they thought China will not be asked to sign China is also signed where the rules of the game what does WTO say in an actual rules of the game for trade related activities are governed by WTO. So if your economy is open the sense that open to exports and imports as well as for investment capital flows into as well as outflow then you need to definitely take into account you have to strictly follow the rules of the game and these rules are prescribed by WTO. Now around again most economies when they want to open up have also embarked upon since 1991 around the world the path of globalization globalization is a process whereby you are trying to link your economy with the economies of the rest of the world. So that means there is interdependence between your economy and economy of the rest of the world. So if there is a financial crisis in your economy it will affect all the trading economy all the trading partners but it may be good it may also have some adverse impact so you have to be prepared once you link there are several advantages that is why most economies have really got into the path of embarked on the globalization path. So with WTO and globalization ruling in the last two decades and more the environmental concerns have also got reshaped very small example I will give you is most of the exporters if you ask them they say we require green labeling apart from others like you know you have to certify that they do not they do not violate human rights and others but green labeling is become a very important factor or developing countries becoming dumping ground for the environmentally hazardous goods are they also becoming heavens for you know investment in those industries the creation of most of the manufacturing industries which they are not able to do in continuing their own country because of strict environmental regulations. So when our prime minister Modi said make in India campaign is started make in India several people worried that should we make the environmental standards stricter comparable to what is there in Europe and US so that this does not attract the most polluting industries to India. So therefore one needs to be cautious about this so there that is why it is important to understand the differences in the concern that are emerged with WTO and globalization. What important you know aspect that I want to talk about again interrelationship is management of natural resources we talked about management of resources mostly financial resources and capital resources etc earlier but today most countries in the world are talking about natural resources because they are it is Japan is an exception which have grown at high rate without having the endowment of natural resources much of natural resources whereas most other countries which have been able to grow barring the Sub-Saharan Africa which are endowed with all natural resources but still not able to grow because they are all by in large exporting staple resources to other countries. So in the process management of natural resources there are two important aspects that have come into play one is the institutions. A colleague Dr. Patsati will also be talking about some of the institutions especially in the context of management of common pool resources but the kind of so institutions that are the need required today are very different from what one had in 1950s, 60s and 70s etc and these institutions have really come up they have come to play very important role in India as well as elsewhere and also the enforcement separate kind of enforcement separate institutions which are basically to enforce the laws of the land with respect to endowment are also have also come into being in the last few decades. So these aspects also need to be definitely understood so it is not simply economic activity but reshaping of the economic activity in the last you know two to three decades that has taken shape in the form of this is what I intend to also talk to you about. Because what I am talking to you today is only I mean this is giving a prelude the first part prelude to what is in store so then what is the objective. So in terms of the perspective following the norms given by the UDC and others so basically idea here is to stimulate the students to think that you know basically the cause aims to provide an overview of the issues involved it is important is enough we can stimulate or motivate the students to think that what are the issues that are involved in planning policy formulation as well as implementation for effective conservation and management of the endowment that is what is definitely required but again when you talk about conservation of the endowment it is not at the cost of low growth rate because without economic growth they cannot be human prosperity and you cannot sacrifice on human welfare because then you will be declared as a sadist so that is we definitely not we want so it is possible so what we are also trying to say is it possible to combine high growth path with environmental management is something that we are going to sort of discuss and learn together. And the issues that we are going to talk about are both theoretical as well as practical especially there are races from formulating strategy planning for sustainable development again both the micro as well as the macro level because what is the level at which one should plan let me give an example in India in 1950s you all would have heard about what is called centralized planning where Yorjana Bhavan people sitting in Yorjana Bhavan in New Delhi used to plan for the entire country top down approach much later people embarked upon decentralized planning again there was a debate what level of decentralization so people said we should go for Panchayati Raj. So Panchayati level planning aggregated to block, district, state and then nation is that what is object is what has been we have tried both in the last you know 65 years plus planning started in 1950 so 65 years but still we have problems of poverty we have problems of inequality we have problems of half as our development across states and poor urbanization planning etc. So there are number of issues that come both the micro as well as macro level since the course is not a pure course on development economics we are focusing more on the interplay between economy and environment so in that context we try to see how the we can deal with it at the micro as well as the macro level I must say that even this part that I am going to talk to you about that is why we have all sandwiched them together is interdisciplinary highly interdisciplinary it is not simply I am going to give you economic theory and economic tools to look at this the course is highly interdisciplinary with special emphasis on environmental economics here and socio economic perspective in planning and implementation for environmental conservation and pollution management in this modules that I am going to be talking to you about but the course is definitely as you already noticed would have been highly interdisciplinary. So what exactly we are going to deal with are basically concepts and issues related to economy environment linkages the concept and measurement of green GDP yesterday there was a discussion in Delhi about the new measures of GDP but we are going to talk about green GDP which is also now CSO is undertaken Central Statistical Administration has undertaken set for this then what are the various economic instruments that can be used for pollution control and if there is time we will also talk about designing a policy for industrial pollution control with some of you may confront especially since you are teaching several of the engineering courses let me see how exactly we can deal with it. In addition if there is time because today everyone talks about climate change the monsoon is yet to set in we are hoping that will start from 1st June now this is 3rd June today is 5th June there is no sign of monsoon I do not know my friends in Kerala can say whether they started monsoon has started it has been raining there in May but people said 3 monsoon showers. So there is climate change so what are the economic impact of climate change some part of it we will discuss in the program if there is time because when they made the syllabus UGC may not really talk about climate change so that is why I am putting it as a additional factor and of course in the entire you know interaction I would like you to get familiarized with and that is what we intend our students also to get familiarized with not necessary to buy hard mug up or you know become champions of this but just get familiarized with tools and techniques of analysis there are concepts like transaction cost, cost benefit analysis, contingent valuation, environmental impact assessments, social impact assessment, etc. Some gift of it we will try to understand as we proceed I do not want to keep one lecture only for the concept because get boring and also it is very difficult it is a big challenge for me to keep you awake especially after you know your lunch break and towards the end of the day today. But I must say since number of you would be keen on knowing what is environmental economics all about economic itself I do not use any of the definitions given by so many textbooks because one of my teachers told me 30 years ago that economics is nothing but common sense in the complicated form so then we were wondering you went to say that every common sense economics is not at all but you can deconstruct all economic concepts and theories and finally when you deconstruct people say oh this is something that already knew this is common sense so it is common sense in a complicated form and environmental economics is no exception. But there are two dimensions from micro as well as from the macro perspective when the micro economic perspective Darjeh deals the behavior of an individual or a firm or business or a particular market whereas macro we are dealing with aggregates economy as a whole is what we are talking about but in the micro level also we are talking about policies policies to control especially market failure I should tell you what is market failure in a while and alternatively there are also people in the macro level we keep hearing in newspaper Lagram Rajan talks about monetary policy or generally talks about fiscal policy and trade policy first I guess Nirmala Sitaraman we talked about trade policy today I am talking about current ministers who are in charge of these activities so at the country level we talk about monetary fiscal and trade policy which have widespread effect on various dimensions okay but some of the issues that we get involved in micro economics are the following each one of it is a major discipline research area for example to start with we are looking at the theory of public goods now the question is what is public good what are public goods this bottle of water that they have given me to drink if I am thirsty it is a private good because I am not going to share with anybody else here private good given only to me but the air that we breathe public good so what what makes it how do you distinguish is it are you going to talk about each of the commodity and discuss no so public goods by definition have two characteristics any commodity where you can't where there is no rival in us in consumption non rival in us means you can consume it but I am also consuming it simultaneously street light is an example all the people walking in the street can benefit from the street light so I am talking to you now I am talking to you there are 450 plus centers now I don't know how many that and then you can't exclude others from listening to me so this is also becoming more of a public good and if it is put in public domain it is an example of public good second characteristic is non-extrude ability non rival in us you can consume together but if the fact that you can't exclude someone else non-extrude ability so usually we give the example of street lamp so there was a survey Kenneth arrow a noble laureate in economics long back said he came up with a theorem called arrows impossibility there he said there that in the case of private good how much of this should be supplied in the market the water bottles so they take individual preferences and then submit horizontally and then to come up with the market demand for water number of water bottles but the same way you can't arrive at for public goods because public goods are usually provided in large quantities very difficult to submit individual because individual preferences can vary somebody will say I need I prefer to have a park here someone will say you know we must have a lake here third person we say no no no we should have it's a playground for children so you start taking people's preferences and trying to aggregate then you know you can't take preferences therefore arrow called it as impossible to submit so it's called arrows impossibility theorem but what's important here is when you run then somebody has to provide this public good so we give let's start with the example of a street lamp so there was a survey done there was no street lamp in a particular colony so they were survey done residents of the area came together society forms and then society starts asking people would you like to support installing a street lamp in our streets so they know that if you say yes you will have to necessarily pay share the cost of installing street lamp so people what they tend to do is now I can always say no because majority will say yes and they will install then if I since I said no they will not ask me for money obviously majority says no then you can't have the state lamp so they expect majority of the people to be rational and say yes therefore some people decide not to say yes so if you turn on and say is it possible for the residents to identify those house walls which have said no to street lamp and then say and keep a watch man and then say that anybody any member of the family walks on the streets after the street lamp is switched on should be asked to close their eyes and walk is humanly impossible to monitor that so this problem in economics what we call it the problem of free ridership so public good entails by definition what is called free ridership so they will always be free rider and because there are free riders the market will never come up with provision of this supply of this therefore you need government to supply public goods that is why most of the public works program I am taking by government not by the private investors is only now that the same we will install provided the government says you can have tolls and then collect tolls which is also been abolished in Maharashtra recently so there may not be any incentive for them to come forward how they recover and thirdly public goods in why involves a lot of investments why I am talking about the public good is because environment is a global public good initially they ask is it a public good for India is it for Maharashtra is it for Tamil Nadu or for Jammu and Kashmir what is public good there or is a global public good the GHG gas emission nose on layers are global public goods when you talk about climate change is a global public good so the theory of public good has to be rewritten now in the context of talking about environment secondly the concept of externality externality by definition mean that any in your action in production or consumption there could be somebody who is adversely affected or positively affected so we call it negative externality or positive externality chemical plant near a housing colony releases waste to the water body nearby negative externality but it provides employment opportunity for people in the colony positive externality we have to deal with both when there is positive externality for example if there is a music company which plays music most time all the residents in the area enjoy free music the company cannot enforce and tell all the residents since I am you are all so quietly listening to music that I am playing everybody should pay it is impossible to price it and sell it we can also be case so and again negative both negative is difficult to negative it's not difficult to enforce I mean regulate and positive external is also very difficult for therefore the market will fail because in these cases consumption production externalities are inbuilt positive as well as negative if there are inbuilt market will fail so to correct market failure government intervention is definitely required that's exactly where we get into externalities and market failure so this is more prevalent in the case of environmental goods environmental goods environmental services etc therefore we will talk about externalities and market failure in specific cases thirdly there is a very interesting development that has taken place in the tools of analysis called cost-benefit analysis which is done by government for most of the investment projects even earlier now they do cost benefit analysis of what are the costs and benefits attached even if they want to start a new engineering college cost-benefit analysis is basically done or they want to construct a new dam check dam or something else the bridge cost-benefit analysis is basically done what are the costs and benefits so now the cost-benefit analysis is a very important tool that has also been used widely in the case of environmental goods and services. Fourthly we have to come up with environmental policy center state coastal zone regulation several others are part of the environmental policy and finally there also environmental audit system that has come so professional auditing is being done in number of cases so all this encompass what is called microeconomic issues in terms of from the environmental point of view which are basically started from the economic point of view but then switched over to I mean which are very important concern for from a normal perspective some of the macroeconomic concerns I have already issues and concerns I've already mentioned to you like economic growth and environment WTO etc but management of natural resources institutional enforcement is also something I mentioned to you now coming to the last three aspects here valuation of environmental resources that has all become very important but we have gone so crazy that China showed the way to the rest of the world they said we want to impute value to the monkeys in China razz pieces so we want to impute value we say because when you talk about value we don't value ourselves we don't say 1 billion population means every individual worth say 1 crore therefore our value GDP includes the value of human resources so it is 1.2 that is the potential GDP of India we don't say that but when it comes to forest or oil gas resources etc we do valuation of environmental resources now people have also started like China sedan in terms of some of the species so they got the extra valuing valuing means economic valuation of monkey so government thought should we start doing it in India they attempted when you want valuation of Royal Bengal tiger after that they stopped thankfully is impossible to value so that's not what we are talking about here we are talking about valuation of environmental resources with the environment gives us which we can use but at an optimal rate so that we can be it can be available for us as well as for the future generation therefore valuation why is the valuation required valuation is required because unless you you know tell the people how valuable it is people will not take it seriously of course there is a in economics we have paradox of value I always tell all the students right in the first class paradox of value is water is something that you can leave you cannot leave without water is something that you cannot leave without but how much are you ready to pay 20 or 30 rupees per month diamond is something that you are you can leave without how much already are you ready to pay 30 or 40,000 is what we call paradox of value water is scarce so is diamond so it's not simply scarcity definition but it's because the what we call it paradox of value now but this valuation of environmental resources why is important because then only you will attach once you attach value then you will respect it you may remember in our grand parental generation in villages etc they used to say when the taps were installed first we were earlier we used to draw water from well then we attached motor installed taps in all the bathrooms and washrooms and others water started flowing then we started using you know buckets and others to fill up water and very often I tell the students because they all stay in the hostel they open the tap water doesn't come there is a walk away and whenever water comes it flows through all unless someone sees everybody will be in the academic area water will go down the drain I've noticed it when I was student staying in the hostel and used to go tell them please close the tap it doesn't come or after use so that the water is preserved and we know how important valuable water is so what used to be taught to us when your children is if you allow the water to go down the drain your wealth will also go down the drain so you are trying to attach you are trying to you know draw a parallel between the water and wealth today you know there are water engineers there are water entrepreneurs all the tankers that supply water to a number of places water entrepreneurs water trade is a very important dimension so some valuation of a number of resources basically done so when they charge you for water depending upon the demand supply mismatch basically intersect no demand and supply that's why the water rates differ across especially for privately available water resources so the valuation of innumerable resources becomes extremely important and another important dimension that has come now it now is in terms of maintaining biodiversity or ecological balance so energy ecology ecology linkage and modeling is also very very popular people are using high-end models programming including match labs to solve some of the models and finally environmental natural resources accounting has also become extremely important that they started doing it it was about 15 years ago when we started doing it for India before that this people from researches started doing for China and then it was dismantled in 1992 they said SCES started system of environmental and economic accounting where you talk about economic accounting and also bring in environmental accounting and then you redefine your GDP based on the amount of environmental resources consumed when you do that you find that actual I mean the green GDP value goes much lower than the GDP levels and if you do have if you include value to environmental resources some studies have shown states in some states in India which are very low in terms of per capita income are scoring very high of course the critics will ask you is it all right to preserve the environment but no need for improving the per capita income in those regions not at all once you embark on that at all so therefore there are a lot of trade-off that we face so we see how much we can sort of talk about it so having given this introduction I wanted to think it over now this is only an introduction to what is in store in this five sessions that I am going to be interacting with you just an introduction to what is going to be discussed so I start by looking at the first topic which deals with interaction between economic activities and environment now I'm not talking about development I want to say economic activities I suppose we can proceed so basically interaction with economic activities and then now very simple diagram that I put this together in all economies whether you talk about you as UK Europe Japan China India the economic activities can be broadly classified into two consumption production consumption cannot take place with production production without consumption is meaningless somebody has to consume otherwise they have to throw it in ocean who are they producing it for you're talking about consumption production of all goods and services in an economy we are talking about an economy within a car we talk about Indian economy or Chinese economy or the economy one economy one country's economy so all the economies have economic activity can be classified into production and consumption how does the production takes place of course households and people live people live in all the economies all the countries who become the consumer so these consumers are endowed with we only talk about two sector two sector model we are not talking about trade we are not talking about government we are not talking about tax authorities nothing simply we are starting a simple model after that we will complicate so every economy has two important players two important actions one is production other one is consumption so the consume consumption is carried out by households individuals and families so these people in order to consume have to purchase goods and services or they have to grow including they have to you know farmers growing in their own farm etc but when they do that they become producers production activity so in order to produce the consumers or households are endowed with what is called factors of production so we have four factors of production economics called land for cultivation and others without land you can have institutions or industries labor effort that is being put into by human beings now including Robo has come in now don't consume they only consume electricity perhaps land labor third one is capital where we talk about capital in term mostly in terms of investments financial capital and others including national capital now when it's talking about and fourth one is management or entrepreneurship those who run the businesses so they're also households individuals and they consume so four factors of production that is supplied by large by households are called land labor capital and organization they factor the production whom do they supply this to they supply this to the production process of what is called the manufacturers the producers use this factors of production to produce and supply to the market goods and services for the consumers by large they supply it for the production to the market for the for the benefit of consumers so if the all of them are consumed then the circle is complete but it's very difficult to have barter exchange therefore we monetized the because water the problem of water is where goods are exchanged for goods that I work for eight hours a day in a factory or teach an IIT and then I'm paid in the form of 10 kilograms of rice or 5 kilograms of wheat which is very difficult barter system because what happens is suppose I want I don't want I'm not a wheat consumer I'm a rice consumer I take it to him and then say can you exchange this rice weight for rice he may say knowing that I know I am desperate for rice you will say you have to give me 2 kilograms of kilograms of wheat for 1 kilo of rice that I give it to you and unequal exchange so in barter sometime he may not be wanting this wheat at all therefore you will say I don't want wheat so first of all barter to work you need to have coincidence of wants two people should have liking for each other's what whatever the each other has therefore barter system failed so we monetize where we valued everything in terms of medium of the in terms of money whatever currency that is the P N dollar whatever or ERO so we monetize and then say we get in compensated in terms of money and then use the money to buy goods and services so the factors of protection earn in return for whatever the consumers are supplying to the production process land ends rent labor earns wages and salaries apart from other perks and others capital earns interest profits is are given to entrepreneurs so 4 factors of production land labor capital organization earn rent wages and salaries interest and profits that come back to the country now this is what they spend to buy and use the service of goods and services done in the production costs so the circle is complete that's what we start economic activity for any country theoretically this is how we try to prevent a simple two sector model now see how I bring in environment here in terms of consumption as well as production but you can see this there is there are two arrows which show R1 and R2 very easy to explain R1 farmers retain a portion of the crop as seeds for next crop which is not sold in the market so resource is retained for themselves for reimbursement seed purposes or other purposes etc so that is R1 it doesn't go to the market system it retain within themselves again consumers buy number of goods and services they consume but they also retain a lot of it for future so R2 they also recycle that is activity takes place within the consumption activity so R1 and R2 are activity which goes on within consumption production etc so far enough in a simple circular flow but as this consumption production which has been going on in the ages several you know centuries and with modernization what happens the consumption as well as production releases a lot of waste today we talk about e-waste solid waste liquid waste and several of this environmentally benign environmentally non-benign damaging several of this form both the consumption as well as production process so they are biological process so this is all put to what is called waste sink which is also there in the country there are dumping grounds all over the country where we sort of use it as a waste sink sometimes wetlands are used for wasting sometimes several other places in cities urban areas in the suburbs outskirts there are lands manned where we go and dump the waste now the system is also waste management is changing now waste management in fact waste management become an important discipline and highly difficult right now because as the consumption increases waste also increase as the population increases consumption increases waste also increase so it is much more challenging to have waste management as the population increases demand for commodities and services increases production also goes up again waste increases I am not talking about once the production goods goes to consumers and then waste is released it comes to waste sink directly from consumption to waste sink that is e2 but production to wasting also takes place again coming to production to e2 that also takes place release of hazardous waste non-hazardous waste air pollution water pollution and others and several others even raw material waste and several other production process all the waste that is generated in the production process all that comes to what is called the waste sink now waste management has become so important that I would like to share with you my personal experience that I had when I lived in Tokyo for a year but 15 years ago that is when I learned how important waste management is becoming where suppose you use a when you go the new family to live in a city like this there are a lot of fellow Indians who approach you and then initially they start approaching and they said no no don't buy a television don't buy a refrigerator etc we'll give you so many households I got introduced to I was wondering how our fellow countrymen have become so generous when they move out of the country now I was really surprised why is every guy I know I hardly know them it's only later as I was talking to them I realized that they have to pay a heavy price so then I asked what about suppose I'm leaving I'm here only for a year after that what do we do you said look for someone like you will enter next year and pass it on to that guy and then go I said but why are you so generous why are you giving me all this because I got off excellent offers for various electronic goods from the guys because they all want to replace it there's no space in their houses they want to buy state-of-the-art machines now but they don't know what to do with the old ones there's no space and if you have to return you can't put in the municipal dustbin if you leave it without telling the government then there's a huge penalty and every commodity is recorded in the name of the purchaser no way you can cheat it's followed in Japan even today so if you are to legally disperse how do people disperse then you write to the municipal company saying that look I have this old television which I don't want to use it anymore so I'll pay you whatever please tell me how much I pay and the price that I pay is 30 percent of the market price of the commodity in most cases so they said you can experiment so I was taken to a department so I went there I asked them what is the price of a television color television so they said you just want to buy one new one or you want to exchange I said I have nothing to exchange you want to buy a new one you want to buy a new one 7000 yen I said what if you have to exchange 10,000 yen I will pay more in India is the other way around if you pay if you give a old one and want to exchange it for a new one they give you discount so typical Indian case I argued they said no no because we have to take care of the waste disposal because the price they have to pay to the tax you have to pay to the government for disposal of that is so high so that is the way they tend to so waste management becomes extremely important in all these countries soon it's coming in our country as well because where do they dump is a big issue but as the production process improves increases growth process of the economy consumption also increases waste sink will also so there is more and more pressure on the waste sink coming back to this with modernization of production as well as consumption we are also heavily dependent on the energy as well as the materials energy and materials were basically needed only for production process earlier but now we need for production consumption also we need gas for the stove or oil we also need microwave oven electricity for any microwave oven OTG or others washing machines require electricity so energy and materials are required for consumption as well so production and consumption both require energy and consumption as production and consumption expands the demand for energy and material also increases so you need to produce more of energy more of materials fine that's also part of the otherwise you can't keep paid for the production so I'll tell you later on but I'll just give an example here if you look at the GDP of Indian economy they have growth targets 5% 7% 8% per annum growth rate of GDP but to produce the GDP you require a lot of energy especially electricity now if you look at the demand supply mismatch in electricity or energy in general that gap is not narrowing so in spite of not meeting the target for energy consumption energy requirement you still are able to grow at this rate it's commendable that means you are perhaps are becoming more efficient in producing coming back here therefore the demand for energy and material increases whereas production and consumption expand so two circles I put them together so that union is something we need to worry about but as these two activities improve what it takes away is the third circle called E3 which is what is called amenities which are by and large meant for consumer households for consumption activity you need parks as well parks lakes and several others as the demand for wasting increases as the demand for energy and material increases this becomes because it's also important you know as E2 increases as E1 increases E2 also will increase because the lot of waste that is coming out of energy and material production also fly ash from the thermal power plants so that will also go into the waste sink several other waste that is released from the energy production goes into waste sink so therefore there's a pressure on E2 to expand further and further as production consumption expands demand for E1 increases and finally they all put pressure on E3 which is amenity available so when that becomes unsustainable threatening then we wake up and then say oh no it's every time we worry about it otherwise results in climate change so finally therefore you're taken to the arrow outside the system what is called E4 which is global life support system where we talk about GHG emissions ozone layer and the like from simple economic activity of these two sectors we are trying to link it to economic activity so what are we trying to in a nutshell what we are trying to discuss here are we take two sectors economic activity classified into two sectors consumption and production consumption are handled by households and production are handled by businesses there is exchange of goods services and factors of production between these two sectors goes from one to the other and again the other to one come back here so environment here is shown in two important ways in terms of E1, E2 and E3 all the three interlink circles that's how we are trying to put environment present environment and trying to link it to consumption production activity we are also trying to put it in terms of all encompassing boundary level E4 so these are the two ways so because E4 affects not only you but also other countries in the world we call it global life support system but E1, E2 and E3 are by and large internal to the country because of here that doesn't mean there is a problem of E1 and E2, E3 does not necessarily mean that we cut down on consumption production then there is no progress in their economy as economic progress takes place consumption demand for consumption will increase demand for production also increase therefore so both the activities they have to go on no way you can stop in fact if you look at the entire climate change debate they talk about business as usual but we cannot talk about business we have to talk about growing rate India and China as rate are rated as the fastest growing economy in the last 10 years when all others are struggling to grow at 2 to 3 percent we are growing at 8 to 9 percent growth rate I am talking about or 7 to 9 percent in that range fluctuates that growth has to be in other countries also without to keep on growing to reach at the consumption level of the first world countries or the developed countries that means how much of pressure on E1, E2 and E3 how are we going to manage this when production consumption expands and E1, E2, E3 and if the pressure on this also increases so let me give a simple anatomy here production sector extracts energy resources for example like oil this is the typology how exactly this takes place as well as mineral resources like I know from the environment they use this for manufacturing process now this production process are basically these inputs now usually in the production process are transformed into two kinds of output we always talk about good output useful output but we also will have to talk about bad output in waste for example SO2 so there is some recycling of resources within the production sector shown by R1 and within the consumption sector say R2 that takes place but we still have to deal with the bad output or waste so when you are dealing with this we start questioning what is the role of environment so when you are introducing this to students I would say please talk in terms of economic activity and then try to bring in the role of environment then only they will get interested because one need not talk about environment without economic activity or economic activity we will have to definitely go on which everyone will definitely appreciate so environment here plays a very important role firstly as supply of resources supplier of resources which already all of you know in terms of natural resources as well as various in terms of timber or oil gas water what not other materials I know etc zinc and what not copper secondly environment also so it means it provides the resources for your investment production process etc so it is a supply of resources environment also plays a very important role in terms of providing acting like a sink or receptor as the term it as for waste products there was no problem in many of the villages for a long time because most of the waste were that we generated and the practice that we had were biologically processed but today the waste are processed both biologically as well as chemically by the environment chemical process also takes place fine when it comes when you become manure for further production cultivation etc we are not seeing all the waste that go into the environment are damaging or harmful whether they can turn out to be harmful depends on the a few number of factors a few examples what I am giving volume of waste total quantity because we have to talk about carrying capacity temperature at which the waste is being dumped into rate of replacements timber water basically in terms of water as well as the why the water table declining because the extraction of rate of extraction of water is much higher than the rate at which you can get replaced same with respect to forest also leads to deforestation so cutting off tree is common but what is the rate at which you to cut the trees especially in an as to you for example so whether harmful or not this waste being dumped into the environment depends on volume temperature as well as the rate of replacement for example I am giving few few others number of others you can list this also becomes a problem because there is a limited assimilator capacity so we start studying is there a limit for accumulative capacity or in other words we start worrying about what is called threshold effect are they some threshold effect are they some thresholds beyond which we should not disturb this environment for as a sink we should move on move to elsewhere in terms of water bodies in terms of your wetlands and several of this so environment plays a very important role in terms of supply of resources as well as in terms of acting as a sink or receptor for the waste products now not always are bad but whether example or not depends on number of factors if there are threshold effect then we need to worry about that is why concentration of people in one locality one particular place where the density is very high can actually be dangerous what happens to the environment when you dump all this when you try to use it as sink so there are what is called natural processes that most of us are aware for some inputs to the environment there are no natural processes to transform them into harmless or less harmful substances then we are inputting when you are dumping something and it becomes input for the environment there are no natural processes to transform some example is what I am trying to present here cumulative and conservative pollutants like metals such as lead cadmium man made substances like PCBs and DDT how does the environment deal with this and also we talk about bio accumulation so they may not be simple process for them to make it less harmful some of them can be transferred to the sample but some can be very very harmful for the environment and therefore for us also for the living beings so that is why it is important that we deal with that another important aspect when we talk about environment is environment also acts as a supplier of amenity the third dimension E3 it provides educational and spiritual value to society a lot of people go number places for meditation or to say for example people in Europe may derive pleasure from existence of wilderness areas in the north in Canada or in tropical moist forest rainforest the Himalayas we would definitely not like that to be destroyed so environment really acts as a major supply of amenity education has sort of spiritual value to society so it is important that we how valuable it is so we start looking into theory of environmental valuation it is very difficult to input value to the resources available in Himalayas but some valuation is required in order to make sure that people start speaking without valuation we may not respect we value in mostly in terms of the economic value we may I am not saying we all will so therefore valuation becomes essential in order to drive across the point and another important dimension that comes here is having said always economics always deals with trade-offs because of scarcity but in the process we learn to identify and discuss and then resolve conflicts I am not talking about political conflicts here I am not talking about other kinds of conflicts here but conflicts and resource use using a mountain region as a source of minerals could mean its amenity value is reduced whose opinion is more important for whom should we give greater weightage for those who use it as amenity or for those who want to use it as mineral source of mineral there is no answer not easy using a river as a waste disposal unit means its amenity values reduce and that we can no longer extract so many material resources for example fish to eat from it so there again there is a conflict should we allow the water to remain clean so that fish can grow and the fish production can continue to expand or we should also now start using it as a sink for waste disposal filling a forest for its timber resources the electricity generating capacity of a dam owing to soil erosion and reduce amenity value since the forest inhabitants like animal humans are displaced or destroyed so we need to deal with that aspect as well and finally final example preserving a wetland for its aesthetic value for those use of drained land for agriculture so there is a conflict of course now you should add we do not want the preservation of wetland there is a conflict between those who want to have housing in urban areas and preservation of wetland we have included into several of the wetlands two of most cities we had answered a couple of studies research on the wetlands in India in cold wetlands in Kerala as well as in the east Calcutta wetlands etc we find their aesthetic quality there is a trade off between this how do we deal with this very difficult to find answer to all this so but it is important that we understand this that the conflicts exist and see how we can circumvent the conflict how we can avoid what is the best way to which we cannot completely eradicate the conflict conflict will remain but how to act when there is a conflict how to plan and use it optimally when there is a conflict now coming to that e1 talk about e2 coming to e1 e2 and e3 now coming to e1 I am posing this example is it necessary that energy use has to increase for the output of an economy to grow in other words thus rising output means rising energy use compared across countries now doing research on India also in this what we find here is as economic growth occurs energy and material demands per real value of output have tended to fall that is the 1 rupee worth of GDP what is the required for every rupee worth of GDP what is the energy consumed that is started declining not only here it started declining elsewhere first France Germany Japan and UK where energy consumption per dollar per euro of GDP produced in those countries started declining so as you grow you tend to become because of technological progress you tend to learn and become more productive in use of energy and therefore your output expands but energy consumption does not does not expand in the same proportion and therefore when the numerator increases denominator also increases but not in the same proportion the ratio increases means you tend to become more efficient in use of energy so rising output does not necessarily mean rising energy use at least in terms of per value per dollar per rupee or per euro of the value of output produced and we find researches have shown that most of the reductions in the energy by real GDP ratios in these countries is accounted for by changes in the composition of energy use when you say technological progress also in terms of change of composition of energy use away from coal and towards petroleum and nuclear sources what about their environmental impacts of course we will have to deal with that all of them have coal have fossil fuel petroleum also has nuclear also has health apart from environmental hazards we will have definitely look into it but what I am trying to say here is one simple point that rising output development need not necessarily mean that you have to have only expansion of energy consumption you can also become efficient in using it so that is where I try to present e 1 into e 3 I try to bring in e 4 now which largely is global life support services maintenance of atmospheric compositions suitable for life that is what is important from the global life support services point of view maintenance of temperature and climate and recycling of water and nutrients they are all essential implication for the world as a whole so therefore e 4 is important that is why countries are coming together to negotiate pure Kyoto protocol can come conference on climate change discussion on climate change cops that keeps taking place several rounds of discussion are going on basically on what kind of agreements countries can reach in order to preserve the global environment because global life support service can you know sort of become threat to entire world not just one country I will know and several others are examples here global warming is a very important aspect here having said all this I thought I will provoke all my colleagues who teach basic engineering in these colleges so I am trying to connect now to what I said till now to what is widely known to you not to me what is widely known to you for most of you would teach this once I say what concept is this you will know this is what my cup of tea yes of course is your cup of tea which is what I have tried to learn from the students here the first two laws of thermodynamics is the thought so all the engineering students of course we hope so the two important physical laws and the relevance for the way we view the interrelationships the first two laws of thermodynamics hold true in strictly closed systems that is systems with no external inputs so we have also talked about system with no external inputs because in this circular flow if you remember I have not brought in trade imports and exports in economic system we consider exports as exports are outflow to the system because they made here but consumed elsewhere but we consider imports as in in flow to the system because they made elsewhere and brought in here so sometimes the threat environment can also come from consumption of imports the toys from China for example they dumped here low cost all the mobile sets plenty of them come imports used in flows outflows but we are not talking about that so we are talking about closed system for the consumption protection within an economy within the geographical bound of an economy we are not talking about that they can be cross border emissions flow of pollution they can be cross border impacts but that all we deal with in the global life support system that is E4 so since I am talking about a closed system closed economy model as we call it since I am talking about closed economy model only two sectors I am able to try and link it to the first two laws of thermodynamics which also hold true in strictly closed systems that is system with no external inputs what happens here the first law as I understand states that matter like energy can neither be created nor destroyed which by and large follows what is called the material balance principle why am I talking about it I do not really explain because you are all teaching this because the implications what is the implication as more matter is extracted by the production process more waste is generated which must eventually be returned to the environment since a matter energy content of the extracted material cannot be destroyed so it is your amenity because it comes to sink and therefore sink cannot so it places limits on the degree to which resources can be substituted for each other in production so it has to be dealt with following the first law of thermodynamics second is your entropy law which says in a closed system the use of matter energy causes a one-way flow entropy resources from entropy resources to high entropy resources from order to disorder that is something that already very familiar to all of you and for energy the amount of work that energy can do is removed well of course the only caveat here is we can talk about recycling therefore I would not like to interpret the entropy law as a harbinger of doom or positivism positivist therefore it says recycling can become when it is useful to understand while it is useful to understand so it is important that we talk about recycling that is why we talk to talk about recycling so recycling takes place within consumption within production but that may have to increase so activity continues activity grows recycling also grows and thereby the there is a less pressure on the environment as well as on the global types of subsystem so that is exactly how one can allow economic activity to connect so here I am not talking about growth development or anything just simple economic activity in terms of consumption production which have to go on as long as we are alive as long as the human beings live on the earth or other living beings also live on the earth so this activity this basically consumption production how it sort of connects to environment and how environment also will have to definitely sort of react to what we expect to to the growing needs of consumption and production etc and how we can minimize the adverse impact on the environment is what we need to learn and adopt so this is not to say that consumption production activity have to be curved or reduced or on a slower phase etc nobody will accept it nor are we recommending that but first step therefore is to understand that economic activities when they take place autonomously on their own having such impact on the environment in terms of the changing lifestyles changing production process changing consumption process and depending on more and more on energy creation of energy and drawing more and more resources from the environment and thereby understanding the with the with the we should be able to manage this given the understand if we are able to understand the first two laws of thermodynamics because in a closed system that is exactly what happens now when you open up it will open up several other opportunities etc so that we will discuss you know in subsequent so I just want to give you a pollute to what is in store and the first topic I am talking is interaction between economic activity and the environment so if they want to ask me some questions or they are welcome to do that and the one sorry one last slide I want to show is the you know I would like you to look up this references by Shogran and white it is a first chapter of the book the economy and the environment two parts of a whole okay so thank you questions so I have a simple question for you sir please you had here you are in your slide there was while it is useful to understand recycling it is not necessary the harbinger of doom would you understand the meaning sir that is deliberately put to check whether away okay now what I am trying to say here it is not recycling is not harbinger of doom but it is the entropy law is not the harbinger of doom that is what I meant that is the meaning of that okay sir thank you sir okay welcome is there one colleague hello good afternoon sir good afternoon madam now there is due to various activities the coral reefs in sea destroyer I read some from private sector sticks and actions to regenerate it is central government takes steps for regenerating it and I have one more question is the price of goods materials like petroleum diesel unfortunately no because the prices are by and large fixed by the demand supply situation but it is now when you when you hear from me later on what is called product charges there they try to bring in the environment so for instance the taxes and levies that we pay for some of the commodities and services that we derive from environment are costs of extraction of these resources otherwise especially in terms of environment otherwise they are by and large reflecting only the production cost okay now answering your first question central government is now through the coastal zone regulation is also trying to see what they can do for coral reefs okay so we will talk about it as we talk about you know climate change and coastal resources etc. I am Mr. Pradeep Kumar from CV oh please go ahead hello my question is that yes sir listen my question is that now we are adopting globalization and liberation era can you define corporate social responsibility for protection of our environment from from this point of view that's a big challenge corporate social responsibility yeah yeah corporate social responsibility we amended last year the act how it can be helpful for protection of our environment in one one sentence we are if we allow corporates to adopt sustainable business practices and put them under corporate social responsibility they can participate in this that's the only way that is allowing them to have sustainable business practices as a part of CSR my second question is that we are sometimes saying that higher inflation is dangerous for the growth of an economy can you justify that what way inflation and growth of an economy are correlated this question will require 45 minutes answer for me but I will just quickly tell you that higher in see there are acceptable rates of inflation across all countries so we have what is called inflation target so anything above the target can really harm the economy because that will lead to too much of money chasing too few goods okay so therefore it will only become more and more monetized and less of commodity being supplied to the system okay in fact it is highly helpful in all the power plants including hydroelectricity it's a tool we have to use it as a tool to understand the costs and benefits identify the costs and benefits and compare if the benefits outplay the cost then only we should go in for the program not otherwise so it is highly useful in most environmental especially in most of the energy projects and now we go mandatory also okay sir thank you welcome question is what is environmental audit and how it is done okay environmental audit is just like you know auditors looking at basically our income and expenditure statements or the income expenditure statements of companies etc the big CAS channel record and look at the auditing now environmental audit is also being done it's a technique that have really come popular in the last two decades now that has also become mandatory for several of the projects to be used especially when you're going to use the resources of the environment for development or other related purposes so we I will give you a you know sort of a picture of what exactly is done in environmental audit as we discuss okay I just wanted to tell you that there isn't something called environmental audit that exists today silicon institute that is I am the question is on from environmental impact analysis yes we know for construction of any project it has both positive and negative impacts correct for construction of any project we are generally calculate the cost benefit ratio but while calculating the cost benefit ratio for EIA how we are calculating the cost benefit ratio for a project and how we can assess it another question that is relating to that one that is the what are the components actually we are considered for calculating this cost benefit ratio again EIA my answer is similar to what I said because EIA is a tool cost benefit is also a tool so what are the various dimensions how we are going to compare is what we are going to be talking here so they are important tools where we will identify the cost we identify the benefits is like a balance sheet we prepare of the benefits and cost and see if the benefits outweigh the cost then we go ahead otherwise we don't go ahead with that particular project but here when we do this there are number of concepts that we have to learn because we have to impute some values we have to introduce what is called shadow prices for the environmental goods so all that which is also part of the condition valuation we will learn okay so here wait we will definitely we will have to we will be talking about cost benefits for most of the project how exactly it is being done and how we make the comparisons and finally take a call is there any criteria or it is some means it should be more than it is some how it is assessed that it is okay it is you know it is assessed mostly in terms of listing and valuation of all the benefits and again estimation of cost that are involved in this particular project for example if you are dealing with the particular you know thermal power plant we identify benefits direct benefits indirect benefits okay to private benefits as well as societal benefits again cost to the plant which you can easily measure as well as cost to society including environmental cost that is exactly how we sort of assess and compare analyzed by argument method or it is finalized by some logistic is there no basically it is like a matrix you prepare a matrix of all this in terms of the benefits and cost listed and then say compare this two so in fact earlier before this way most mostly people have been using spot analysis but now they started getting into because you can in some sense you try to bring in the material balance principle to estimate this in terms of value we do the comparison if the comparisons are mostly done through the valuation okay thank you sir welcome IPS academy what is your relationship between environmental and natural resources economics okay see well there are lot of similarity between them but environmental resources by and large deal with I guess it also includes air and water pollution whereas when it comes to natural resources we expect them to be produced given by the supported by the nature so we talk in terms of the forest water bodies and the like so that but of course there are the large overlap between these two there are various disciplines sub-disciplines that have come within environmental economics so therefore some of them would like to call it economics of biodiversity some of them would like to call it natural resource economics some of them will like to talk about environmental economics and the like so there are various nomenclatures yeah thank you sir okay okay so have a wonderful evening and thank you for the opportunity to interact with you