 Very good morning to all of you. I think you have been having a wonderful time here, that is what my colleagues said, unfortunately I have been travelling, therefore I could not time earlier to interact with you, chat with you over you know coffee, tea or you know lunch etc. But I said I will spend definitely the forenoon with all of you today. Now when we thought of this program, all colleagues from various parts of the country, we thought we will just share with you, you know what exactly we have been sharing with our students because I wanted to really begin with the counterpoint on the skit that they presented but I will come to that in a while because these are the things exactly I really like the skit, may not agree with them. But in fact how we engage ourselves with the students, that is the most important thing because you must remember the course most students look at it, even we look at it as something imposed on us by the Supreme Court. So when a course of this kind variety is not really coming from us and is imposed by an outside agency, we definitely take it with a pinch of salt, we said why should we teach and the students will also wonder why should we do, that is because Supreme Court want us to learn etc. But whatever the reason, but definitely let us look at the good side, good part of it, it has been extremely useful in just sensitizing them. We have achieved our purpose if you have sensitized them about some of these concerns, we cannot sensitize them about all the concerns. So some of it we will definitely try to sensitize. My part of the course is going to be looking at from an economist perspective, I am trained as an economist having studied from University of Madras and Delhi School of Economics and then spent a year at the United Nations University working on industry environment linkage, largely for India as a post-doctoral fellow about 15 years ago, then I also spent a few weeks in Cambridge presenting some of my works. So largely I would say a work in the area of technology, industry and environment, policy, overlap, I know sort of thing. The number of development issues that I cover apart from hardcore industry economics also. Now some of the recent works have been the area of economics of energy used in Indian industries. Now based on this, I have also represented Government of India, I mean nominated by Government of India to represent India in meetings of UNFCCC, IPCCC and as well as project meeting organized by European Union Director General of Environment. That was of course in 2005 and when recently in 2012 I was again asked to speak and just like the team B we talked about energy intensity, energy consumption per capita is increasing etc. They were all talking about how to reduce energy consumption. I presented a case for giving access to energy to the poorest of power in India. I talked about the concept of energy poverty. So they were taken aback, they said what is all of us are assembling here to talk about reduction energy consumption and you are talking about access to, I said there are so many villages in India which do not have access to energy. So I, you know couple of my students actually gave me this data because they come from villages which are more places, I visited them just to see December 2013 and these villages one was, I mean both of them got access to electricity supply only the previous year and there are all these students in IIT Bombay in the PhD program. I said I salute you guys here if you are coming from such background able to reach IIT Bombay for a PhD program, how did you study? Most of the time spent the study education was in the daytime. Now we, can I talk to them about you know per capita energy consumption should be lower for all Indians? I cannot generalize, isn't it? IITians you know students may, BTEC students will say that is good thing because we are consuming too much of energy, I told them to them I say reduce don't not waste energy that is generated, we spend so much of effort in generating energy don't waste it but definitely we cannot say it as a country. So again another point I wanted to say here is in 2005 I still remember that European general meeting there was a two-day workshop and government wanted some of us to attend, accepting me all others were bureaucrats. So for some reason they wanted me to attend, so I also went. This is all on CDM, clean development mechanisms. Two days fully we were told the merits of CDM and how exactly it can be done all that is fine. Then they were represented from so many countries. I mean mostly the dominant group was from Briggs, Brazil, Russia, India, South Africa, etc. Okay China. So they know each team are about 56 people apart from other countries and then the Director General of EU environment said now having attended all this would you now go back and tell your government to compel your industries to accept clean development mechanisms. Nobody wanted to speak this is a question posed to the audience. All of them chose to keep quiet. He says I want a response from you guys. You guys have attended the workshop for two days. You've learned what is CDM, how carbon trading can take place and why it is important for industries to adopt CDMs, etc. Therefore I'm posing this question to you will you now go back and tell your government to compel your industries adopt CDMs. Every word here was important, adopt, compel, etc. So I chose, so nobody, so the Indian representatives they said no, they said I definitely want a response from India and China, they said. So the BRICRAT said sir we, none of us can speak because if we speak either far or against it we don't know what's going to be the political you know ramification or implication of this. Therefore we don't want to risk our job. So and we cannot really speak for the government. But you are an academia, you have complete freedom to speak and something happens, we'll take care, don't worry. So and they're all top level BRICRATs. So I said in any case I always have an independent mind. So I am willing to, I mean, although I'm nominated by government opinion, I am willing to speak my mind. So I told them, my first response in China said no, first India. So I said yes, we will. Oh, you must see all the developing countries were looking at me, Khaase hai aaya, kyaise bolda hai. So I said yes we will. But you should have also asked me when. So well then he said now you can explain when. I said thank you for letting me say when. I said you have to wait till we reach your per capita income levels. The entire, the thing was all the developing countries jumped up in the chair. Then the general said thank you so much and then he left the room. He said I can't, I said you have to wait till we reach your per capita income. I actually mean it. Although I teach this, I sensitize people, it's important that we take it as part of our, this thing, that's we do it for our own sake. Not because someone else is forcing us to say or do. That if you, you know, sort of intel kit, you'll get it. And that can come only if they understand because again, it should not be looked like a course. All of us are teaching so many courses. That it has to come from within. No, where does it come? When do we start? Can we start in IIT? Can we start from engineering colleges? Where do we start? Here I was telling my earlier that my one year stint in Japan really helped me to understand where to begin. I'll tell you my personal experience here. My son was only five and a half years old at the time. So he was sent to a kindergarten. Till the age of seven, nobody is taught ABCD or any alphabet in Japan. Till the age of seven. Only from seven they start teaching. Until then you send them to play school. School nursery is kindergarten, they call it from the age of three. So they go and, you know, they bathe all the kittens and others, you know, all the pets. You know, they are taught to wall climb, I mean rock climbing and several others. They really enjoy it. Now, the age of between three and seven, they all go into kindergarten. And of course they pick up the language only by speaking to each other. So it is Japanese kindergarten. So that's compulsory for you to send. You can't keep the child at home. I said, you also go. He picked up some Japanese also. Now, after having spent here, he came back and I put him in a school in Chennai. A few months down the lane, for some reason my family had to be in Chennai for a few months. I went for a holiday to meet my family, et cetera. My father-in-law said, the principal of the school wants to meet you. I said, why, what happened? I asked my wife, is there any complaint about him? They say some peculiar thing they are saying that they want to talk to you only. So I went. So the principal called me and then I went and met her. She said, I think you must take your child to a psychiatrist. I said, what? What happened? What's wrong with him? What makes you think that he requires psychotic attention? No, he has some basic problem. He's well-behaved in the school, et cetera, but no, on one particular thing, he doesn't listen to us. And I think the mental blockade is a psychotic problem. What is that effect? She said, precisely to tell you that the mother sometimes gets very emotional. So I thought I should wait till you come. It's not such a serious thing, but still you should do. Consult. I said, please let me know the problem so that I decide whether to take him. She said, you see, we have a dustbin in the school. I said, fine. Why are you showing me dustbin? So she's saying that no, the teacher crushes a paper and tells him you put it in the dustbin. He refuses. He does everything else the teacher says, but he just refuses to do it and he's saying that, you know, you require three dustbins. I got it. Now, she said, you know, many schools don't even have single dustbin here. You know, we have a clean dustbin here. He said, you know how it is clean? I said, yeah, I can see it's clean. So we have a clean dustbin. We have right here. But he refuses. So what etiquettes have you taught? Everything else is very well behaved boy. No problem. Absolutely very friendly, very, you know, very good in studies. But this one is we get our guess and he's not, he is demanding. No, I can't throw it there. He refuses and says, you need three dustbins in school. Poor guy is unable to explain to them, why do you need three dustbins? But he's trained that way from... I said, what did you ask him to throw? So they showed me a crushed paper. I said, can I open and see this dustbin? They said, yeah, please do. So they opened and showed me it was wet waste. I said, obviously you will not throw it there. So you're also saying this? I said, definitely. Then they asked me, what is the three dustbin all about? Why do you need three when even one doesn't get filled? Of course, this is 2001. So I told them why they required three dustbins, how they're taught from kindergarten to segregate the waste, recyclable, biodegradable, and ones which needs to hazardous and others, you know, cans, bottles and tins and others. I said, how exactly they're trained from childhood? It is nursery training. Obviously he hasn't learned to explain it to you, but this is exactly how they're trained. So the training, because when I came after I came and joined here, we started installing three dustbins and IIT Bombay also. But I wouldn't say that we achieved what we wanted to in terms of segregating the waste. We are trying to do our best. But the most important thing is where do we start? Obviously if we start at our age, or this thing will take a lot of time for us to get used to it. But at that tender age, they pick up very fast. So these are all very important things that we, part of the personal experience that I thought I'd show, and you say this, the students and others will also get motivated. So something of that variety is where we start picking it up. Now let's come to the serious business of, I'm not going to go through all this. I will just share exactly what we are saying in terms of the interlinkage. Now, definitely when you try to say you start by saying that why do we need to do it? So neither the other. I don't think they will dispute on the first point. But why do we need it? It means we in developing countries, especially India. Because it's possible for us to achieve an ideal mix of resources. Ideal mix of use of resources, preservation of the environment, and achieve economic development. Nobody, if the moment you start talking about trade-off, there exists a trade-off. People will say, should I compromise? There was some exercise carried out for various states in India. Presentation was also made. They said the best state in India in terms of valuation of natural resources, best methodology applied. Estimated, they said. And then divided by number of people living in that area of population per capita. Value of natural resources divided by per capita. By population gives you per capita value of natural resources. You know which state topped the list among all the countries? This is done by the government of India recently. And some researchers contribute to that. Arunachal Pradesh. Followed by some of the other Northeastern states. Excellent. But can we also look at the human development index? Fine, good. Can we also look at the per capita income in these places? And other indicators of development all score very poor. So are you going to talk about valuation of the natural resources, preserve them, etc. And then keep, feel good factor only. But without having money to spend on your basic requirements. So that's the trade-off. That's the sort of trade-off. When you talk about trade-off, this is exactly how I expect you to share with them. So you can't say, I will postpone, sacrifice, develop and all this because I want to be well known in the world. Like European Union appreciates, oh India has adopted CDM. In spite of manufacturing sectors contributions only, 20% of GDP and growing only at 3 to 4% in snail speed. And now we are talking about making India. So how can we do all that? So therefore we need to have development. So that is something. But what is the best possible way in which we can achieve development? Since we are late starters, we can learn from the experience of other countries. And when you have leisure time, I would say, that please read a very interesting book with whom I worked in Cambridge. Who is a co-author with Joseph Stiglitz, Novel Laureate in Economics. His name is Hajun Chang. Hajun Chang is a Korean. The title of the book is Kicking Away the Ladder. He is talking about kicking away the ladder. He is saying present day developed countries have all used some ladder for growth in the economy. But having grown, they want to kick away the ladder so that others are not allowed to use, others don't use the same ladder to climb up. They want to deprive you of the opportunity to use the same ladder. But can't we make our own ladder? That is the argument I made against him. He was criticizing developed countries for that. I said, maybe it's a blessing in disguise, that we will all be asked to build, construct our own ladder. And the ladder here comes from our environmental sensitiveness. That can definitely be used here. No, but when you start looking at it, the first planning commission, it has taken 11 into 5, 55 years. It's only the 11th 5-year plan that we start talking something about interrelationship between environment and development. 12th 5-year plan, because some of us insisted, I was part of the team which prepared some parts of the 12th 5-year plan document. I don't know what's going to happen now, now that planning commission is being closed down and Nithya Yoga has come. But several of us have put in effort to prepare that where we said, please highlight interrelationship. It's important. And today people say, no, no, this is the age of globalization, WTO, fine. But they're also talking about environmental concerns. And one is also talking about management and natural resources. Yes. Eleanor Ostrom got Nobel Prize in Economics on her model of management of natural resource. Very interesting model she got it in 2009. So the step here is to talk about the interrelationship between them. So therefore, finally, the objective here is what do we intend to do? Just to provide an overview, because we can't cover everything possible because it's such a huge course and various components here. Just give an overview of the issues involved in planning, policy formulation and implementation for effective conservation and management of the environment. That's all required. So in the process, you have to bring in development because the planning is not made for environment alone. The planning is made for fostering economic development. So here you may have to give a gift of both theoretical as well as empirical, our practical aspects. The devices in formulating strategy as well as for achieving, I mean both the macro as well as the macro level that you need to deal with. Now, but this is highly, what I'm going to talk to you is also highly interdisciplinary. I am taking a risk, stepping my neck out and even talking about the first two laws of thermodynamics and bringing them to explain economic development when you talk about the interplay between economy and the environment. That's where the challenge, because all of you would have studied and maybe teaching laws of thermodynamics. I don't know, I have not been taught. I'm reading, I'm an economist by training. I'm reading that to learn to see how it is related. Because when you talk about the movement, I say environmental economics, it is not pure economic theory. Well, economics itself, as my teacher said long back, when he started learning, back in late 1970s, first, one thing that I always remember, he said economics is nothing but common sense in a complicated form. So then somebody asked him, does it mean everything is common sense in economics? That does not mean that every common sense is economics, but that definitely implies that all theory and concepts and methodologies here, when you deconstruct, finally you say, oh, this is something I already know. What is the news that you're saying? It is common sense. If I talk about fiscal policy, finally I deconstruct, you say, I already know about it. So it's common sense. So here, in such a subject matter, when you try to talk about environment also, obviously it has to be common sense. So I try to link it to that and see how exactly, and therefore interdisciplinarity of this is the most important. The whole course, if you look at the content, even if you see given content, it is highly interdisciplinary. So the challenge lies in any one of us teaching the entire course, or a couple of us teaching the entire course. So that's why we also thought we'll split and then bring in the dosage because otherwise it becomes sort of very often monotonous. So we're dealing with concepts and issues related to first. This is the fourth thing that I would like to share with you. First is the interlink between economy and the environment. Economic activities and environment because the team also talked about anthropogenic change. Climate change is anthropogenic. There's a lot of debate about whether climate change is exogenous or anthropogenic. And we cannot, although the syllabus doesn't mention the phrase, I was talking to Dr. Maya, doesn't mention climate change because when Supreme Court drafted about it, perhaps this was not so popular. But when we talk about environment, we have to bring in climate change at some part. So basically we talk about economy and environmental linkage. And it was a very simple, one of the basic models of economy to introduce this. Next, in fact Dr. Parsa, the SLA said some of you requested for discussion on the estimation of green GDP as again the conventional GDP measure. So I thought okay, I'll put that also together. Thirdly, what are the economic instruments that can be used? Tax and subsidy and several other policy instruments available with different governments which could be used to regulate pollution behavior or environmental behavior of people. And here we are going to look at what other countries are doing. In fact, let me tell you, this is what fascinates the students the most. You give them examples of what, you know, France is doing or, you know, Brazil is doing or Uruguay is doing. They really get excited. And then say why we cannot do it, are we doing it or why we are unable to do it? And the success are not otherwise of this. And finally, can we really have a design of a environmental policy or pollution control of actually an industrial policy, you call it, which can also ensure the environmental aspects are taken into account. It's possible. In fact, even the business schools have now accepted. Management schools have also accepted. Porter was the person who was well known for diamond, et cetera. Now he is saying that yes, there are, you can bring about innovation offsets for this pollution control. So how exactly we can do it, et cetera. So if there is time at some point, you can also look at economic impacts of climate change, which is now really growing. And also environmental economics gives you a wide variety of tools and methodologies. Some of them are very interesting. For your own sake, you can easily learn very good textbooks are available and you don't require very sophisticated software. You don't even require MATLAB. You can do several of this just by either in Excel or in SPSS at best. That is basically the concepts and measurements of the transaction costs involved and the transaction cost was first mentioned by Ronald Koz in 1933. So it's not a new concept. Cost-benefit analysis is often done for various projects. Contingent valuation when, especially when it comes to natural resources, use of public places and others, environmental impact assessment, social impact assessment, et cetera, are all now becoming mandatory because for several investment projects or industrial parks, et cetera, EIA, SAI have become mandatory. And I met the team which did the environmental impact assessment of Mumbai Pune Expressway before it was made. It's such an important landmark here. Now, I have an MPL student whom I told them to look at the social impact assessment. So in that context, I met this team. I said both of us interacted. And then with the social impact, when we were ready with the dissertation, the team, out of their interest, the team is dismantled. They were there much before the Mumbai Pune Expressway was made. They said, can you please come and present to us? What exactly your results show now? The social impact assessment exposed expressway was being made a few years after the expressway was made. So we presented to them how exactly we did. First thing they said, we could not even think of a methodology to do an assessment of social impact. I said, I told them that's also required. Now, now it's becoming mandatory. You're talking about society. So Mr. Farnavi has said that RA plan, the redevelopment of RA to have third metro is put on hold right now. Because it is housing, so many. Goshalas as well as several forest cover. RA colony is next door to RA to Mumbai, where they have planned initially. Now they said no, we'll go slow because a lot of civil society people protested. They said no, you should not destroy. So that's where, if there is time, we'll talk about some of the methodologies. So the broad context, if suppose you want to, you're very familiar with what is economics, et cetera, and then sometime you can ask me, are you talking about microeconomics or macroeconomics? Or are you both? They're two broad contests. But let me tell you, micro usually deals with the behavior of individual firm under a particular market. Whereas macro talks about economy as a whole. There is policy for both. Micro policy for the micro level is mostly confined to correct the market failure. We'll talk about what is market failure, when does the market fail. And macro is largely in terms of what you hear from Raghuram Rajan monetary policy, orangeately on fiscal policy, and some of the trade policies, international trade policies. So how do we, because trade and environment is also very close to deliver. How exactly we deal with all this is what we subject matter. So the microeconomics issues that you can share include very interesting concept. First you start with theory of public goods. They must know what is a private good, what is a public good. This particular instrument is in my hands. You can't change the slides because I have control over this. Private good. But just because she is watching this, I cannot deprive others of watching this. So this is at least in this particular room it will become public good. Projection. Because she cannot block people from behind to walk. There are two important characteristics of any commodity or service which make it public. In economic theory. One is non-excludability in consumption. And secondly, non-rivaled innocent consumption. And the best example we give is street lamp. Street lamp, benefits of street lamp can be used by all those who pass by the street. So just because five people are using doesn't mean that five others cannot use it. Street lamp is kept in such a place where everybody can benefit out of this. But what is the problem with such commodity? Who will provide? Will the market provide? Because to provide a street lamp, suppose you take a survey and ask people in that area. We need light. It's getting dark here. So we need light every evening. So whoever said yes, we write saying that should contribute to putting up of the street lamp. Assuming government is not going to put it up there. So they circulate. They ask people, would you like to say yes or no? So if you say yes, then you have to say 50 rupees is something you have to contribute. So that every contribution put together, we can. So first the essence of how much it will cost to put up a lamp in the street. So when they do, some people will say I'm not for it. So we don't, why? If you say yes, you have to pay money. So I say I don't want to, in any case these guys will put up street lamp. So we will benefit from that. So this is what we in economics we call it the problem of free riders. And when there are free riders, like in the case of environment also. Market cannot fix what is the right price. Because maybe 20%, 10% of them will free ride on the others. Means the cost of the street lamp has to be distributed among 80% and not among all the 100%. You can't come, it's a democratic system. You can't compel people to pay etc. Now having only 80 people contributed, can you appoint a security there and check whether any member of the family from this 20 is benefiting from the street lamp? The cost of monitoring that will be extremely high. And it's impossible to monitor also. Why? Because what is the reason they are giving, they said we don't need the benefit of street lamp because we go out after sunrise and return home before sunset. I don't need street lamp, fair enough. But some of the others who contributed are standing and this member of the family is not paid. He's walking. Can they stop him or her and then say close your eyes and walk? Because you're not paid for it. It's not possible. That's the problem of free rider. So when it comes to public good, there is a possibility of free ridership and if there is free ridership, the market will collapse. Because others will say who is going to build the car? That's what the rest should be ready to. So then they said since such a public good, government only should provide. But government says I have enough problem. I don't have money. I can't provide street lamp for the entire country. I have several other commodities and services to provide. So they get into, seriously, public good. For example, I'm just giving an example. Secondly, in the case of externalities also. Externality can be positive as well as negative. We always look at chemical plant, emitting pollution, air or water. They talk about nuclear power plant. And therefore, people developing respiratory problem or water getting contaminated. Externality. Why do we call it externality? Because it's difficult for the system, a market to fix these charges on this particular firm which is indulging in this emission. And the company also doesn't know how to take care of the emission. So we went to this place called KED. KED is on the way to Ratnagiri from Mumbai. We had interaction with some of the people there. So chemical engineering, there is a MIDC. Several chemical plants are there. The problem with them, they asked IIT Bombay for support. To give them technology support to have an effluent treatment plant. So we looked at all that. And it is possible to have an effluent treatment plant there. And we have expertise here. So we sort of said we'll work closely and then put it up. Now the question is, should we have common effluent treatment plant? So that everybody can use? So I argued for it. Common effluent, so that all the industries can benefit and etc. Some of the big industries there, they said no, no, we'll talk about that later. Why don't we? I said no. If IIT Bombay is coming in a big way and supporting you here, it should be common effluent treatment plant or everybody. And you guys manage, we don't come to management. So everybody benefits from that. Now the question is who is going to, because is the government only going to set up common effluent treatment plant in all these places? How are we going to deal with it? That externality becomes a problem. Sometimes positive external, that leads to market failure. Sometimes positive external also lead to market failure. Therefore, we need to look at that. Cost-benefit analysis is a tool to methodology, which is now done in most investment projects. And of course environmental policy, environmental audit has become now fashionable. There are people who are trained as environmental auditors. So that's more of a microeconomic response. Now from a macroeconomic issues that one can deal with in the course, etc. Start with economic growth and environmental linkage. Because every country has to achieve certain level of growth. And especially in modern times, with opening up of the economy, we will try to organization. And everyone trying to link their economy with the economies of the rest of the world, globalization. And what happens in the environment? And several others. Energy economy linkage, natural resources accounting and others. So these are some of the issues. You can sensitize them. So that they take interest in the course. The most important is that instead of simply, you know, deriving some models and explaining some theory, which could be sort of boring. Because the idea here is not to just make them, you know, by heart or remember, and then vomit in the exam, but also make them environmentally sensitive. I was telling you at the beginning, I was so satisfied. I came back home and told my wife after that meeting that principal of the school, that I'm so happy that we send our son to this, you know, Japanese kindergarten. They look at the impact it has made on him. Now the school, the aftermath of that, they requested him to demonstrate how to segregate the waste to other children. He was so happy, you know, jumping in joy doing that. And then I don't know whether they still practice it, but then they immediately brought, you know, two more dustbins and segregated. They said, whatever the municipal corporation does, doesn't matter. But at least in our school, we'll do this and give it separately to them. They will mix it and do whatever. So they said that we have no control over. But at least we will segregate and we will do this, et cetera, something they said. It's not really in cities, in suburbs of Chennai. I was very happy. I was very impressed that they did that. And they, you know, we were happy that no child learned this because this is a positive externality of sending him to a Japanese kindergarten at the tender age. If I had gone, I wouldn't have perhaps picked up so well the way that he has picked up without any inhibition. So that is the externality that we have. Yes, please. Yeah. Before going to the next slide, I want to get clarification. When you're talking about the concept of green GDP. Yes. Okay. Can you please explain by giving one single example by interlinking micro and macroeconomic with green GDP? Exactly. And why it is able to possible in India, why it is not possible with China? Because there always it is that concept is failing. So if you, if you bring that context, it will be more. In fact, what I'm still now covered is just to give you a prelude of what I'm going to talk to you. I've not spoken on any of this. So when it comes to green GDP, I'll tell you the methodology of estimating green GDP. And then it is done in China as well as in India. Estimation is done in both. Okay. Now the first apprehension, let me give you the answer right away. The first apprehension for when it comes to green GDP, why several countries have not immediately, immediately accepted. They thought that GDP may even become negative because you are going to calculate IEC, imputed environmental cost. No, no, that concept, green GDP concept itself. Yeah. They are when they are going to impose. Okay. Sometimes they'll achieve, but many times, many places in China. Actually, this is, see, let me tell you, this is a concept. It's just a measurement. There's nothing imposed on you. It is just a valuation of your GDP. Should it be, what is GDP? Value of goods and services produced in an economy during a reference period. Value of goods and services produced in an economy during a reference period, usually one year. Green GDP is adjusting that for environmental cost. That is, you know what exactly all countries have agreed to now do. Okay. You are imposing this on you. You can bring in your own methodology. So, I mean, to suit the local requirements. That is, there is permission. So, we'll come to that. How exactly it is estimated, etc. Okay. In an economical point of view, what are the cost-benefit analysis here in CETP? CETP. CETP. Commerical. Commerical. Yeah. Very good. You have to basically, cost and benefits I'm saying are there for every project. It is important that you estimate cost and benefits for CEPT also and then compare. CEPT for K will be different from CEPT for Dindical and Tamil Nadu. So, therefore you have to definitely look at it. Okay. Now, first is how much quantity can they sort of handle it here? So, that is the first technological exercise that we have to do. What is the size of the, you know, a flow that is permitted? If all of them put, because their timing is given. So, we actually gave a project to the engineering college students there to prepare a linear programming problem to estimate the cost and benefits. So, we say how many, so many industries are there, how much each one should be allowed to discharge at what point in time. So, taking all these inputs, one has to look at the cost and benefits. So, see cost and benefits have to be compared for all the projects. Of the cup, I cannot say benefits here will be more, benefits there will be cost, etc. If you really ask me, you know, subjective value judgment question, then I will say, if assuming all the plants, chemical plants in that area, individual effluent treatment plant and common effluent treatment plant, I compare. So, here I bring in the concept of economies of scale. There are economies of scale in common effluent treatment plant. Thank you, sir. That is where the difference. Good question. First presenting to you the interaction. So, I am just going to throw open a small diagram to you. Just look at this. For, I do not know how many of you have ever had, as so many engineering colleges have an introductory course in economics. In your colleges, do your students do an introductory course in economics? Yes. How many know? No. Please raise your hand, there are no. No problem. They are not taught. It is not compensated just because my subject need not be taught in your class. Fine. It is not being taught at all. Okay. But if you ask them, whether they are from Maharashtra state more or CBSE, etc., especially I know, I am very familiar with the CBSE syllabus. When they are 9 standard, when they are 9 standard, they are taught about basics of macroeconomy. CBSE has included that a part of their social studies paper, basics of macroeconomy. So, anyhow, even if they do not know, let me tell you how to put this. This sort of diagram really helps you to communicate to them why it is important to talk about economy and environment or interlinkage between them. See, there are two activities that takes place in all economies, whether the U.S., Europe, Singapore, India or China, Brazil, wherever. Two activities are one consumption. We consume clothes, textiles, food and others. We consume air also, air, water and all that. Other thing is, we can consume all this only if it is produced. So, two activities will take place in all over the world, wherever there are civilizations. Consumption and production. Now, how do these two activities carry on in an economy? So, assuming, first of all, we are not talking about open economy, trade with others and so on. We are talking about within an economy. I am not talking about Gandhian system, but within an economy, closed economy system. So, where we have two activities, consumption and production. The consumers, sometimes I am only talking about consumption and production. So, the people who produce also consume and the people who consume obviously are involved in production. I am not talking about consumers and producers. We are talking about consumption and production. Two activities, two economic activities only. So, all those who consume now, let us talk about individual households have, in order to buy what they want to consume, need money, they have resources. That means they have to work. So, in economics, we say people are endowed with four kinds of skills or four kinds of what is called factors of production. Either they own land or access to land or they work physical labor or intellectual labor, either way, skilled labor or unskilled labor. Or they have money, either natural resources or other capital they have, capital. Fourthly, they are entrepreneurial. We do not have money, but they are so dynamic. They have all the, you know, entrepreneurial skills, managerial skills. So, if you have four sets of, this is compartmentalized, land labor, capital organization. You supply this for the production process and earn in return, land gets rent, labor gets wages and salaries, capital gets interest and entrepreneurs get profit. So, they have factors of production which they supply and then earn this money. But this money that they earn, whether in the form of cash or kind of whatever you call it as, is spent assuming it is cash. So, it is spent on the goods and services produced by this sector, maybe by themselves. So, if you look at consumption production activity, then we say that the factors of production are supplied by the consumers to the producers who are also part of them only and then for the production process and that is being supplied back to them. So, the process is complete. So, entire money is earned by them, factors of production supplied, all that is earned, they spend it on goods and services, in return they get goods and services. So, that is complete. This is what we call it simple circular flow model, circular flow of an economy. No problem if this takes place smoothly and it does take place everywhere. Problem comes only when it comes to the composition of consumption as well as production which gets complicated. Now, what happens here is, let us start with production. For the production activity traditionally people have been consuming only raw materials and resources, local resources, natural resources or human being made resources. I did not want to say man-made resources, human being made resources, all that is being used. But very importantly as the production expands, economy also grows. That is what GDP growth all about, increase in the value of goods and services produced in the economy. So, production has to continuously expand. When you expand, what happens here is you are dependent on energy and materials also increased. You want to produce more, because you want to be more productive, more efficient. So, you tend to mechanize the process. You need more energy. You need more materials to produce more commodity, more quantity. So, more energy, more material which you are drawing from this circle called energy and materials, E1. Fine, it is available in your system. So, you are drawing from that. Right now we are not bothered about who is owning them and all that. So, it is available. So, they are using. Okay, suppose you would say it is available. So, they are all drawing upon it to for the production process. Now, the same energy and materials are also now going towards through the production for to consumers, but also the energy part is going towards to consumers. I have not drawn the link here for some reason. Energy is also used by all of us for consumption. That is the essential requirement. Now, we cannot run because we cannot cook without gas stove, gas connection. You also require electricity to have induction cooker and others, microwave and so many others. So, you that also require a lot of energy. So, as production expands, as consumption expands, the demand for energy and material continue to expand. And as this expands, obviously the supply of the energy and material also will have to increase. Fine. So, let us keep that aside for a minute now. Now, or maybe I can say one more thing here. There is also something called the waste sink. An example of waste sink that we have in most urban places today is you are or wetlands. One of the facilities of wetland, one of the use of wetland is to provide waste sink. We are talking about live biodegradable waste and others. Of course, the material waste and several others will also continue to increase. So, waste sink. So, as and the energy production, energy generation will also sort of give a lot of, really a lot of waste. They talked about nuclear waste. We talked about fly ash of thermal power plant and several others. So, this waste sink. So, as this fails, the waste sink also sort of lot of pressure on the waste sink. And as production expands, consumption also expands that also releases a lot of waste. Industries also when they produce more, the waste releases more and more. That is also there. This also released from waste. Consumption production. As the waste expands with increase in production, increase in consumption. This is bound to happen. What is new? Nothing new. As I said common sense, a complicated form. Problem comes only when it comes to E3. Nature has also given us several amenities. Use a lot of resources and other spaces for certain amenities. As consumption expands, production expands or production expands, consumption expands, etc. Energy demand and supply also increase. Therefore, the lot of pressure on the waste, etc. That can be tackled only by curtailing on E3. So, as this activity expands, E3 sort of gets shrunk. So, we have much less space now than we used to have earlier for amenities and others. So, when it comes to that, then they say, oh, there is a trade-off. There are certain tolerable limits. We cannot cross this, we cannot cross that, all that comes in. This is not to say that these activities have to be stopped. If these two activities have to be stopped, then we cease to exist. As long as human beings exist and other living beings exist, production and consumption will continue to take place. So, this interaction is most important to understand. Where is the problem? Consumption have to continue. Production have to continue. And then this interaction will continue there. And thereby, energy and material demand will also increase. Waste will also, pressure on waste will also increase. Then there will be pressure on the amenity. Can we increase the size of this waste sink and amenity infinitely? If you can, no problem at all. We don't need to be interacting today. Because of the restriction on this E2 and E3 that we are here, what we can do with respect to E3 is, developed world is talking about reduction in per capita energy consumption. But where I have energy poverty, how can we talk about reduction in this? I can only ration out the energy for various purposes, various people, etc. Therefore, that's also essential for me too, for developing countries. So, when you talk about economy, so of course we have to make a decision within a developed economy, developing economy. But just in saying that in terms of simple waste sink here. Now, what happens here is, as the pressure on amenity mounts, it starts adversely affecting our consumption. That is the reason why your organically processed food is so expensive when compared to inorganically processed food. Because of the pressure on amenity. And now people say, if you really want that comfort, you have to pay a price. If you want to go to a nature walk, you pay a price. It's no longer free. Because it becomes difficult for us to manage this E3. Now, why is it important to manage? Why can't we just allow with the chaos too? Recycle will take place, etc. Because all that is because of this link outside to E4. That is not threatening us. We don't need to worry at all. Global life support services, ozone, GHG emission, ozone layer, climate change therefore, and then impact on both consumption and production. That's exactly the interlink between any economic activity and this. So, I put this information in slides in the form of points. Which you can just take a look at it. All-encompassing boundary label as E4. Now, this is energy generation leads to a lot of generation of waste, oil, mineral resources I know from the environment. We use them and then these are transformed to output useful as well as waste. And there is some recycling of resources. That's something that we need to do. Because some recycling, whatever we try to do, that R1 and R2 are within the consumption, within the production. That also really takes place. Here, we must understand therefore, every economics, economics should understand that environment is a supply of resources. Without that, economic activity cannot take place. But it also has second purpose. It acts as a sink or receptor for waste products. The problem here is, it's important that we understand that waste can be biologically and or chemically processed by the environment. And I am not saying all waste are harmful. But whether they are harmful depends on the volume of waste, temperature, rate of replacement. For example, in history. And also, there are limited assimilative capacity perhaps and there are also threshold effect. That's why we are talking about. Otherwise, there is no reason to worry. But in the process, so there are certain aspects of what is called natural process that takes place. Which we may not have to worry too much. For some inputs to the environment, there are no natural process. To transform them into harmless or less harmful substances. Like PCBs, DTT, etc. And then one also talks about bioaccumulation, etc. So when these things happen, then your waste disposal becomes very difficult and also become more and more costly. Eventually, it boils down to value. People look at, now started looking at environment also as a source of spiritual value. The Himalayas. Tropical forests. So that brings in what is called theory of environmental valuation. But valuation when it starts going, going, going, doing. That's why it's really not good to look at China all the time. You know because Chinese, India some people have started valuing. Applying economic valuation for Royal Bengal Tiger. What is the value of Royal Bengal Tiger? In thousands of crores of rupees. We don't do that for human beings. You know what happened in Bhopal, no? Still I can never forget the sentence, the statement made by the International Court of Justice. When they fixed the compensation paid by the UCC to citizens of Bhopal. They said the compensation is fixed in such a way as per law of the land. Law of the land, Bhopal, India. Then they went on to say, I quote here, the justice here. You cannot expect a multinational company to value the life of a citizen of a country more than by its own government. So my lawyer-cousins told me that means if the government of India values your life only worth 2 lakhs, UCC cannot be asked to pay you more than 2 lakhs to your kitten cube. That is the statement. That is what the value of your life is for your own government. So how do you expect a multinational company to value more than that? International Court of Justice said this. So we don't get into that. But now the valuation now becomes so fashionable that people started imputing value for Royal Bengal Tigers. That is why I was trying to read this paper, where do you get the Mathuraadhaifram? Mathuraadhaifram borrowed from China because they started doing valuation of monkeys. So the idea here, also it is important to say all these students, so that it is not, when in valuation it is not thoughtless valuation. We are talking about environmental valuation. Valuation of natural resources and other environmental bodies. So that why is it important to have a certain value in one of the workshops and water? I spoke about this. People will say, I was thinking, what do I say? They say, no, no, you must talk about valuation, water resources. I said, I only remember what my father used to tell me when I was very young. So because initially, I mean I come from a place where we used to draw water from the well. Many of you would have also been by hand, drawing water from the well and use it. So in those days, you will use water very judiciously. Not because there is no water in the well, because you have to draw more labour. And as a young boy, I would like to go and play cricket or football rather than doing this all the time. So therefore, we were very economic. So a lot of, as we grew, a lot of pressure from so many family members, my father very reluctantly put a motor and then put a tap. This is a big thing. Oh, you can open a tap and get water. So by one thing he said, if you allow the water to go down the drain without using, you keep a bucket, go somewhere and come back, water will be overflowing. You would have never done that when you are drawing the water for yourself. He is saying, your wealth will also go down the drain like way. So it is a sentimental thing. So I wonder why you have been told that. So since you will add some value to the wealth that you have, so that you would like to preserve it closely, take care of it, guard it. If you also give same respect to the water that is coming through the pipe now easily, he never said that when you are drawing the water from the well. But he said that when they fixed the motor and then the tap was fixed to bring the water to you. So that is what this valuation is all about. You have to equate it to something so that you respect. You don't waste it. That is most important. So if you can prevent the wastage, its un-prevention of wastage is actually done much more by us than by some of the developed countries, let me tell you. Because I was snubbed in my first visit to US in a conference. Everybody is using projector. Everybody is making a presentation, fine projector. So after some point we were discussing, presentations are over, no need for the projector again. So they put projector fully on, right on and it was hitting my eyes also. So I asked, I interrupted and then said, can we switch off this projector? So they turned and looked at me, they said, they are not really, you know, thought that I am talking because I am getting irritated in the eyes. I had, you know, even waste of energy in my mind, but you know, that is not the place to talk about it. They said, Dr. Narayan, you do not have to worry. Unlike India, we are energy rich. I said, that is my worry because you are energy rich, you are wasting. And we are paying for it. So he said, no, no, no, if your eyes are getting irritated, we will put it, you put a notebook there so that. I said, I am actually mean by saving on energy. Why do we switch it off? We don't require it now. Somebody needs, we can switch it on at the time. They kept arguing with me rather than switching it off. You know, and then the Chinese friend outside told me that, do not bother, they do not listen to anyone of us about this because they have plenty, that is why they waste. It is plenty, which is the problem of plenty when it comes to wasting. Those who have scarcity will not waste. And this is where economic theory comes in. That is economics, the study of scarcity. Because of scarcity, only we start talking about it. And valuation is somewhere bringing in so that you attach, you have to attach something to this. So that is where the valuation comes in, very handy here. Now, but the moment you talk about valuation, you must know that there can be conflicting use of resources. Some of the examples I have given here, mountain region can be used as source of mineral, as well as for the amenity value. River as a waste disposal unit means amenity value is reduced and that we can no longer extract so many other material resources. Say fish to eat, filling a forest for a timber resource, reduce the electricity generating capacity of a dam. And preserving wetland for aesthetic quality means, if forgo, the options of using it for drainage land for agriculture. So these are the conflicts that we have to definitely keep in mind. At this point, I wanted to draw as particularly, I thought I should immediately come to that when the group B presented. Does it necessarily mean, when you say they said energy consumption per capita is increasing? I was wondering what is the source of their data? Because my data shows the other way around. So as an economy grow, energy, material demand per dollar of output or per rupee output tend to fall. This is what we have noticed. You look at France, Germany, Japan, UK, I am not talking about US. Most of the reduction in the energy by real GDP, means GDP adjusted for prices or inflation. In these countries, accounted for by changes in the composition of energy use, away from coal and towards petroleum and nuclear sources that they have done in these countries. Now, look at this diagram. You see over a period of time, consumption production of energy. Now let us talk about India. The gap is widening. Consumption is higher than the demand is more than supply. Now, but if you look at the growth rate of energy consumption in India, see it is always good to use some of the diagrams to convey your point to students better. That is the reason why I also put some diagrams here. At different time periods, 80 to 85, 86 to 90, because you can say liberalisation, pre-liberalisation, post-liberalisation and the like and the whole period, you see post-pre-90, post-90. Growth rate of energy consumption seems to decline. Now, if you look at the consumption and the GDP, total energy consumption and GDP from this period, how is it growing? You look at the growth rate of this. That is also growing at different rate, consumption and GDP growth rate. Now, if you look at GDP and energy consumption ratio, that is the quantum of GDP produced per unit of energy consumed or amount of energy consumed for every, in other words, whenever GDP is expanding, is our energy consumption also expanding at the same ratio, same proportion. If it is so, then it is bad. But now, our output is expanding. The consumption ratio, energy is reducing. That is why this is declining steadily. Continues to decline even now in the last 10 years as well. This is declining. That is energy intensity, we call it energy intensity, energy consumption per unit of GDP is actually on the decline. That means we are improving our efficiency in the use of energy. Not to feel complacent, but when compared to when your output economy is expanding, your energy consumption in total is increasing, but per unit is going down, per dollar of GDP or per rupee of GDP is going down. Look at the, again we talk about primary energy, secondary energy, etc. You see the growth rate per BTU, per US dollar, almost sort of stable over this 25-year period. These are some of the good indicators for India. So, it is possible for you to improve the energy efficiency when your output is expanding. And that is what we should walk towards. We do not have to feel bad that we are not able to do it. We are, in fact, we do not even look at the data and then say, make a sweeping statement, we are, our per capita energy consumption is increasing, we are not able to manage, etc. In fact, demand supply mismatch is continuous in India and for industrial and others, but still not saying that we should feel complacent because our recent work on pollution because of energy composition, composition of energy consumption in terms of electricity, coal, diesel and other conventional sources, how much each industry is responsible for emission that we calculated and the paper got immediately accepted publication. We talked about CO2 emission based on energy mix of, at the firm level, we have calculated this. Data is available on various, and so it is important to engage students also in terms of energy output, energy GDP comparison, that is going to really take them to that. Of course, when it comes to E4 in the diagram, we talk about maintenance of atmospheric composition suitable for life, maintenance of temperature and climate as well as recycling of water nutrients which are essential so that we do not put too much of stress on the overall system outside the global life support service. Okay, now what is the purpose of discussing all this? The most important purpose of all this is sort of try to connect them to what they already know. What do they know? There are various countries in the world which are in different stages of development, different levels of per capita income. There are various countries in the world which are growing at different rates. India and China are well known for, again, being fastest growing economy in the last 10 years. Yes. But again, a lot of people say India has a lot of advantage which you can optimally use. And one major advantage we have is what is called demographic dividend. And they are very young, they will understand what is demographic dividend. Age composition of population. They will be dominated by young people. So, in a country where the workforce participation ratio is still less, you know, I want to tell you, I'm so glad that so many, you know, faculty members, lady faculty members have come from so many institutions, but I want you to be aware that a recent study by Tata Institute of Sciences have shown that the female workforce participation ratio, what does it mean? Availability in the job market, that's all. I'm not saying employed or anything, available in the job market. In India, it's only 29%. In Japan, it is 85%. Availability in the job market. Don't say that they're not available in the job market because they're not confident of getting a job. No. They're not even available. And this includes formal informal employment, including domestic help. 71% don't even come to the labor market. Obviously, there's a lot of potential for us to, you know, use their labor. They must be doing something else. But that doesn't get evaluated. That's why we always say that contribution is not valued and included in GDP. Our GDP is grossly underestimated. It's true. People say, when I say GDP is underestimated, I know why you're saying it because, you know, nearly 30% of it is parallel transaction, black money. Not getting accounted for. I say that could be reason. We're not getting into that dispute right now. But I'm saying because so much of it is not even coming to the formal sector. It's not getting counted. So we will need to connect what is sort of widely known. Okay. Now, before I connect to other economic thing, I am stepping my neck out to talk about two laws of thermodynamics. How we are connecting to these two. The two laws, which all of you are very familiar, very relevant for viewing this relationship, first two laws of thermodynamics hold truly in strictly closed systems. System with no external input. So we also talk about closed economy. So closed system. Okay. Consumption production. We are not talking about imports, exports. No trade, nothing. The first law, which you all know, matter like energy can either be created or be destroyed. So it's based on material balance principle. In economic circular flow also we follow the material balance principle. And as more matter is extracted by the production process, more waste is generated which must eventually return to the environment. Since the matter, energy, content of the extracted material cannot be destroyed. So it places limits on the degree to which resources can be substituted for each other in production. That's where the problem comes. So that is something that is most relevant as far as this goes. The first law is concerned. Now second which is also known as the entropy law. It's also said in a closed system, the use of matter energy causes a one-way flow from entropy resources to high entropy resources from order to disorder. Again for energy, the amount of work that the energy can do is diminished. However, while it is useful to understand recycling, it is not necessarily the harbinger of doom. We are not saying this is doom. However, it is important that we try to connect. So I am using simple circular flow that happens in an economic system, in a closed economic system rather. And then connecting it to the first two laws of thermodynamics that you already are familiar. So then you can actually sensitize them easily and then make them, get them on board. Then why it is important to talk about the interrelationship and understand the tradeoffs and others. So that's where this comes here. Now before I proceed to the next one, approaches to development. That is the next thing I am moving. I just want to give you one small example of what happens in Japan again, based again on personal anecdotal experience I want to say. If you want to buy a new television, then all our schemes are available now. We have buy-back scheme. You can return your old one and then we buy a new one. And we value old mobile phone or old television sets and then we take it. We reduce 3000, 5000 depending upon the how good your old set is. All of us are familiar with this. Simple marketing strategy. Now you go to Japan. You find that if you want to buy a new set, price is say 10,000 yen. Just giving arbitrary number. 10,000 yen price. So they said, do you have an exchange program? You want to give your old set to this etc.? Then they ask you details of the old one. First of all you ask them, can you offer some discount on this? They said, well if you are buying it upfront, without ending this thing, right now I can give you a 7,000 yen. 30% discount. But no stings are attached. They said, but I want to give you back my old one. Then they said no, 10,000 is the price. You return your old one, take 10,000 new one. So I used to wonder that what is this in India, when you give an old one, apart from 3,000, which is a discount for cash, whatever that you are paying, they will give you some 500,000. Working condition may. No discount. So it took some time. Then I asked the other Indians, why does this have a scheme like this, system like this? And as soon as you go, you are flooded with so many phone calls from fellow Indians. Don't buy television, don't buy refrigerator, don't buy this, don't buy that etc. And they said, please I will give you, free of cost. Told my wives, what happens to Indians when they come here, they become so different. Initially we didn't understand. Maybe you all know why it is. So you, suppose you want, there is no space, there is a big constraint for everybody. You want to dispose of the old one, you have to go and put it in the dustbin, you can't. You can only put it in the municipal dustbin etc. When you put there, the, whatever you call IEM or Chases number etc. That is registered in your name. So to dispose of the solid waste, you go and leave it in a public dustbin. You have to first approach the municipal office, tell them this is my set which I want to dispose of etc. So they give a certificate and then say you have to make payment according to the size of the, so a television, typical old fashion, picture tube television, you have to pay 3,000 yen. I calculated this and then it came, went back to, I said this guy is very smart. That 3,000 yen that they had to pay to the municipal commission, they are collecting from you without discount. So buy a new one, no problem, I will give you discount. But new one, if you want me to take the old one, no discount. Which is difficult for us to digest. Because we, so many people don't have television or they can put it. It's soon going to become a problem. Solid waste management, this is how they are managing. And you can't leave it quietly and get away. You will definitely be caught. And if you are caught, the punishment is very high. You will have to pay double. So it is better you pay. So that solid waste management becomes an extremely important discipline in our area of research in those places. It's slowly picking up here. But since not everybody has access to all this, we still can find takers.