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  • Economy and Environment—linkages, interactions and exchanges

    (Image by Michael Dawes,

    It is a fact that economic systems are embedded within the broader ecological systems or ecosystems. The former, or the economic sub-system, draws resources like material and energy from the ecosystem and in turn dumps wastes into it. The two functions, that is, source and sink, of the ecosystems are crucial towards the sustainability of functioning of an economic system. It turns out then that sustainability of functioning of the ecosystems is necessary conditions for the sustainability of functioning of the economic systems.

    In particular, the crucial variables here
    (a) the rate at which non-renewable resources are depleted,
    (b) the rate of extraction of renewable resources in contrast to their rate of regeneration, and
    (c) the rate of assimilation of wastes in contrast to the rate of disposal.

    Earth’s ecosystem is materially ‘closed’, as we can hardly ‘import’ or ‘export’ any material from, or to the rest of the universe. Of course, there are cases of losing a few satellites or of one or two meteors landing on earth’s surface, but they are really aberrations from the rule here, and their occurrence does not make any change from the ‘closeness’ in material terms.

    On the other hand, energetically, earth is an ‘open’ system; thankfully. Either it is the ‘fresh cal’, that is photosynthesis, or the ‘bottled sunshine’, that is the stock of fossil fuel, that virtually runs the entire economic activity. It is due to the sun’s influence for which various bio-geo cycles take place, like movement of air and water, which these days are considered as ‘nonconventional’ sources of energy. The only source of energy, which has nothing to do with sun is chemical reactions using nuclear sources, but dangers and risks associated with it does not make it a much favoured option.

    (Image by Bureau of Land Managem,

    Economic activities results in production of various goods and services, which are valued by its users for it maximises their well-being. Greater the activity, larger will be the requirement of both material and energy. Of course it is possible to re-use and re-cycle the materials, along with reducing the material intensity, or amount of material used per unit of goods or service produced, but beyond a point such possibilities cannot be carried out in economically justifiable manner.

    On the other hand, despite repeated efforts by various governments and other non-state actors, share of fossil fuel energy in the total energy consumed refuse to fall beyond a threshold. In addition to this is population growth. Due to the phenomenon of ‘rebound effect’ or ‘Jevon’s paradox’, the technological advancements that may result in greater energy efficiency (production of usable output per unit of energy), use of energy may rise in absolute terms. All this calls for serious rethinking on the development pathways pursued by both countries and communities and in it the subject of economics plays a crucial role.

    It may be useful to remind us here that the pressure on the non-human component of the ecosystem that we witness today can largely be attributed to the intensified pursuit of material consumption by a growing mass of population in the post-war period. Subjects like Ecological, Environment and Resource Economics attempts to recognize, understand, analyse and evaluate the nature-society exchanges towards their implication on human well-being. Towards addressing this, it aims to design and implement effective policy instruments that assist in sustaining a given quality of life on earth and its enhancement over a longer time period. The MSc Programme in Economics with a specialisation in Environmental and Resource Economics at the TERI University has exactly this focus.

    About The Author:
    Nandan Nawn, Associate Professor,
    Teaches MSc Economics programme
    Department of Policy Studies,
    TERI University.

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