The Hindu : Tamil Nadu News : “Economic tools effective weapons to save environment”

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Sunday, Feb 17, 2008
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Tamil Nadu

“Economic tools effective weapons to save environment”

Special Correspondent

Seminar on environmental economics held at Loyola College

CHENNAI: Money matters are at the heart of the environmental debate, according to Planning Commission Member Kirit Parikh, who addressed a seminar on environmental economics at Loyola College on Friday.

What will happen if India’s Gross National Product took into account the costs of environmental degradation to the country’s natural capital? It could fall off that pedestal of a 9 per cent growth rate, Dr. Parikh pointed out. In fact, some experts have suggested it could fall as low as 6 per cent.

On the other hand, economic instruments could be the most effective weapons in the fight to save the environment. Dr. Parikh listed pollution taxes, trade controls, product emission standards and auctionable emission rights as among the methods available.

“Environmental economics can play an important role in framing public policy… The use of economic instruments can make policy choices more efficient because of the lower cost to society,” said Dr. Parikh. Such tools will play an important role in India’s national climate change roadmap, to be unveiled in June.

Any environmental policy must reflect the balance between growth and degradation. “It is critical to understand that there is a trade-off. Almost any economic activity has an environmental impact,” warned Dr. Parikh.

The Planning Commission Member highlighted Environmental Assessment Impact reports as an effective tool to measure and control the impact.

“Think of how many projects were modified because of these reports, think of the savings…Yes, they need to be made more effective, but they are having an effect,” he said on the sidelines of the seminar.

The Central Statistical Organisation’s green accounting project will be another potential tool, he said. The CSO is identifying a methodology to monetise the value of natural capital such as clean air and water or forest resources.

Using the example of air quality, Dr. Parikh said that the monetary cost of air pollution could be measured by its impact on health — cost of medical services, cost of lost working hours, cost of additional deaths — or property prices. That would help calculate whether a polluting industry was really contributing to economic growth, considering the cost of such pollution.

On the tricky issue of who should bear the cost, especially in the international scene, Dr. Parikh reiterated the Indian government’s stand that since the developed world has been the main culprit, it must also bear the burden.

He emphasised that all global environmental economics should be calculated on a per capita basis, adding that tradable emission quotas made on a per capita basis would be an equitable way of dealing with the problem.

As many ‘green entrepreneurs’ are discovering, environmental economics are not just a challenge, but also an opportunity. The carbon credit economy is providing a new way of making money while helping the environmental cause.

Dr. Parikh pointed out that while India has the largest number of projects under the carbon credit system, China was making the most money with larger projects. India needs to start including projects like the Metro Rail for credit under the clean development mechanism, he said.

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