Economics, environment and the disjoint - I

Jun 6, 2012

We have a problem here. A serious one. Select a tree in your house and ask a employee from a sawmill: what would be the cost if he were to cut the tree and sell it for you? He'd say Rs.X for the sale and Rs.Y for the cutting charges etc. And that's the value of the tree. Now ask him or anyone else: what is the money value of the benifit to the society if it were to be left alone. You will be left with blank stares. We have learnt that the most important function of a tree is to take in carbon dioxide and provide oxygen, which is responsible fot the life of the entire animal kingdom. So what's the money value of that? The answer is that we simply didn't consider that in our economics. Our economics only cared about consumption of the tree for producing goods or clearing it to make way for cities. And that narrow mindedness is where we're having trouble when dealing with environmental issues. Economics simply hasn't taken into consideration the environemental effects.

Lets extend this to renewable energy and fossil fuels. The fossil fuels based power plans and vehicles are cheaper than renewable energy ones. Commercial rates of electricity in Tamil Nadu is Rs.7/KWh and is mostly produced by coal powered plans. If it were to be replaced by solar power plants, then the cost would be Rs.15-Rs.20KWh (and higher for standalone rooftop solar systems). If one were to look at the economic point of view, then it would make perfect sense to stay with coal powered plans. Again. What are the factors that we did not consider? Did we consider the problems caused by emission of carbon dioxide and other harmful gases/particles? CO2 causes global warming which has been causing cyclones to become more and more severe each year. But the average railfall keeps falling. So, the total cost of power produced by coal is Rs.7+Rs.X and it is very difficult to model and bring about the value for 'X'. But our scientists tell us one thing – if we don't do something soon then global warming will go out of control and lead to horrible disasters.

This economic paradigm which we live in needs change. It is incompatible with the environment.

(to be continued)

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