The first thing that any student of economics learns in a Basic Microeconomics class is that individuals always try to maximize their satisfaction, whether be it in the present or in the future.
Attributing such a selfish quality to every person leads to a conclusion that we humans will never act if the benefits are not immediate and tangible. No wonder climate change has become such a major problem and has led to serious debate between the economists and the environmentalists. Some economists aggressively suggest that undue focus on preserving nature will lead to a considerable fall in the growth rates of economic development.
On the other hand, the gist of the argument upheld by environmental conservationists is that conserving the environment is now a pre-requisite for sustainable economic progress as well as the survival of human race.
However, on delving deeper into the two view-points, it becomes evident that they are not dichotomous; they have always been intrinsically interrelated. They now support the success of each other ever more than before, and this needs to be clearly understood as the new paradigm.
It is only with the help of greater innovation emerging from economic activities, can the environment be protected. It is only through an abundant supply of clean and efficient energy and renewable resources, can the economic growth be maximized and sustained.
Extrapolating this argument to the Indian context leads to only one conclusion. Acting on climate change now will lead to greater economic progress in the future. India is the seventh-largest economy in the world today in spite of abject poverty, high levels of unemployment, lopsided development and deteriorated levels of the environment.
We are talking about a USD 5 trillion economy by 2025, and yet we continue to progress with the same old business models and processes. We stand at the onset of an opportunity, to be one of the economic leaders in the world by creating and adopting sustainable practices and at the same time solving the problems of economic inequality.
The two things that are pulling us back are the lacking impetus from the policy angle and a constructive people’s movement that can influence political leadership.
Climate change due to global warming has led to unprecedented and extreme weather patterns all around the world. Frequent cyclones and droughts have exacerbated the problem of productivity in the majorly rain-fed agriculture sector leading to food scarcity and rising inflation that further leads to increase in poverty.
This poverty creates a vicious circle of unemployment, low demand, low production and eventually low levels of economic growth. Caring for the environment and shifting to a new climate-economy model is thus a win-win mantra to address the twin problem of poverty and global warming.
This year itself, the state of Maharashtra has witnessed heavy flooding in cities like Pune, Kolhapur and Sangli. According to the Pune Municipal Corporation (PMC) administration, losses in one area of Pune (Rajendranagar) due to the floods were to the tune of Rs. 200 crores. Generally, a source of wealth generation, Cities, are now forced to divert a huge portion of their budget towards relief, rescue and redevelopment.
This budget could be used in developing infrastructure and sustainable urban planning. With rise in global temperatures, there is high chance that such disasters will get worse in future. This will eventually lead to a large chunk of the budget being spent on disaster management rather than on projects of growth and development.
Climate action can now become a catalyst for major development objectives in India. Solving environmental problems should now mean shifting the approach towards running a sustainable economy.
At the same time, it is unrealistic to expect that the economic model that we have been functioning with for so long, can be changed overnight. But it is nonetheless necessary to realize that such a change is the need of the hour and it can result in greater economic benefits for our country.
India has always been a follower when it comes to adopting economic models and new technology. In this new age of consequences, climate change has now offered our country a chance to lead by example by facilitating proactive innovation for creating models of sustainable development.
The nation which leads in building sustainable business will surely lead the economic growth in the future. For this, economic models need to aggressively start monitoring externalities at the broader level and get ‘Pigouvian taxes’ in to the picture to account for them.
However, accounting for economic growth without incorporating the role of the political sphere is indeed futile. Hence, the governance systems in the country need to include the reality of global warming as an essential part of budgeting and legislative reforms.
The UN Sustainable Development Goals (SDG), can be adopted as an agenda by every local government in the country. It can further solve maximum social as well as environmental problems and ensure economic prosperity.
On the energy front, coal and oil are increasingly becoming unprofitable and are relying on subsidy from the government. Renewable Energy (RE) has become cheaper over the years and is cost-competitive as opposed to fossil-fuel.
Creative destruction has been the basis for development since time immemorial, and it is time that India accepts thermal energy as an obsolete form of energy generation. Renewable Energy is the only way forward and it is high time that we invest the money spent on coal subsidies, in making Renewable Energy widespread and abundant.
Renewable Energy must become the new ‘Oil’ for the future.
Today, India faces several direct challenges when it comes to climate change. It is thus not only in the interest of the government but also the people, to shift to a low carbon lifestyle. It is time to invest in a new and combined approach of climate action and economics to ensure sustainable economic success of our systems.
Many nations have recognized this truth and have already declared constructive policies both for the economy and towards climate change. The old growth model based on fossil fuels and pollution is out of date and out of touch with our planet’s needs. We in India must wake-up to the new realities and take bold steps to utilize this unique opportunity. 21st century must be remembered as the one that saved humanity rather than the one which destroyed it, and we all need to work towards that.
The views and opinions expressed in the article are those of the authors and do not necessarily reflect the official policy or position of The Tilak Chronicle and TTC Media Pvt Ltd.