Inter-linkage between Economy and Environment

Inter-linkage between  Economy and Environment

The links between the economy and the environment are manifold: the environment provides resources to the economy, and acts as a sink for emissions and waste.

In recent years there has been growing concern about degradation and  pollution of environmentand climate change as they impact on future development of both the

developing and developed countries. In 1992, representatives of over 150 countries met at

Rio in Brazil to discuss the environmental issues and their implications for future

development of the world. This meeting at Rio is called the ‘Earth summit’ or the United

Nations Conference on Environment and Development (UNCED).

This conference clearly spelled out the linkages between natural environment and

development and put forward the concept of “sustainable development”.

Economy-Environment Linkages (Relations):

It is of great importance to explain how the economy and environment are interlinked. The 

environment supports economic activity by man in four ways – it provides life support, 

supplies natural resources for production and consumption, absorbs waste products and 

supplies amenity services. The economy works from inside the environmental system and 

its activities affect the environment and the latter also affects the economy.

The purpose of economy is to produce goods and services to satisfy consumer wants. For 

the production of goods and services, the economy uses made-made capital, labour and 

natural resources (such as coal, oil (petroleum and diesel), CNG gas), minerals and metals, 

etc. from environment.

First, by providing a biological, chemical and physical system that makes it possible for 

human beings to live, the environment system that includes the air and atmosphere, rivers, 

the fertility of the soil and biodiversity (i.e., various types of plant and animal life) on which 

life of households depends.



Second, the environment provides raw materials and energy resources such as minerals, 

metals, food, wood and cotton for production and use by the firms and households in the 

economy.



Third important function of the environment is to absorb the waste products such as carbon 

dioxide (CO2) which originate from the production processes of the firms, from power plants

or the consumption activities of the households which generate garbage for collection and 

disposal. Thus, the environment is used as a waste sink. Wastes may be in a variety of 

basic forms such as solid, air and water-borne.



The theme of Rio-12 Earth Summit held in June 2012 at Rio which was to suggest 

measures to achieve the objective of green economy. “A green economy is the one that 

results in improved human well-being and social equity while significantly reducing 

environmental risks and ecological scarcities. Growth in a green economy is driven by 

investments that reduce pressures on the environment and the services it provides us while 



enhancing the energy and resource efficiency.”