Environment VS Economics Case Study

Details :Background:

  • Protests over environmental concerns have led to the closing down of a Vedanta group’s Sterlite’s copper plant in Thoothukudi in Tamil Nadu.

Copper smelting and impact on environmentProcess of Copper Smelting:

  • Copper smelting is the process by which the metal (copper) is extracted from the concentrated ore, which has copper combined with sulphur and oxygen (as in copper sulphate).

Pollutant Sulphur Dioxide as bi-product:

  • Smelting essentially means separating copper from the sulphate, which released sulphur dioxide gas.
  • Sulphur dioxide is a pollutant—and a toxic one at that—causing asthma and acid rain.
  • Most smelting plants capture the sulphur dioxide gas and make it into sulphuric acid, which can then be sold separately, or further used in the manufacturing of phosphoric acid.
  • However, this capturing process is not foolproof, and there have been gas leaks in the past, resulting in the temporary closure of the Sterlite plant.

Contamination of water:

  • The smelting process also uses water—in cooling, processing and washing, and also to convert the sulphur dioxide to sulphuric acid.
  • Most of the water is recycled, but some of it could end up released into the environment or into the groundwater.
  • Depending on the ore that provided the copper, the contaminants in the water vary—including heavy metals like arsenic and cadmium. 

Environment vs EconomicsEnvironmental damage can be minimized but at a cost:

  • The wastewater from smelting can be recycled and cleaned, but at a cost.
  • It takes both capital investment and running costs to minimize the adverse environmental impact of copper smelting.
  • World over, cost pressures and environmental concerns have seen copper smelting move out of developed countries.
  • Today, the largest smelters are in China, Chile and India.

But copper costs are also worrying for the industry:

  • On the demand side of the equation, electrification and a flourishing automotive industry mean that copper demand is booming, growing at 7-8% a year.
  • China, due to environmental concerns, is beginning to shut down smelters, squeezing global supply.
  • This is making copper prices shoot up.

So India would prefer to smelt copper here:

  • In an era of rising crude prices, India, understandably, will not want to expend more money importing copper, or higher metal prices.

Concerns with the company’s practices:

  • Vedanta’s investor reports place its copper operations in the lowest quartile of cost (thus claiming “cost leadership” in the sector).
  • This raises concerns if the company is cutting costs in managing environmental impact.
  • Some questions have been raised over environmental clearances for a plant, with some alleging that it was not up to the (environmental) mark.

Company claims it is clean:

  • The company leadership, on the other hand, points to the multiple awards from prestigious organizations, including one for good water management.

Shouldn’t sustainability have primacy over costs?

  • We must figure out the price of copper that we are willing to pay while allowing for environmental concerns to be addressed.
  • This is not a question limited to Thoothukudi and Vedanta.
  • There should be a price put on carbon pollution (or on water).

Protecting environmental resources is paramount today:

  • We must realise that environmental resources are becoming more precious due to dwindling supply, rising demand and rising awareness.
  • Climate change means that water resources in parts of India (including and especially Tamil Nadu) are going to become very scarce, and fights like these are going to become more common.

Environmental issue is now politically and economically (for companies) important:

  • Customers (and voters) are becoming better informed about environmental hazards and are beginning to buy, vote and protest on environmental grounds.
  • A 2017 survey by Global Shapers (born out of the World Economic Forum) of young people found that they overwhelmingly judged climate change and the destruction of nature to be the most critical issue.

Way forward:

  • Companies and institutions should note that reputations have become more fragile and transparency more widespread thanks to laws like the Right to Information Act and social media.
  • Climate change and shrinking water and other environmental resources mean that mainstreaming sustainability is must.

Importance:GS Paper III: Environment Related question:Companies and leaders must take on board shifting trends in public opinion about environmental sustainability and the reputational consequences of not doing so. Comment in light of the recent closure of a copper plant due to protests over environmental concerns.Section : Editorial Analysis

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