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This lecture introduces an environment-based interpreter as an efficient way to implement a language supporting recursive functions. By using an environment to store parameter bindings, the interpreter avoids explicit substitutions, leading to a simple and cost-effective evaluation process. The lecture illustrates this concept through the computation of a factorial function, demonstrating how the environment evolves with each recursive call. The interpreter's design eliminates the need for substitution functions, streamlining the evaluation process and enhancing efficiency. By updating the environment with parameter-value pairs, the interpreter can evaluate function bodies without the overhead of substitutions, resulting in a straightforward and compact implementation.