sustainable development - low priority Flashcards
stock pollutant
a pollutant that has long-term consequences – e.g. CO2 in the atmosphere
flow pollutants
pollutants that do their damage relatively quickly and are then either diluted to harmless levels or transformed into harmless substances
How do people modify the environment
through the use of natural resources and the exhaustion of environmental sinks
renewable vs non-renewable
As long as the rate of extraction of renewablere source stocks is balanced by regeneration, resource use will not reduce future availability. However, any use of nonrenewable resources reduces their stock
Common definition of sustainability
“development that meets the needs of the present without compromising the ability of future generations to meet their own needs”
Weak Sustainability
o Requires that the overall capital stock needed to support a high quality of life —including manufactured, human, social, and natural capital—is maintained
o In other words, weak sustainability can be achieved even with the loss of natural capital as long as other forms of capital are adequate substitutes
Strong Sustainability
o Requires maintaining the total stock of each form of capital separately (natural, manufactured, human, and social)
o Focuses on measuring natural capital
Neoclassical economists
o Neoclassical economists view natural and other forms of capital generally as substitutes in production
o View nature as highly resilient
o Globalisation, if it promotes development, can also lead to a sustainable future
o Sustainability is achieved through a well-functioning and properly regulated market system
Ecological economists
o Ecological economists argue that other forms of capital cannot generally be used to substitute for natural capital
o The global ecosystems in which our economy is embedded are fragile
o Tend to be technological pessimists
o See the need for an expanded role for government inaggressively protecting our dwindling stock of naturalcapital.
Implementing weak sustainability
o Weak sustainability assumes that it is generallypossible to substitute human-made for naturalcapital. But natural capital produces goods and services over long periods of time
o How do we value the services of natural capital(eg climate regulation, fresh water filtering, biodiversity preservation) far into the future?
o The answer: use benefit-cost analysis to assess if it is more efficient to protect or to use up the natural capital today.
posting an environmental bond
Putting money aside into a bank account specifically to compensate future generations for pollution damages or depletion of natural capital
The potential for posting an environmental bond offers us a rationale for spending less on prevention today than the full value of the damage we inflict on future generations.
discounted future benefits
When future costs and benefits are not weighted as heavily as current benefits
present discounted value
PDV = $X/(1+r)^T
What determines an interest rate or market discount rate?
Supply & Demand in the market for “loanable funds”
The supply of loanable funds is determined by bank deposits—money in individual and business savings accounts that, in turn, form the basis for loans by banks
Why is the real interest rate on savings so low, typically 5% or less?
A positive rate of time preference:the well-known desire to consume more today, regardless ofthe consequences for tomorrow.
demand curve for loanable funds
reflects the opportunities for productive investment projects in the economy
what do quantity of loans supplied and demanded depend on
Both the quantity of loans supplied and demanded depend on the interest rate: Higher rates lead to a desire for more savings, and less desire for borrowing.
At the same time, reductions in the overall supply of loanable funds, or an increase in demand, will raise market rates and lead to greater discounting of the future.
Ramsey equation
r = d + ng
d = rate of time preference
g = growth rate of the economy
n = elasticity of marginal utility of consumption
Weak Sustainability and the Discount Rate
o The emphasis of weak sustainability is discounted consumption possibilities.
o Savings – for example in the form of ‘environmental bonds’ facilitate future consumption.
o Erosion of natural capital is permissible as long as future (discounted) consumption is still enabled.
o Note though that ‘weak sustainability’ can imply a strong policy response
Strong sustainability - precautionary principle
o Precautionary Principle: Never reduce the stock of natural capital below a level that generates a sustained yield of services unless good substitutes are currently available for the services generated. When in doubt, conserve
o To determine the availability of substitutes requires focusing on uniqueness and uncertainty combined with irreversibility
Strong Sustainability in Practice
o The Endangered Species Act is the only piece of U.S. legislation that requires strong sustainability
o National Environmental Policy Act (NEPA), requires a “light” version of the precautionary principle
o Requires and environmental impact statement (EIS) for “legislation or other major federal actions significantly affecting the quality of the human environment.”
o In the EU, REACH (registration, evaluation, and authorization of chemicals) requires chemical manufacturers to carry out health and environmental safety tests prior to introducing new chemicals
How has human well-being improved over the last 200 years?
Fewer famines
Increased caloric intake
Reduced child and infant mortality
Increased life expectancy
Reductions in time worked
Increased literacy
What did Malthus assume about Ecological Economics
Assumed
1. that the food supply grows arithmetically
2. a healthy population grows geometrically
Malthus argued, population growth would outstrip the food supply, leading to increasing human misery, famine, disease, or war
Challenges for Malthus’s Assumptions
Agricultural output has not grown arithmetically
From about 1950 through the 1980s, the Green Revolution in agriculture resulted in greatly increased yields for major crops around the world
Population does not always increase geometrically
Excluding immigration, high income countries have very low population growth rates—often below zero.
Other resource constraints than just arable land
Agriculture requires massive quantities of freshwater, energy, fertilisers, and pesticides
Just because food production has increased faster than population in the past is no guarantee that it will continue to do so in the future
Rising affluence has resulted in a massive increase in the demand for meat, which is resource intensive
Ecosystem services
the benefits that people receive from nature
How can the majority of ecosystem services be declining at the same time as there are big gains in human well-being?
- It may be that the really important services, like food production, are increasing and this more than makes up for declines in other services
- Technological advances have made well-being less dependent on natural capital
- There may be time lags between declines in natural capital and declines in standards of living.
Measuring strong sustainability - Ecological footprint
The ecological footprint of a community (or nation) calculates how much land and water area is needed to provide the resources for production and for assimilation of wastes for that community
ecological footprint calculations indicate that we currently need about 1.5 earths to accommodate all the demands over time
Measuring strong sustainability - Human development index
The Human Development Index (HDI)includes measures of per capita income, education levels, and life expectancy
Varies between 0 and 1
Norway has the highest score (0.94)
The Democratic Republic of Congo has the lowest score (0.29)
Measuring strong sustainability - impacts
IPAT equation:
Environmental Impact = Population X Affluence X Technology
Measuring weak sustainability - Net National Welfare
Net National Welfare (NNW), attempts to measure, on an annual basis, the “real” well-being of society’s members
In principle, NNW can be defined as the total annual output of both market and nonmarket goods and services minus the total externality and cleanup costs associated with these products, minus the depreciation of capital, both natural and human-made, used up in production
NNW = Total Output - Costs of Growth - Depreciation
Failures of GDP as a measure of sustainability
- fails to include the value of nonmarket goods and services
- includes costs incurred in reducing harmful activities
- fails to account for the depreciation of the capital used up in production, especially natural capital
- reflects the experience of the “average person” but does not account for distribution or equity concerns
Measuring weak sustainability - Inclusive Wealth
IW is defined as the value of all capital stocks including human capital, manufactured capital, natural capital, and social capital
The idea behind IW is that if we leave future generations with greater overall wealth, then they will have the means to be better off. However, if we deplete wealth, future generations will be unable to match current standards of living.
Depreciation Rule for natural capital
depreciation equals the measured value of the resource rent
resource rent
what future generations arelosing by our exploitation of natural capital
Are We Achieving Sustainability?
Several studies show that NNW and GDP are not correlated, which means that popular perception of GDP as a measure of economic welfare may well be misguided.
The evidence to date seems to indicate that NNW and IW are growing in most countries but that each is growing more slowly than growth in GDP
Whether this evidence is really proof of achieving sustainability, however, is questionable.
Market actors use high rates
Decision makers in the private sector often have shorter time horizons than do government agencies: Companies and consumers often discount at 15-20%, meaning they will only invest in projects that pay back in5-7 years.
High market discount rates explain why many of our decisions today might be unsustainable. Due to high discount rates, we fail to make many long-lived investments that could benefit our descendants
Why are required profit rates so high, when there are many long term investments for the future that can’t be funded at these rates?
high required returns reflect only the private benefits of investment and fail to account for the external costs to society as a whole of growth
some of these profits are coming from resource rents, and do not reflect any depreciation of natural capital
high returns are required to induce people to save and invest their income
The Ecological-Neoclassical Debate in Context
In advocating for strict standards, both safety proponents and ecological economists make utilitarian arguments: Environmental protection is good for people because the society-wide opportunity cost of protection is relatively low
Efficiency advocates and neoclassical economists respond that the safety and ecological positions are too extreme. They insist there are trade-offs and that we can pay too much for a pristine environment.
