sustainable development - low priority

Question 1

stock pollutant

Answer 1

a pollutant that has long-term consequences – e.g. CO2 in the atmosphere

Question 2

flow pollutants

Answer 2

pollutants that do their damage relatively quickly and are then either diluted to harmless levels or transformed into harmless substances

Question 3

How do people modify the environment

Answer 3

through the use of natural resources and the exhaustion of environmental sinks

Question 4

renewable vs non-renewable

Answer 4

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

Question 5

Common definition of sustainability

Answer 5

“development that meets the needs of the present without compromising the ability of future generations to meet their own needs”

Question 6

Weak Sustainability

Answer 6

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

Question 7

Strong Sustainability

Answer 7

o Requires maintaining the total stock of each form of capital separately (natural, manufactured, human, and social)
o Focuses on measuring natural capital

Question 8

Neoclassical economists

Answer 8

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

Question 9

Ecological economists

Answer 9

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.

Question 10

Implementing weak sustainability

Answer 10

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.

Question 11

posting an environmental bond

Answer 11

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.

Question 12

discounted future benefits

Answer 12

When future costs and benefits are not weighted as heavily as current benefits

Question 13

present discounted value

Answer 13

PDV = $X/(1+r)^T

Question 14

What determines an interest rate or market discount rate?

Answer 14

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

Question 15

Why is the real interest rate on savings so low, typically 5% or less?

Answer 15

A positive rate of time preference:the well-known desire to consume more today, regardless ofthe consequences for tomorrow.

Question 16

demand curve for loanable funds

Answer 16

reflects the opportunities for productive investment projects in the economy

Question 17

what do quantity of loans supplied and demanded depend on

Answer 17

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.

Question 18

Ramsey equation

Answer 18

r = d + ng

d = rate of time preference
g = growth rate of the economy
n = elasticity of marginal utility of consumption

Question 19

Weak Sustainability and the Discount Rate

Answer 19

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

Question 20

Strong sustainability - precautionary principle

Answer 20

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

Question 21

Strong Sustainability in Practice

Answer 21

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

Question 22

How has human well-being improved over the last 200 years?

Answer 22

 Fewer famines
 Increased caloric intake
 Reduced child and infant mortality
 Increased life expectancy
 Reductions in time worked
 Increased literacy

Question 23

What did Malthus assume about Ecological Economics

Answer 23

 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

Question 24

Challenges for Malthus’s Assumptions

Answer 24

 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

Question 25

Ecosystem services

Answer 25

the benefits that people receive from nature

Question 26

How can the majority of ecosystem services be declining at the same time as there are big gains in human well-being?

Answer 26

1. It may be that the really important services, like food production, are increasing and this more than makes up for declines in other services
2. Technological advances have made well-being less dependent on natural capital
3. There may be time lags between declines in natural capital and declines in standards of living.

Question 27

Measuring strong sustainability - Ecological footprint

Answer 27

 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

Question 28

Measuring strong sustainability - Human development index

Answer 28

 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)

Question 29

Measuring strong sustainability - impacts

Answer 29

IPAT equation:
Environmental Impact = Population X Affluence X Technology

Question 30

Measuring weak sustainability - Net National Welfare

Answer 30

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

Question 31

Failures of GDP as a measure of sustainability

Answer 31

1. fails to include the value of nonmarket goods and services
2. includes costs incurred in reducing harmful activities
3. fails to account for the depreciation of the capital used up in production, especially natural capital
4. reflects the experience of the “average person” but does not account for distribution or equity concerns

Question 32

Measuring weak sustainability - Inclusive Wealth

Answer 32

 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.

Question 33

Depreciation Rule for natural capital

Answer 33

depreciation equals the measured value of the resource rent

Question 34

resource rent

Answer 34

what future generations arelosing by our exploitation of natural capital

Question 35

Are We Achieving Sustainability?

Answer 35

 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.

Question 36

Market actors use high rates

Answer 36

 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

Question 37

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?

Answer 37

 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

Question 38

The Ecological-Neoclassical Debate in Context

Answer 38

 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.