Standard Specification in Empirical EKC Research

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Standard Specification in Empirical EKC Research

• f(Eit) ?0 ?1 g1(Yit) ?2 g2(Yit2) ?3
  g3(Yit3) ..
• .. ?4 g4(Yi(t-an)) ?B ?t ?it

Where Eit is an environmental indicator for
country i at time t Yit is per capita income for
country i at time t Yit-a is per capita income
for country i at time t a (lagged) B is a
vector of other explanatory variables
(geographic) ?it is the error term Source
Ekins (1997)
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• Synthesis/Summary
• Disagreement over the nature of the
  economy-environment relationship
•  
• Natural versus produced capital
• Differences in future visions and time paths for
  economy/society

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TOPIC 2 CONTINUEDAN INTRODUCTION TO
SUSTAINABILITY
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• Defining Sustainable Development
•  
• Sustainability requires that we must
• optimize among efficiency and equity, as well as
  non-economic goals
• conservatively assume that future generations
  require as many natural resources as us
• use non-renewable resources so as not to preclude
  easy access by future generations
• deplete non-renewable energy resources slow
  enough to allow transition to renewable energy
• maintain agricultural and biological productivity
  at the local or site level
• (Goodland and Ledec 1993)

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• Ecological economists (e.g. Charles Perrings)
  emphasize
•  
• critical thresholds governing ecosystem
  functioning
• resilience of natural systems
•  
• Pezzey (1989) analysed different development
  paths
•  
• sustainable (C ? CMAX)
• sustained (change in C over time ? 0)
• survivable (C gt CSURV)
• Howarths (2007) fair-sharing principle
  Protecting the rights of future generations
  requires either the conservation of environmental
  resources or compensatory measures that ensure
  the fair and proportionate sharing of net
  benefits over intergenerational time scales
  (p656) 

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Economic Damages from Biodiversity Loss in the
Presence of a Critical Threshold
Source Perrings and Pearce 1994
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• Six concepts of sustainability from Perman et al.
  (1999)
• A sustainable state is one in which utility (or
  consumption is non-declining through time.
• A sustainable state is one in which resources are
  managed so as to maintain production
  opportunities for the future.
• A sustainable state is one in which the natural
  capital stock is non-declining through time.
• A sustainable state is one in which resources are
  managed so as to maintain a sustainable yield of
  services.
• A sustainable state is one which satisfies
  minimum conditions of ecosystem stability and
  resilience through time.
• Sustainable development as capacity and consensus
  building

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• Measuring Sustainability Whats wrong with GNP?
•  
• defensive expenditures
• residual pollution damages
• non-market environmental goods services
• depletion of natural capital

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• Example The Valdez Oil Spill
•  
• The following effects would emanate from a
  serious coastal oil spill. Indicate which
  increase, decrease or have no effect on GNP (/-
  or 0).
•  
• loss of oil (ie. reduction in stocks)?
• costs of the oil spill cleanup?
• wildlife damage and deaths (not related to
  tourism)?
• impact on commercial fishing?
• impact on tourism?
• repair or replacement of the tanker?
•  
• What do you think the overall effect would be?

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• Alternative 1 Measuring Sustainable Income
•  
• Sustainable income is defined as
• the level of national income that does not
  reduce the value of assets and therefore
  productive capacity and can be produced in
  perpetuity.
•  
• From GNP,
• deduct preventive or defensive expenditures
• deduct value of residual pollution damage
• deduct depreciation of manufactured capital
• deduct depletion of natural capital

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Figure 4-1. GDP and NDP as a Measure of
Sustainable Income in Indonesia, 1974-84
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• Alternative 2 Improved Measures of Welfare
•  
• Index of Sustainable Economic Welfare (ISEW)
  developed by Daly and Cobb (1989) or Genuine
  Progress Indicators (GPI).
• Pearce-Atkinson Indicator and later extensions
  (Net Adjusted Savings) that calculate genuine
  savings by deducting (a) manufactured capital
  depreciation and (b) natural capital depletion,
  and other components, from savings in the economy
•  
• Alternative 3 Physical or Satellite Accounts
•  
• Separate physical accounts are prepared for
  natural and environmental resources, but in
  physical stock and flow units.
• Examples include Norway and France.

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The Pearce-Atkinson Sustainability
Indicator,Selected Sub-Saharan African Countries
( of GDP)
Source Pearce and Atkinson 1995
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• Adjusted Net Saving in the Six Black Sea
  Countries, 1996 - 2004

Source http//web.worldbank.org. Calculation of
Adjusted Net Savings involves deducting (a)
depreciation of manufactured capital, (b)
depletion of natural resources and (c) residual
pollution damages and adding (d) current
education expenditures.
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• Structure of Material Resource Accounts for
  Norway

Source Alfsen, Bye, and Lorentsen (1987).