Sustainable Development

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Sustainable Development
2
Policy for Sustainable Development

• The United Nations Conference on the Human
  Environment
• 1st meeting of representatives from 113 countries
  (500 NGOs), focusing on environmental issues
  (Stockholm, 1972)
• The Brundtland Report - 1987 ("Our Common
  Future")
• A definition for sustainable development"developm
  ent that meets the need of the present without
  compromising the ability of future generations to
  meet their own needs
• The Rio-Earth Summit - 1992
• 175 countries and gt1500 NGOs (bio-diversity,
  climate change, sustainable forest management)
• The Johannesburg Summit - 2002
• climate change, drinking water, and renewable
  energy

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Malthus-Model (Malthus 1766-1834)
What are the policy implications?What would you
change in the modell?
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Meadows 1992
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Growth and Sustainability

• The Kuznets Curve/Hypothesis (1955)
• At low levels of development both the quantity
  and intensity of environmental degradation is
  limited to the impacts of subsistence economic
  activity on the resource base and to limited
  quantities of biodegradable waste. As economic
  development accelerates with the intensification
  of agriculture and other resource extraction and
  the takeoff begin to exceed the rates of resource
  regeneration, and waste generation increases in
  quantity and toxicity. At higher levels of
  development, structural change towards
  information-intensive industries and services,
  coupled with increased environmental awareness,
  enforcement of environmental regulations, better
  technology and higher environmental expenditures,
  result in levelling off and gradual decline of
  environmental degradation (Panayotou, 1993).

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Economic growth and sustainability
Environmental Impact per unit income
b
k
a
Y2
Y
Y1
0
Income
Quelle Common (1995)
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poltical and economic systems
The 11 Relationship Between GDP and CO2
Emissions Can be Broken
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Example IPAT Model
I environmental impact, measured in vol. or
mass units. P population A per capita income
in money units (e.g. GDP) T technology,
measured in resource demand or emission per
production unit (e.g. t/GDP).
Global CO2- Scenarios
Source UNDP (2001), WRI (2000) PPP
Purchasing Power Parity
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Economy-environment interdependence
4 Functions
e.g., indoor skiing, orswimming
4 environmental. functions 1) life support
services and which hold the functioning system
together 2) resource base (stock or flow) 3)
amenity service base 4) waste sink
e.g., sewage plant
e.g., house insulation
investment
economic activities
Common, 1995
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What should be sustainable?

• Daly (1987) Sustainability requires that all
  processes operate only at their steady state
  renewable resources.
• Pearce et al., (1988) A necessary condition for
  sustainable development is the constancy of the
  natural capital stock.
• Goodland and Ledec (1987) Sustainable
  Development is a pattern of 'development' which
  optimizes the economic and societal benefits
  available in the present without jeopardizing the
  likely potential for similar benefits in the
  future.
• Tietenberg (1984) The sustainability criterion
  suggests that, at a minimum, future generations
  should be left no worse off than current
  generations.

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Concepts of Sustainability

• A sustainable state is one in which
• 1. utility (consumption) is non-declining
  through time.
• 2. resources are managed so as to maintain
  production and consumption opportunities for the
  future.
• 3. the natural capital stock is non-declining
  through time.
• 4. resources are managed so as to maintain a
  sustainable yield of resources services.
• 5. satisfies minimum conditions for ecosystem
  resilience through time.
• 6. sustainable development is based on
  consensus-building and institutional development.

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Consumption Time Paths
CMin minimum level of consumption that society
deems socially and morally acceptable. CSurv
biophysical minimum consumption level (poverty
line)
C(1), C(3), C(5), and C(6) are not
declining. Ranking of C-Paths by a Social Welfare
Function, assuming non-declining
consumption. What about the level of
consumption? How large should be the
non-declining level? Should be the poverty line
culturally or biophysically determined? How about
non-renewable resources and consumption?
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Weak and Strong Sustainability Criteria

• Natural capital (KN) aquifers, soil, biomass,
  atmosphere,...
• physical capital (KP) equipment, buildings,
  infrastructure,...
• human capital (KH) embodied skills to enhance
  the productive potential
• intellectual capital (KI) disembodied skills and
  knowledge (books and other cultural constructs
  that are transmitted and developed through time
  by social learning processes).

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Weak and Strong Sustainability

• Production function with Labour (L), natural
  capital (KN) and Human Made capital (KHM)
• Strong Sustainability KN is non-declining
• Weak Sustainability the sum of KN KHM is
  non-declining
• Solow, Hartwick, and many other economist are
  weak sustainabilists (how about you?)
• substitution between KN and KHM to produce
  life-support services and amenity services (e.g.,
  indoor skiing)

KHM KH KP KI
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How to measure capital

• how to measure the size of the natural capital
  stock?
• how to define a single-valued measure of natural
  capital stock?
• how do we add two lakes and one forest into a
  single value for natural capital (e.g., national
  income accounting)?
• for output of goods and services, an obvious
  weight to use is relative prices (e.g. economic
  accounts).

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Norms of social justice in economics

• Question how should be benefits and costs
  distributed?
• horizontal equity people with equal income are
  treated equally.
• same net benefits within equal income groups,
  different regions, etc.
• vertical equity people with unequal income are
  treated equally.
• same net benefits between unequal income groups
  in a progressive or proportional manner (not
  regressive).

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Lorenz Curves
100
income distribution e.g. between urban and rural
regions, or women and men, or lawers, or farmers,
etc.
absolute equality
80
60
income
40
20
absolute inequality
0
40
60
80
100
20
population
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What about benefits and costs of locally
unwanted/undesirable land uses -LULU)

• Facility owner try to max. net benefits
• close to source of waste
• cheap land
• minimum future liability (minimize risk)
• Recipient community try to max. net benefits
• maximize compensation payments
• maximize safety
• Why do LULUs end up in low-income communities
• land is cheap
• lower compensation
• people want the jobs.

efficiency?
equity?
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Sustainability and Policy

• !!incentives - information - irreversibility!!
• an efficient outcome is a situation where no
  individual can be made better off except at the
  cost of making some other individual(s) worse off
  (fairness?)
• sustainable development will be enhanced if
  pollution flows are reduced, recycling is
  encouraged, more attention is given to the
  regulation, management, and disposal of waste gt
  information!
• !!if all resource-use decisions were reversible,
  then much of the force behind sustainability
  arguments would be lost!!

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Extreme events