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Sustainable Development: Theory and Practice for a Sustainable Future…
Sustainable Development:
Theory and Practice for a Sustainable Future
Andrew Steer and Will Wade-Gery
Introduction
The concept of sustainability has long-standing roots in the physical, biological, and engineering sciences.
The question of whether the planet’s limited natural resources can continue to support human development indefinitely goes back at least as far as the late eighteenth century to the Reverend Thomas Malthus (see Dixon and Fallon, 1989)
The term “sustainable development” is of more recent origin.
First widely publicized by the International Union for the Conservation of Nature in the World Conservation Strategy (1980)’ sustainable development achieved even greater prominence seven years later with the release of Our Common Future, the seminal report prepared by the World Commission on Environment and Development (better known, perhaps, as the Brundtland Commission).
There is also broad agreement on the term’s conceptual “basics”:
economic development, to be sustainable, must be modified to take account of development’s ultimate dependence on our natural environment.
In fact, by some estimates there are now as many as 70 different definitions of sustainable development, offering a number of possible modifications to the development process and a number of different reasons for doing so (Holmberg, 1992)
The Traditional Account
The Brundtland Commission’s definition of sustainable development - “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”
In the past, economists have tended to emphasize the economic growth element of sustainable development.
Given the abundance of natural capital, neo-classical economics assumes (reasonably enough) that the greatest returns will be generated by investment in physical capital, even at the cost of depreciating natural capital.
Incomes will continue to rise - so economists tell us - as long as investment in new capital is high enough and productive enough to generate the required increases in future consumption. What kind of capital: physical capital like plant and machinery, human capital like education or technology, or natural resources like forests or fish stocks?
What is Wrong with It?
Externalities and Current Welfare
Indeed, in extreme cases, the benefits from rising incomes can be offset by the costs imposed on health and the quality of life
So if development is to be sustainable, we have to’abandon the notion that consumption and income levels are adequate measures of either individual or collective levels of human welfare.
But does this really argue for modifying economic orthodoxy?
But even though economic orthodoxy accepts the existence of environmental externalities, the fact remains that economists, most of whom are unfamiliar non-economic systems and interactions, have consistently underestimated their importance - in part because they are difficult to measure in economic terms.
Epidemiologists, for instance, know that water contamination increases the incidence of diseases which extract an almost unimaginable price in human suffering
For development to be sustainable, environmental externalities must be factored into decision making at every level.
Externalities and Future Welfare
In some circumstances, the full welfare effects of externality costs may not show up immediately.
First, by undermining the relationship between present levels of investment and future levels of consumption, environmental degradation and ecosystem destruction can cause substantial loss of welfare in the future.
Take soils. Many farmers seek actively to promote the fertility of the land on which they farm.
Second, some users of natural resources may be forced to increase consumption to a level at which investment in that resource is no longer sufficient to maintain its productivity.
For instance, one way to increase crop yields, in the short term, is to reduce fallow times
Of course, in both these cases, farmers may be aware of the eventual welfare costs of their actions.
Externalities and Poverty
The current and future welfare effects of environmental externalities are overwhelmingly concentrated on the poor (KEY)
Water-related diseases afflict the poor in disproportionately large numbers because they cannot afford to invest in measures which would prevent water contamination. (KEY)
Over a billion people lack access to clean water; more than 1.7 billion are without adequate sanitation
The poor’s political marginalization further limits their ability to avoid the impact of externalities.
When cholera struck Peru in 1991, the government advised Peruvians to boil all drinking water, a course of action which would have cost the typical Peruvian slum-dweller about a third of his/her annual income, well beyond the means of most poor families. Richer families, by contrast, could buy their way out of such situations.
More powerful groups, who can better control the public policy process, can obtain environmental goods denied to the poor - in-house water connections, sewerage services, subsidized energy, and so on.
All too often in developing countries, the environmental agenda is dominated by air pollution and other forms of degradation which more powerful groups cannot easily avoid, while concerns such as water pollution receive less attention precisely because their health impacts, although serious, are concentrated on the poorest members of society. (KEY, KEY)
Ecological Thresholds and Uncertainties
The second way in which environmental factors question the economist’s orthodox understanding of sustainable development is methodological.
Thus, to the extent that they have included in their calculations the potential impact of a deteriorating natural capital base, they have tended to assume that environmental impacts will be gradual and consequently susceptible of moderation by remedial policy
Unfortunately, the smooth functions which underlie neo classical economic theory may not always be accurate representations of the behaviour of real world ecosystems
We are beginning to realize that functional discontinuities could invalidate many economic projections - with uncertain, but potentially catastrophic consequences of an irreversible nature.
Rather, the concern is that projections of ozone depletion or of its ecological effects could be wrong
Since the interactions of stratospheric ozone with the earth’s ecological and economic systems are largely unknown, it is possible that some ecologicathreshold may be crossed beyond which disastrous effects on economic and social life would irreversibly occur.
Although we tend to associate ecological thresholds with global environmental issues such as global warming or ozone depletion, they can be local as well.
Here is a clear case of economic activity destroying its own ecological underpinnings
The Way Forward
“Win- Win Policies
Policies which exploit the extensive synergies between economic growth and environmental improvement, so-called “win-win” measures, are perhaps the clearest way forward.
There are many other policies with this “win-win” quality. Cutting subsidies to environmentally damaging activities such as logging or ranching in tropical forests, or increasing irrigation water prices which are below supply costs, improves the efficiency with which resources are allocated
Moreover, many forms of environmental degradation - inadequate sanitation, shortages of clean water, indoor air pollution from burning firewood and dung, and many forms of land degradation - have their root cause in poverty.
poverty alleviation and the protection of the environment reinforce each other
In such cases, sound development policy is sound environmental policy. Development, in other words, is sustainable.
Breaking the Negative Link
two-stage process
First, the welfare trade-offs between economic growth and environmental protection need to be accurately assessed through cost-benefit analysis.
Once the true costs and benefits of alternative courses of action are exposed, policies can be put in place to influence behaviour in ways which preserve and enhance overall welfare, now and in the future.
Efective Cost-benefit Assessment
In the 199Os, three new directions for cost-benefit analysis will have to be pursued.
Second, valuation will need to be extended to less local levels of decision-making - sectoral, national, regional, or international where cost-benefit techniques are far less advanced
Third, the possibility of crossing thresholds can be reduced by adopting precautionary approaches in circumstances where ecological collapse could conceivably develop
First, most project-level analysis has been conducted by assessing physical environment impacts - far more emphasis is required on identifying the economic costs and benefits which flow from these physical impacts
Cost-eflective Policies and Strong Enforcement
The experience of developed countries shows clearly that once costs and benefits are clearly understood and assessed, the links between economic growth and environmental degradation can be broken or muted by carefully- targeted policies.
A great deal of research, at the World Bank and elsewhere, is currently underway to identify policies which can realize welfare gains in the most cost- effective manner possible
A great deal of research, at the World Bank and elsewhere, is currently underway to identify policies which can realize welfare gains in the most cost- effective manner possible
they encourage polluters to develop innovative and cost-effective pollution abatement technologies
they have low enforcement and administrative costs - a vital consideration given the constraints on developing countries’ institutional capabilities
they allow environmental problems to be addressed by those polluters able to do so at least cost
Sophisticated valuation techniques now under development, may be able to demonstrate that conserving a particular rainforest area addresses peoples’ preferences far more efficiently than “developing” it in environmentally-destructive ways
The “capture” problem is made particularly acute by the concept of intrinsic value, which is the value people place on environmental assets per se, rather than for any identifiable functions they serve
An analysis of the Korup National Park in Cameroon, for instance, found that
in terms of national preferences only, it would be difficult to justify continued conservation of the area, since logging would have far greater returns. But when external preferences for conservation were included, the case against logging was convincing.
At the 1992 Earth Summit in Rio, the international community agreed that environmental damage has two main causes: first, unmanaged economic expansion; and second, a lack of economic development.
As is recognized throughout Agenda-21, this causal duality implies that two different sets of policies are required: those which seek to break the negative links between economic growth and environmental degradation, and those which seek to exploit the positive links between economic growth and environmental improvement.
Tough Conceptual Issues
Sustainable Yield and Sustainable Development
The relationship between sustainable yield and sustainable development is the source of much confusion.
Natural and Physical Capital
The Discount Rate
Conclusion