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
"development that meets the need of the present without
compromising the ability of future generations to meet their
The Rio-Earth Summit - 1992
175 countries and >1500 NGOs (bio-diversity, climate change,
sustainable forest management)
The Johannesburg Summit - 2002
climate change. drinking water and renewable energy
Malthus-Model (Malthus 1766-1834)
food / capita
What are the policy implications?
What would you change in the modell?
Growth and Sustainability
The Kuznets Kurve/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
Economic growth and sustainability
Impact Fall 1: 0 as t
Impact per unit
Impact Fall 2 : k as t
0 Y* Y1 Y2
Quelle: Common (1995) t
Between GDP and
Can be Broken
Example: IPAT Model
I = environmental impact, measured in vol. or mass units.
P = population
I P AT 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
P A T I
(in Mrd) (PPP GDP (tonne pro $ (in Mrd tonnes)
in $) GDP)
today 5.8627 6,948 0.0005862 23.881952
1) P x 1.5 8.8005 6,948 0.0005862 35.843711
2) P x 1.5 & 8.8005 13,896 0.0005862 71.687417
3) P x 1.5 & 8.8005 13,896 0.0001952 23.881952
I from today
Source: UNDP (2001), WRI (2000); PPP = Purchasing Power Parity
Economy-environment 4 Functions
4 environmental indoor
skiing, or e.g., house e.g.,
functions: swimming insulation sewage
1) life support services and
which hold the functioning
2) resource base (stock or investment
3) amenity service base
4) waste sink
is the science of energy. Energy is the potential to do work or
The FIRST law of thermodynamics says that energy can
neither be created nor destroyed - it can only be converted
from one to another
The SECOND law of thermodynamics is also known as 'the
entropy law'. It says that heat flows spontaneously form a
hotter to a colder body, and that heat cannot be
transformed into work with 100% efficiency (entropy is a
measure of unavailable energy).
open vs. closed vs. isolated system
The laws of thermodynamics mean, given enough energy,
that all transformations (recycling) of matter are possible
Given the energy, there is no necessity that shortage of
minerals constrain economic activities (nuclear fusion)
no scarcity of minerals (what about fossil fuels?)
The problem is that such expenditure of energy would involve
a tremendous increase in the entropy of the environment,
which would not be sustainable for the biosphere
(Biancardi et al., 1993)
=> Sustainability issue involves uncertainty!!!
Production function specification
Qi fi Li , Ki i = i th firm
R represents some natural resource (matter cannot be
Qi fi Li , Ki , Ri created)
Qi fi Li , Ki , Mi M represents flow of waste
A denotes the ambient concentration level of some
Qi fi Li , Ki , M i , A M i pollutant which depends on the total of waste
i emissions across all firms. However, matter can
be created => contradiction =>
synthesis of resource and environmental
Qi fi Li , Ki , Ri , M i Ri , A M i economics production function.
the PF is material based
includes possible feedbacks
the study of the distribution and abundance of plants and
an ecosystem can be defined at various scales, local <=>
global (ponds <=> biosphere)
2 concepts (Holling, 1973, 1986): Stability and Resilience
Stability is the propensity of a population to return to some
kind of equilibrium following a disturbance
Resilience is the propensity of an ecosystem to retrain its
functional and organisational structure following a
disturbance (economic activities???).
Limits to Growth
Daly (1987): 2 classes of limits to growth; biophysical limits
and the desirability to growth, rather than its feasibility.
1. The desirability of growth financed by running down resources is limited
by the cost imposed on future generations.
2. The extinction or reduction in the number of sentient non-human species
whose habitat disappears limits the desirability of growth financed by
3. The self-cancelling effects on welfare limit the desirability of aggregate
4. The desirability of growth is limited by the corrosive effects on moral
standards of the very attitudes that foster growth, such as glorification
of self-interest and a scientific-technocratic worldview.
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
Concepts for Sustainable Development
A sustainable state is one in which:
1. utility (consumption) is non-declining through time.
2. resources are managed 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
5. satisfies minimum conditions for ecosystem resilience through
6. sustainable development is based on consensus-building and
Consumption Time Paths
CMin = minimum level of consumption that
society deems socially and morally
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
What about the level of consumption?
How large should be the non-declining
Should be the poverty line culturally or
How about non-renewable resources and
The Hartwick Rule
Hartwick (1977, 1978) identified conditions for infinite constant
consumption subject to finite stock of a non-renewable resource.
W U Ct e t dt
s.t. K Q K t , Rt Ct
S Rt dt
Cobb-Douglas Production function
Qt K t * Rt with 1
The Hartwick Rule
with enough K and , high level of output can be produced
with very small level of resource input, and a programme of
capital accumulation such that Rt never actually becomes 0
constant consumption is the outcome if a particular
savings/investment rule (Hartwick rule) were followed in an
economy where depletion of the resource satisfied the
conditions for inter-temporal efficiency and substitution
possibilities as between capital and resources are great
total rent arising in the resource extraction industry be saved
and invested in reproducible capital.
Weak and Strong Sustainability
Production possibilities at any point in time depends on the
stock (capital) of productive assets available for use.
Natural capital (KN): aquifers, soil, biomass, atmosphere,...
physical capital (KP): equipment, buildings, infrastructure,...
human capital (KH): embodied skills to enhance the
intellectual capital (KI): disembodied skills and knowledge
(books and other cultural constructs that are transmitted
and developed through time by social learning processes).
Weak and Strong Sustainability Criteria
Production function with Labour (L), natural capital (KN) and
Human Made capital (KHM):
Q f ( L, K N , K HM ) KHM = KH + KP + KI
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)
How to measure ‘natural’ capital
how to measure the size of the natural capital stock?
how to define a single-valued measure of natural capital
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).
Ecologists on sustainability, 4 &5
- resources are managed so as to maintain a sustainable yield
of resources services
- satisfies minimum conditions for ecosystem resilience
H* = G(S*)
S1 S* Smax S
The institutional conception, 6
- sustainable development is based on consensus-building
and institutional development.
This view focuses on processes, rather than looking at
outcomes or constraints as do the economic and
de Graaf et al. (1996): sustainable development is defined as
- development of a socio-environmental system with a high
potential for continuity because it is kept within economic, social,
cultural, ecological and physical constraints
- development on which the people involved have reached
consensus (through negotiations).
Norms of social justice in economics
Question: how should be benefits and costs distributed?
horizontal equity: people with equal income are treated
same net benefits within equal income groups, different
vertical equity: people with unequal income are treated
same net benefits between unequal income groups in a
progressive or proportional manner (not regressive).
income distribution e.g.
80 between urban and rural
regions, or women and
men, or lawers, or farmers,
0 20 40 60 80 100
Sustainable Development 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 => information!
!!if all resource-use decisions were reversible, then much of
the force behind sustainability arguments would be lost!!