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Sustainable Development Policy for sustainable development The

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					Sustainable Development
        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
        own needs„
   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)
                              population


                                       food supply




                                    food / capita




                Jahre

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
   (Panayotou, 1993).
         Economic growth and sustainability

                                        Environmental
                                                                   impact
                                           Impact        Fall 1:           0 as t  
                                                                     Y
Environmental
Impact per unit
   income




                                                                               t
                                b
k
                                        Environmental              impact
                                           Impact       Fall 2 :          k   as t  
                              a                                      Y
 0                Y*    Y1   Y2
                               Income




Quelle: Common (1995)                                                              t
poltical and
economic
systems

The 1:1
Relationship
Between GDP and
CO2 Emissions
Can be Broken
                Example: IPAT Model

                    I = environmental impact, measured in vol. or mass units.
                    P = population
I  P  AT         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
 Scenario:
 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
    Ax2
 3) P x 1.5 &             8.8005             13,896                0.0001952       23.881952
    Ax2&
    I from today

 Source: UNDP (2001), WRI (2000); PPP = Purchasing Power Parity
        Economy-environment                                            4 Functions
        interdependences



                               e.g.,
4 environmental                indoor
                               skiing, or           e.g., house     e.g.,
functions:                     swimming             insulation      sewage
                                                                    plant
1) life support services and
which hold the functioning
system together
2) resource base (stock or                  investment
flow)
                                              economic activities
3) amenity service base
4) waste sink




                                                                             Common, 1995
    Thermodynamics
is the science of energy. Energy is the potential to do work or
   supply heat

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
    Recycling
The laws of thermodynamics mean, given enough energy,
  that all transformations (recycling) of matter are possible
  (in principle).

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.
                                        i    
                                                 the PF is material based
                                                 includes possible feedbacks
    Ecology
the study of the distribution and abundance of plants and
   animals (ecosystem)

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
    takeover.

3. The self-cancelling effects on welfare limit the desirability of aggregate
    growth.

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
     current generations.
       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
   resources services.

5. satisfies minimum conditions for ecosystem resilience through
   time.

6. sustainable development is based on consensus-building and
   institutional development.
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?
        The Hartwick Rule
Hartwick (1977, 1978) identified conditions for infinite constant
  consumption subject to finite stock of a non-renewable resource.
              t 
       W           U  Ct  e   t dt
             t 0

         
s.t.    K  Q  K t , Rt   Ct
         
        S   Rt
         _      t 
        S             Rt dt
                t 0




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
  (asymptotically).

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
  enough.

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
  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).
       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
  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).
             Ecologists on sustainability, 4 &5
             - resources are managed so as to maintain a sustainable yield
             of resources services
             - satisfies minimum conditions for ecosystem resilience
             through time.
     G(S)           Maximum-Sustainable-Yield

H* = G(S*)
      H2

      H1




               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
  ecological approaches.

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
    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).
                  Lorenz Curves


           100
                                                 income distribution e.g.
                 absolute equality
           80                                    between urban and rural
                                                 regions, or women and
% income




           60
                                                 men, or lawers, or farmers,
           40
                                                 etc.

           20

                                                absolute inequality
             0   20     40    60     80   100
                      % population
    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!!

				
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