Chapter 23
The Quest for Sustainable Development
Chapter 23 begins a discussion on sustainable development. The “Brundland Report” defines sustainable development as “development that meets the needs of the prent without compromising the ability of futur e generations to meet their own needs.” Other definitions of sustainable development abound creating a vagueness associated with the topic.
Sustainable development is a large topic; one that could generate considerable discussion with your students.
I view it as an opportunity to let the students brainstorm. At this point in the mester, they should have a good grasp of the conceptual issues and both student and teacher are likely tired of conventional lectures. Take advantage of this situation and e what they can do with this chapter! The main questions to try to answer are; what are the principles of sustainable development?; What changes are necessary?; How could the transition to sustainable development be managed?; Will the global economic system automatically produce sustainable development?; If not, what policy changes will be necessary?梦见单位同事
⏹Teaching Objectives
1. Provide definitions of sustainable development.
2. Discuss models of sustainability.
3. Discuss efficiency versus sustainability and highlight when the two concepts are incompatible and
when they are compatible.
4. Discuss international trade and sustainability.
5. Discuss options for moving toward sustainable development and the obstacles to that transition.
⏹Outline
I. Sustainability of Development
A. Four possible future scenarios are prented, ranging from a scenario where the future is always
better off to the opposite extreme in which future per capita welfare drops to zero (Figure 23.1).
The scenarios suggest that three dimensions of sustainability are important.
1. The existence of a positive sustainable welfare;
2. The magnitude of the ultimate sustainable level of welfare compared to the current welfare
levels; and
3. The nsitivity of the future level of welfare to actions by previous generations.
Chapter 23 The Quest for Sustainable Development 141 B. Predictions of societal collap em to be exaggerated. The existence of renewable resources
guarantees positive sustainable welfare levels. Therefore, the two extreme scenarios can be ruled out, but it is not clear whether the future generations will be wor off than the prent generation.
C. Current generations can have both positive and negative effects on the sustainable welfare levels
of future generations. Investments in human capital are positive contributions to the future, while fossil fuel u, reductions in biodiversity and pollution will have negative effects.
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D. Market failures and imperfect markets can promote unsustainable outcomes.
1. Free access to resources or open access to resources promotes unsustainable harvesting.
2. Intertemporal externalities also interfere with sustainability. For example, emissions of
greenhou gas impo costs on the future.
E. Some market imperfections, however, have the opposite effect and help promote conrvation.
1. An oil cartel, for example, restricts supply, which conrves more for the future than
a perfect market would.
2. Renewable alternatives may be discovered in the prence of scarcity. Fish farming is one退税流程
example.
F. Restoring or ensuring efficiency is not sufficient to produce sustainability.
G. Efficient allocations of depletable resources show declining consumption over time, which is not
sustainable without transfers.
H. Dasgupta and Heal (1979) model an economy where a consumption good is produced with
capital and a depletable resource. The depletable resource can be ud to produce both capital and the consumption good. The authors show that sustainable consumption exists in this model, but that any positive discount rate would result in declining consumption levels.
I. This and other economic models show that restoring efficiency will typically be a move toward
sustainability, but will not be sufficient.
J. If the value of the capital stock is declining, the activity is unsustainable (e Example 23.1 for the ca of Malaysia). However, if the value of the capital stock is rising, the activity may still be unsustainable if the prices are wrong (Ashiem 1994 and Pezzey 1994). If the capital stock is being valued at the wrong prices, we may have the fal impression that the value of the depletion is less than the value of the investment.
K. Efficient allocations of depletable resources do not necessarily produce sustainable growth.
L. Renewable resource models suggest that sustained growth of welfare with renewable resources can only occur if the resource growth rate exceeds the sum of both the discount rate and the population growth and if the initial food supply is sufficient for the existing population. Both of the conditions could be difficult to meet. The cond condition is especially important in poor countries that might have to sacrifice the future so as not to starve. This suggests that foreign aid is important for sustainability (Pezzey 1992).
M. Global climate change is another example for which efficiency is not sufficient for sustainability.
With climate change, sustainability can only be achieved if current generations t aside
compensation for the future and if the future would be willing to accept monetary compensation. N. The notion of sustainability gets even more complicated when we acknowledge that we do not know the values of the future. We do not know how much the future values the continued
existence of fish stocks for example, even though we may have replaced wild fish with fish farms. Thus, some resources must be protected becau of this uncertainty.
142 Tietenberg/Lewis •Environmental and Natural Resource Economics, Eighth Edition
O. The starting point will determine whether or not restoring efficiency will result in a sustainable outcome. Efficient markets cannot always achieve sustainability, but this does not mean that
efficient markets will not result in sustainable allocations. The incompatibility of efficiency and
sustainability is the exception.
II. Trade and the Environment
This ction explores the various views on trade and the environment.
成为好爸爸A. Trade can have detrimental effects on the environment when some nations (usually developing)
have poorly defined property rights. This tragedy of the commons problem can be intensified by
freer trade.
B. The pollution havens hypothesis suggests that free trade can produce pollution hotspots if strict
environmental regulations in one country encourage domestic production facilities to move to
countries with less strict regulations. Pollution levels in the havens can change due to:
1. the composition effect;
2. the technique effect; or
3. the scale effect.
Studies of this hypothesis have found little evidence to support it. Pollution control costs are
a small portion of total production costs.
C. The Porter hypothesis suggests that firms in areas with the most stringent regulations will be at
a competitive advantage. Strict environmental regulations encourage firms to innovate.
Innovations make firms more competitive.
D. According to the Environmental Kuznets Curve idea, environmental degradation increas
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with higher incomes up to some income level (the turning point) and then, after that certain
income level is reached, high incomes result in lower environmental degradations. Again, there
is little empirical support for this theory, though some studies have found it applies to certain
pollutants (like SO2), but not to others (such as CO2).
E. Example 23.2 explores the empirical evidence of the Environmental Kuznets Curve in Mexico.
In particular, it analyzes if including Mexico in NAFTA had development effects on this
country’s economy, which ultimately promoted an increa in the environmental protection.
F. Evidence suggests that environmental regulations are not a major factor in firm location decisions
or in the direction of trade.
G. The environmental impacts of free trade em to depend on the specific situation.
H. The environmental implications of foreign investment is a more recent question.
I. NAFTA allows corporations to sue the national government if they feel a government
regulation adverly affects their investment such that it violates NAFTA rights. This clau
rais environmental concerns becau it could be ud to require governments to compensate
companies who have been hurt by environmental regulations. This could put a damper on
environmental regulations. Several cas have already arin.
J. Under GATT rules and the WTO, a disputed environmental action that discriminates against goods from another country is unacceptable. Debate 23.1 examines the most controversial of
the rules that invol ves a distinction between “product” concerns and “process” concerns.
Chapter 23 The Quest for Sustainable Development 143
III. Managing the Transition
This ction tries to answer the question of how the transition to sustainable development can be accomplished.
A. The transition to sustainable development is difficult.
1. Some entrenched development paths are unsustainable.
2. The unsustainable paths have so dominated sustainable ones that switching will be very
difficult.
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B. For example, development in Los Angeles was partially a respon to a massive program of
highway construction and low gasoline prices. Now, the efficient u of mass transit to help curb air pollution will require changes that will be extremely difficult to implement—more difficult
than before the land-u patterns became so entrenched.
C. Transferable development rights are a market option for prervation. The rights help to
conrve and prerve nsitive or historic areas by granting credits to developers who limit
development in environmentally nsitive areas. Some examples are discusd in Example 23.3.
D. Enforceable international agreements will be necessary to deal with global environmental
problems. Changing economic incentives can help the move toward sustainability. Many
barriers to international cooperation exist.
E. Choosing cost-effective and flexible policy instruments will help encourage nations to impo
stricter environmental policies. Moving from inefficient policies to efficient policies will create
gains.
F. Offering local communities a stake in prervation can also enhance enforceability.
G. Economic incentives can be ud to reduce the conflict between economic development and the
sustainable u of a renewable resource. Transferable catch quotas for fish harvesting (e.g., in
New Zealand) is one example. The offt policy is another.
H. Economic analysis suggests five principles that can provide the foundation for international
cooperation in the resolution of international environmental problems.
1. The full-cost principle suggests that all urs of environmental resources should pay their
full cost. This would include both making environmental costs explicit, but would also
entail the elimination of inappropriate subsidies. Prices should also reflect the scarcity of
the resource.
2. The cost-effectiveness principle says that all environmental policies should be cost-
effective, meaning they should achieve a policy objective at the lowest possible cost.
Achieving the full-cost principle would automatically produce cost-effectiveness. Fairness
will likely require some cost sharing to be negotiated. Emissions trading is one example of
the implementation of the cost-effectiveness principle.
3. The property rights principle suggests that local communities should have a property right
over flora and fauna within their borders. Well-defined property rights would ensure that
local communities receive any benefits associated with prervation of the species. Plant
bad medicinal discoveries could bring royalties to local communities.
4. The sustainability principle says that all resources should be ud in a manner that respects
the needs of future generations. Restoring efficiency would help in the transition to
sustainability. Restoring intergenerational fairness in the u of depletable resources is also
important. One application of this principle would be the adjustment of the national income
accounts.
144 Tietenberg/Lewis •Environmental and Natural Resource Economics, Eighth Edition
5. The information principle suggests that citizens need to be informed. Implementing this
principle can involve freedom of the press, labeling of green products, and better access to
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records on the quantities and types of pollutants emitted. Example 23.3 discuss some
positive effects of this principle in a governmental program in Indonesia.
论情⏹Common Student Difficulties
This chapter is very difficult, becau it covers a lot of material. While many of the terms should be familiar at this point, the breadth of topics and the complicated nature of the problem could possibly em daunting to your students. However, many of the examples refer to topics in other chapters, making it a nice summary. Some proposals for sustainability are outlined. The may be controversial and worthy of class discussion. Depending on time availability and student interest, it might make n to spend some extra time on the last few chapters.
⏹Suggested Classroom Exercis
One interesting exerci might be to look for the characteristics of an enforceable international agreement. This is an especially timely topic given the current status of the Kyoto Protocol and the views of the Bush administration. It might be interesting to examine the Montreal Protocol and look at why it is an example of a successful agreement, while the Kyoto Protocol does not have tho characteristics and was doomed to fail. A uful source on this is (Barrett, S. “Montreal versus Kyoto: International Cooperation and the Global Environment,” in Global Public Goods (Kaul, et al. editors), Oxford, New York, 1999).
Another exerci would be to compare the NAFTA rules to other free trade zone rules and examine the concept of sustainability and environmental justice within the different frameworks.
⏹Essay Question
Debates 23.1 explores a ca for which eco-labeling was ud to skirt WTO rulings that force countries
to treat products as equal even if the production process violates an environmental rule in the importing countries. Are free-trade and environmental sustainability inconsistent?
