Fig. 11.1 EKC hypothesis – confi rmed and rejected . . . . . . . . . . . . . . . . . . . 199 Fig. 11.2 Inconclusive evidence for the EKC hypothesis. . . . . . . . . . . . . . . . 200 Fig. 11.3 Limits to growth model – components and interactions . . . . . . . . . 203 Fig. 11.4 Selected scenarios of the LTG model . . . . . . . . . . . . . . . . . . . . . . . 205 Fig. 12.1 Econometric input-output model (Panta Rhei) . . . . . . . . . . . . . . . . 217 Fig. 12.2 Panta Rhei projections of GDP and CO 2 emissions, Germany 1991–2007/2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 Fig. 12.3 Sustainability constraints in a linear programming model . . . . . . . 219 Fig. 13.1 Natural wealth and economic growth in Botswana and Namibia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242 Fig. 13.2 Maximum consumption limits in the feasibility space . . . . . . . . . . 246 Fig. 15.1 Towards sustainability – conclusive questions . . . . . . . . . . . . . . . . 263 Fig. I.1 Optimal environmental protection. . . . . . . . . . . . . . . . . . . . . . . . . . 281 Fig. III.1 SEEA application: Germany, 1990 . . . . . . . . . . . . . . . . . . . . . . . . . 286 xxviii List of Figures List of Tables Table 1.1 Indicators of global non-sustainability . . . . . . . . . . . . . . . . . . . . . 10 Table 2.1 Schools of eco–nomic thought . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Table 2.2 Environmental sustainability: concepts and analysis . . . . . . . . . . 30 Table 3.1 Country categories by level of growth and development . . . . . . . 47 Table 3.2 Non-sustainability in development: From limitations to limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Table 4.1 From framework to statistics: Format and use of the FDES . . . . 65 Table 4.2 United Nations 2004 questionnaire on environment statistics, river quality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Table 4.3 Framework for statistical integration (FSI) . . . . . . . . . . . . . . . . . 71 Table 4.4 Framework for Sustainable Development Indicators (FSDI). . . . 75 Table 4.5 FSDI and related frameworks: Freshwater indicators . . . . . . . . . 77 Table 4.6 Trends towards meeting MDG targets for access to water and sanitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Table 5.1 EEA indicator assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Table 5.2 Dutch policy theme potentials for calculating theme equivalents and indicators. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Table 5.3 Indices of sustainability: Concepts and methods . . . . . . . . . . . . . 94 Table 5.4 Indices of sustainable development: Comparison of results. . . . . 95 Table 5.5 Evaluation of indices of environmental and socio-economic sustainability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 Table 6.1 Material fl ow balance and derived indicators. . . . . . . . . . . . . . . . 116 Table 6.2 Physical input-output table, Germany 1990 (Million tons) . . . . . 122 Table 7.1 Simplifi ed structure of a NAMEA . . . . . . . . . . . . . . . . . . . . . . . . 138 Table 7.2 NAMEA 1997 (Netherlands) – origin and destination of material fl ows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 Table 8.1 NDP and EDP in case studies of green accounting (lowest and highest percentages) . . . . . . . . . . . . . . . . . . . . . . . . . 156 Table 8.2 Adjusted net savings, world regions 1999 (% of GDP) . . . . . . . . 158 xxix Table 8.3 Green accounting indicators, Germany 1990, 1991 and 1995 (provisional estimates). . . . . . . . . . . . . . . . . . . . . 158 Table 9.1 Eco-balance, Kunert AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 Table 10.1 Environmental depletion and degradation cost in selected countries (% of NDP) . . . . . . . . . . . . . . . . . . . . . . . . . . . 187 Table 10.2 Environmental-economic profi les: Energy and CO 2 intensities, Germany 2000 (1991). . . . . . . . . . . . . . . . . . . . . 189 Table 11.1 Assumptions, purpose and critique of the LTG model. . . . . . . . . 206 Table 12.1 Economic growth and effects of environmental standards, Sweden, 1985/2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . 215 Table 13.1 Taxonomy of environmental policy instruments . . . . . . . . . . . . . 234 Table 13.2 Evaluation of environmental policy instruments . . . . . . . . . . . . . 240 Table 13.3 Eco-tax in theory and practice . . . . . . . . . . . . . . . . . . . . . . . . . . . 244 Table 14.1 Sustainability effects of globalization: Pros and cons . . . . . . . . . 253 Table I.1 Non-market effects conducive to market and policy failure. . . . . 276 xxx List of Tables Part I Questions, Questions, Questions This introductory part raises the main questions, which the book seeks to answer. Chapter 1 identifies the planet’s environmental problems and describes defensive action by the international community. The scattered evidence does not confirm predictions of environmental doom; it does reveal, though, human responsibility for environmental deterioration. Chapter 2 answers the question about the role of economics as a matter of inter- action between economic activities and the provision of environmental services; both also affect human welfare. Among different schools of environmental- economic analysis, two approaches represent a fundamental dichotomy between environ- mental (market-oriented) and ecological (market-sceptical) economists. Both schools want to maintain environmental services and human well-being but offer different concepts of these maintenance goals. Economic sustainability relies on produced and natural capital maintenance; ecological sustainability seeks to reduce the burden on the environment by a dematerialized economy. The term ‘eco–nomics’ stands for both schools and sustainability concepts. Parts II, III and IV will look for ways of bridging, or at least clarifying, this dichotomy by quanti- tative assessment and analysis. The picture gets more complicated when introducing further social, cultural and political goals into the sustainability discussion. The resulting popular para- digm of sustainable development is opaque and suffers from an implementation deficit. This is the reason why Chapter 3 dares to ask whether the paradigm has run its course. The final chapter of the book raises all these questions again. It will provide some answers without pretending to know them all. Chapter 1 What on Earth is Wrong? Environmental doom-and-gloom literature created awareness of environmental problems, as well as advocacy for environmental action. The international response produced declarations, action plans and conventions. Global conferences propa- gated the paradigm of ‘sustainable development’ but did not succeed in penetrating economic policy. Vision, advocacy and action plans are important means of spreading the idea of sustainable development. They need to be questioned and modified if facts and figures do not support their predictions and strategies. Available indicators and reports do show symptoms of environmental non-sustainability of particular economic activities. They are inconclusive as to the overall effect on human welfare and the sustainability of economic growth and development. Extended economic analysis (Ch. 2) provides the framework for assessing sustainability and its benefits. 1.1 Paradise Lost It began with innocence lost. Human awareness of good and evil was punished by extradition from paradisiacal harmony with nature. Together with the biblical call to ‘subdue the earth’ (Gen 1:28), this powerful metaphor dramatizes human aggres- sion of nature by technology and unrestrained proliferation. Forty years ago, White (1967) set off a heated debate with his claim that Christian arrogance towards nature is responsible for the contemporary environmental crisis. Most religions embrace now the notion of stewardship of the environment by the current genera- tion for future generations [FR 1.1]. 1 Far beyond the reach of Judaeo-Christian mythology, environmental destruction and catastrophe show the cost of human ingenuity in exploiting nature’s resources. 1 References to the further-reading section at the end of each chapter are shown in brackets as FR and section number. P. Bartelmus, Quantitative Eco-nomics, 3 © Springer Science + Business Media B.V. 2008 4 1 What on Earth is Wrong? Overuse of natural resources contributed to the downfall of ancient cultures and empires like Mesopotamia, classic Maya and the Roman Empire. Land degradation, brought about by overirrigation and ensuing water logging and salinization, is the main reason for the breakdown of agricultural systems. Overpopulation, overtaxa- tion, rebellion and war are socio-political factors in the collapse of ancient societies. In the eighteenth and nineteenth centuries the search for new sources of natural and human-made wealth drove the needs of warring and colonizing Europe [FR 1.2]. Among others, securing energy supply has been a motive for the current war in Iraq. Perhaps the most ominous development is that technological advances in harnessing nuclear power and genetic resources have now the power to endanger the survival of the planet. Is apocalypse the inevitable consequence of heeding the biblical advice? Or are environmental concerns just another bug in our social systems geared towards the creation of ever-greater wealth? Can paradise be regained or at least some semblance of it re-established? When and where, and for whom? The answers range from predictions of environmental doomsday, calling for a new environmen- tal ethics [FR 13.3], to faith in technological progress. Obviously, we need to examine these proclamations with hard facts and figures – hence the book’s focus on quantification. The need to bring in economics may not be that obvious at first sight. A closer look at the environmental conundrum reveals, however, that economic activities can be both the cause of the problem and part of its solution. The following section sets out, therefore, from an examination of early dooms- day scenarios and international reactions and responses. Next, key indicators of the state of the environment are assessed as to their capacity of alerting to possibly disastrous transgressions of environmental thresholds. The purpose is to set the stage for examining (in Ch. 2) the ability of economics to deal with environmental limits in our quest for prosperity. 1.2 Environmental Doomsday and International Reaction 2 Conspicuous pollution incidents in the 1960s and neo-Malthusian views of demo- graphic and economic growth led to the appearance of environmental doomsday literature. Titles like The Death of Tomorrow (Loraine, 1972), Silent Spring (Carson, 1965), Blueprint for Survival (Goldsmith et al., 1972), or Conservation for Survival (Curry-Lindahl, 1972) are indicative of the environmental mood in the late 1960s and early 1970s. The use of a seemingly objective computerized global model gained widespread attention for the Club of Rome’s Limits to Growth report (Meadows et al., 1972). The model predicted ‘a rather sudden and uncontrollable 2 Most of the first part of this section is (with some modifications) from Bartelmus (1994a, pp. 5–8; with permission by the copyright holder, Taylor & Francis). decline in both population and industrial capacity’ within the current century if growth trends remain unchanged. To avoid the disastrous consequences of transgress- ing these limits the authors called for ‘a controlled, orderly transition from growth to global equilibrium’. Chapter 11 will critically review the assumptions and results of the model. All these publications deserve credit for creating awareness of environmental con- cerns and alerting us to potentially disastrous trends of environmental deterioration. However, countries in the early stages of economic development could not accept zero-growth strategies with an exclusive focus on ecosystems. For them, improving the standards of living appeared to be more important than concern about wildlife or global pollution. In their view, only affluent countries could afford the luxury of diverting some of their wealth to environmental protection. Moreover, the high and wasteful consumption of the industrialized nations generated most of the stress on the resources of poor countries. Developing countries thus reacted with suspicion to proclamations of global solidarity for our planetary home. The only view rich and poor countries seemed to share at the time was the conviction that environmental conservation and economic development are in conflict. The international community opened the dialogue on environment and devel- opment between developed and developing countries. A preparatory seminar for the global United Nations Conference on the Human Environment (Stockholm, 5–16 June 1972) concluded that environmental problems result not only from the development process itself but also from the very lack of development (United Nations Conference on the Human Environment, 1972). Poor countries have to cope with lack of clean water, inadequate housing and sanitation, malnutrition, disease and natural disasters. The metaphor ‘pollution of poverty’ illustrates this aspect of the environmental question. Consequently, environmental goals should provide a new dimension to the development concept. The Conference itself endorsed the principle of integrating environment and development. It also estab- lished a small, but rapidly expanding secretariat, the United Nations Environment Programme (UNEP) to implement and monitor an Action Plan for the Human Environment (United Nations, 1973). Despite the call for integrating environment and development, integration did not take place. Issues of population growth and urbanization, economic develop- ment, desertification, pollution and resource exploitation continued to be the responsibility of specialized departments, while macroeconomic policies focused on maximizing economic growth. Relatively weak environmental agencies addressed environmental impacts, albeit without much influence on socio- economic decision-making by the central government. ‘A widespread feeling of frustration and inadequacy in the international com- munity about our own ability to address the vital global issues and deal effectively with them’ (WCED, 1987) motivated, therefore, the United Nations to establish a World Commission on Environment and Development (WCED). Under the generic label of sustainable development, the WCED proposed a large variety of policy recommendations that should meet ‘critical objectives’ for such development. The objectives included: 1.2 Environmental Doomsday and International Reaction 5 6 1 What on Earth is Wrong? ● Reviving growth while changing the quality of growth ● Meeting essential needs for jobs, food, energy, water and sanitation ● Conserving and enhancing the resource base ● Reorienting technology and managing risk, and ● Merging environment and economics in decision-making. The idea of effectively merging environmental protection into socio-economic planning and policies had been discussed extensively in the wake of the Stockholm Conference. The WCED advanced, however, a new approach for implementing the integration of environment and development. The idea was to move from dealing with environmental effects, after their occurrence, to focus- ing on the ‘policy sources’ of these effects for preventive action. This approach shifts the discussion from environment and development to development and environment. The purpose is to include environmental issues in mainstream policy rather than to change socio-economic policies from the periphery of the environmental movement. In follow-up to the WCED recommendations, the 1992 United Nations Conference on Environment and Development (UNCED), the Earth Summit in Rio de Janeiro, attempted to translate the new paradigm of sustainable development into a globally adopted philosophy, an Earth Charter, and an international action programme (United Nations, 1994). Figure 1.1 provides a synopsis of the results of UNCED, comprising a watered-down Rio Declaration (as compared to a Charter) [FR 13.3], the action plan of Agenda 21, the adoption of two conventions on biodiversity and climate change, and a statement of forest principles. Immediate reactions to UNCED differed widely (Bartelmus, 1994a), ranging from ● Describing Agenda 21, as ‘the most comprehensive, the most far-reaching and, if implemented, the most effective programme of international action ever sanctioned by the international community’ (closing statement by the Conference’s Secretary General, Maurice Strong) to ● Considering the Conference as ‘a failure of historic proportions’ (Greenpeace summary critique of UNCED results). Five years after the Rio Summit, disillusion spread widely. The special session of the United Nations General Assembly, known as Rio + 5, achieved, in the words of its President Ismail Razali, an ‘honest appraisal’ of meagre progress (Osborn & Bigg, 1998). Most governments did not commit to implementing Agenda 21 and the Rio conventions. Contrary to the North’s promises in Rio, ‘new and additional’ resources for the implementation of Agenda 21 had not come forth (with notable exceptions), and official development aid decreased in general. A renewed focus on economic growth, thinly veiled by sustainability rhetoric apparently prevailed. It comes as no surprise, therefore, that the Plan of Implementation of the 2002 World Summit on Sustainable Development (WSSD) in Johannesburg (United Nations, 2003) presented mostly a perfunctory summary of Rio’s Agenda 21. The declared objectives of the WSSD were ‘to take stock’ since Rio and foster implemen- tation by means of work plans and new ‘public-private partnerships’. It remains to be seen whether explicit targets (for sanitation, biodiversity, use of chemicals, and harvesting of fish stocks), the inclusion of new topics (energy, transport, globaliza- tion), and some focus on regions, sustainable production and consumption, and pov- erty can overcome global lethargy. 3 At least the United Nations Framework Convention on Climate Change (UNFCCC) has now been translated into a concrete – some will say insufficient – commitment by governments through the ratification of the Convention’s Kyoto Protocol (Box 1.1). Judging from the flurry of publications on the sustainability of economic growth and development, there seems to be no consensus on the exact meaning and impli- cations of these concepts. It is easier, therefore, to look first into the main symptoms of non-sustainability, which after all gave rise to the call for sustainable develop- ment. Chapters 2 and 3 will then explore possibilities of defining sustainability in more operational terms. Preambular goal A new and equitable partnership Selected principles Humans at the centre of sustainable development Sovereign right of resource exploitation Right to development Environmental protection integral to development Poverty eradication Common but differen- tiated responsibility for environmental degradation Transfer of technology Supportive and open international economic system Women in sustainable development Social and economic dimensions - Accelerated sustainable development - Poverty - Consumption patterns - Population - Health - Human settlements - Integrated decision -making Major groups - Children and youth - Indigenous people - NGOs - Local authorities - Workers - Business - Scientific community - Farmers Environmental concerns - Atmosphere - Land - Deforestation - Fragile ecosystems - Sustainable agriculture - Biodiversity, biotechnology - Oceans - Freshwater - Wastes Finance Technology Science Capacity building, technical cooperation Institutions Legislation Information Biological Diversity Convention Framework Convention on Climate Change Statement of Principles on Forests AGENDA 21 CONVENTIONS RIO DECLARATION Education, awareness, training Means of implemen -tation Fig. 1.1 Results of the Rio Earth Summit Source: Bartelmus (1994a, fig. 6.1, p. 146; with permission by the copyright holder, Taylor & Francis). 3 Further information on the results and follow-up to the Summit can be found on www.un.org/ esa/sustdev. For a more critical evaluation of the Summit outcomes, see WWI (2003). 1.2 Environmental Doomsday and International Reaction 7 8 1 What on Earth is Wrong? 1.3 Reaching the Limits? The above-cited doomsday literature and subsequent international environmental conferences drew attention to the sorry state of the environment. Activist individu- als and groups like Greenpeace, the World Watch Institute or the Club of Rome keep the environmental movement alive with unrelenting warnings about reaching the limit of the earth’s carrying capacity. Box 1.2 presents typical proclamations about imminent environmental calamity. Environmental indicators – like those in Plate 1.1 – have been put forth as evidence of environmental deterioration. Typically these indicators refer to three main catego- ries of environmental impacts: ● Natural resource depletion – of forests, fish, soil/land, minerals, metals and water ● Degradation of ecosystems – involving loss of species, genetic resources and wilderness ● Pollution – either local (air, water, waste) or global (greenhouse gas emission and climate change, ozone depleting substances). Add population growth and hunger, and you obtain what one ‘skeptical environmen- talist’ calls ‘the Litany of our ever-deteriorating environment’ (Lomborg, 2001). The reactions by environmentalists to Lomborg’s claim that we have mostly expe- Box 1.1 Framework convention and Kyoto Protocol on climate change At the first Earth Summit in 1992, the international community adopted the United Nations Framework Convention on Climate Change. Its ‘ultimate objective’ is to ‘achieve stabilization of greenhouse gas concentrations … at a level that would prevent dangerous anthropogenic interference with the climate system’ (http:// unfccc.int/essential_background/convention/background/items/2853.php). Five years later its Kyoto Protocol replaced the vague objective of danger- ous interference by a target for industrialized countries to reduce greenhouse gas emissions by at least 5% below total 1990 levels during 2008–2012. With Russia’s ratification the Protocol entered into force in February 2005 (http://unfccc.int/essential_background/kyoto_protocol/items/2830.php). The Protocol also specifies key ‘mechanisms’ for achieving this target: cooperative projects of joint implementation, clean development mechanism, and emission trading (http://unfccc.int/kyoto_mechanisms/items/1673.php). Individual greenhouse gas reduction targets for industrialized countries range from −8% of 1990 emissions for the EU (USA: −7%, Protocol not rati- fied) to +10% for Iceland during the 2008–2012 period (http://unfccc.int/ kyoto_protocol/background/items/3145.php). The United Nations Climate Change Conference in Bali (3–14 December 2007) could not agree on targets for the post-Kyoto era; it settled instead for ‘negotiations’ to this end to be concluded by 2009 (http://unfccc.int/meetings/cop_13/items/4049.php). [...]... 1.1 Environmental Indicators (See Colour Plates) Source: Globus Infografic GmbH 9 10 1 What on Earth is Wrong? rienced an improvement rather than decline in these issues were harsh [FR 1.3] Clearly, there is a need for assessing the validity of available data and their interpretations How close are we indeed to life-threatening environmental limits? The World Resources Institute once proclaimed that... www.greenpeace.org) Climate change and global warming are matters of life and death; increasing levels of air pollution threaten the survival of nature and the well-being of people around the world (World Wide Fund for Nature: http://www panda.org/about_wwf/what_we_do/index.cfm) Our world is in a state of pervasive ecological decline; our current economies are toxic, destructive on a gargantuan scale, and... centuries, even if greenhouse gas concentrations were stabilized [5, p 11] - Ecosystems, human health and economy are all sensitive to climate change; many regions are adversely affected, some effects are beneficial for some regions [3, p 215] - Climate change is an overriding challenge facing our global civilization [4a, p 16] - Temperature increase of 0.6 °C is not a dramatic divergence from previous... (2003); [9] United Nations (2006); [10] = Nordhaus and Boyer (2000); [11] = Millennium Ecosystem Assessment (2005); [12] = Stern (2007) In turn, many sources are based on primary data from national and international statistics More commonly accepted data are shown in bold The last column of the table indicates the variety of sometimes contradictory conclusions about environmental impacts and the sustainability... might indeed raise more questions than answers, for instance, ● ● ● ● ● ● ● What are the likely consequences of different degrees of global warming? Is the global forest cover decreasing or increasing? Where and when? How does human-induced species loss compare to natural losses, and what is the value of these losses? Are soil erosion and land degradation harbingers of increasing starvation? Is the... local water scarcity mainly a management problem of facilitating access to available water resources? Did we solve the ozone-layer-depletion problem? The list of questions could be easily extended The reports shown as references in Table 1.1 are among many more that raise environmental issues and suggest how to tackle them [FR 1.3] Other indicators might cover further environmental concerns, and differing... and their useful and wasteful things, however optimal the distribution of its load’ (Daly, 1996) Conventional economics is thus seen to be in denial, as it clings to its formalistic axioms of rational behaviour in perfectly competitive markets Experiments, testing the rationality axiom of neoclassical economics, came up indeed with cases of irrational behaviour However, more comprehensive experimentation... scarcity of environmental services The only way to assess the scarcity of non-marketed goods and services and to compare it to that of market products is to draw non-market goods into the pricing system Chapter 8 will show how green accounting can achieve this in a practical manner Note however that – unconvinced – environmentalists reject any monetary valuation of the environment, giving rise to a serious... decreased [3, p 64] - During 1985-1995 the trend showed population growth racing ahead of food production in many parts of the world [3, p 62] - There is no imminent agricultural crisis or any approaching scarcity of food [2, p 109] - Decade-long decline in the global fish harvest [4, p xx] - Exploitation of living marine resources and loss of habitats are now recognized as being at least as great a... growth, agricultural failure and warfare Deforestation, for example, is a significant contributing factor in the collapse of ancient Greece and Rome, according to Hughes and Thirgood (1982) Diamond (2005) describes selected cases of ancient and modern societal collapse; he also draws lessons for changing individual and governmental values for attaining sustainable resource use and population growth Tainter . by mid -21 st century [3, pp. 21 2, 21 3]. - Today we have pretty much done what we can [2, p. 27 4]. References: [1] = WRI (20 06); [2] = Lomborg (20 01); [3] = UNEP (20 02) ; [3a] = UNEP (20 06); [4]. per usable land area (%) - Starvation in devel- oping countries (million people) 52 (since 1961) [2] 7 .2 (Fig. 1.1) 23 [3] 17 (of all land) [2] 920 (1971) [2] 7 92 (1997) [2] 824 [9] - No clear. [5] 47.3 (21 00, no govern- mental control) [10] 110 (21 00, worst cases) [5] 26 (since pre-industrial times) [5] 32. 5 [4] 0.74 (1906 20 05) [5] 1.8–4.0 (by 21 00) [5] 2 2. 5 (likely, by 21 00) [2] 5–6