Sustainability, accounting for natural resources and environmental degradation

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1. What is it?
2. Sustainability and population factor
3. Sustainability and technological factor
4. Sustainability and affluence factor
5. Sustainability and economic measurement
6. Sustainable development and developing countries
7. Accounting for natural resources and environmental degradation

1. What is it?

On first hearing, "sustainable development" sounds difficult - and certainly achieving sustainability looks to be one of the toughest challenges our species has ever faced. But the significance of these terms is simple to sum up: they indicate a switch in environmental thinking from a necessary early obsession with emerging problems to a growing interest in environmental solutions which will be economically, socially and politically viable. They also potentially permit a much wider range of interests (environmental, social, political, economic, commercial) to make common cause. However, there are very different views on what the end-point of this process should be, what it will involve, who is responsible for initiating and guiding it, and how fast it should go.

The 1992 UN Conference on Environment and Development (UNCED), or Earth Summit, called for a shift from "talk" to "action". Two main categories of problem are seen as targets.

The first category is the broad range of environmental degradation which has been so thoroughly catalogued in such publications as the Worldwatch Institute's "State of the World" series.

The second category embraces a range of socio-economic problems, including poverty, lack of shelter, poor health condition, lack of appropriate education, malnutrition and famine.

It is often argued that the first category of problems is aggravated by population and economic growth, while the second can only be alleviated by economic growth. Sustainable development aims to square the circle by proposing a new model of development which is simultaneously sustainable in environmental, economic and social terms. But the fundamental collision between proponents of growth-based solutions and no growth or almost-no-growth-based solutions remains at the heart of the sustainability debate.

The generally used concept of "growth", as it adheres to misleading information on economic activities which also deplete and destroy, is not suitable for any sustainable solution. "Sustainable development" is definitely meant as an alternative to growth, not as a semantic replacement.

Sustainability in economic terms can be described as the "maintenance of capital", sometimes phrased as "non-declining capital". Historically, at least as early as the Middle Ages, the merchant traders used the word "capital" to refer to human-made capital. The merchants wanted to know how much of their trading ships cargo sales receipts could be consumed by their families without depleting their capital. Of the forms of capital environmental sustainability refers to natural capital. So defining environmental sustainability includes at least two further terms, namely "natural capital" and "maintenance" or at least "non-declining".

The most commonly accepted definition of sustainable economic development is that first proposed in "Our Common Futures": development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Fine, as far as it goes, but it can hardly be described as a blueprint. The World Commission on Environment and Development (WCED) Secretary-General MacNeill was a bit more specific: "An essential condition for sustainable development is that a community's and a nation's basic stock of natural capital should not decrease over time. A constant or increasing stock of natural capital is needed not only to meet the needs of present generations, but also to ensure a minimum degree of fairness and equity with future generations"

The concept has variously been described as a compass point, a banner, a rallying cry. The implication is that its power to attract and direct is one of its fundamental values. "Sustainable economic development has become the new rallying cry of the environment/development movement", as Timberlake noted in 19884. "Like most such cries ("Liberty!", "Popular Participation"!, "Power to the People!"), its meaning is not absolutely clear." By the time Pezzey settled down to review the literature in 1989, he identified around 60 separate definitions of "sustainability". In fact, there are those who see its very vagueness as part of its power to attract new recruits.

The intricate dynamics of sustainability have still to be adequately investigated and articulated. But already we can see enough of the outline of this new area of science, economics and technology to understand the general direction in which society needs to travel. In this respect, the concept of sustainable economic development is important for three main reasons.

  1. First, it provides a framework within which broader cultural, socio-political, economic and technological factors can be incorporated into the environmental debate - and vice versa.
  2. Second, the phrase is dynamic, implying a transition from unsustainable to sustainable forms of economic development and activity. It thereby potentially opens out the time horizons within which environmental issues are discussed. The phrase introduces the notion that some problems may be more critical than others in terms of negotiating that transition. The implicit message is that we must set priorities.
  3. Third, sustainable development is inclusive. By focusing on the need for "development", it increasingly provides a framework within which the business and development communities can feel comfortable in discussing and addressing environmental priorities. And development, clearly, is an area where business has a distinct edge on most non-governmental organisations (NGOs) - with the result that there are growing numbers of business organizations working in this area.

Sustainable economic development is a process which necessarily involves all sectors of society, including those not yet born. The early phase - when key actors in this process felt they faced "no win" (where no-one could win) or "zero sum. (where only one side could win) outcomes - has been replaced by a phase in which key actors - including NGOs have been looking for "win-win" outcomes, where both sides can benefit. The central challenge for the future is to work out how to achieve "win-win-win" outcomes, where both sides and the environment benefit. This by no means implies that conflict should be avoided, on the contrary: conflict is a function of the great choices ahead.

Natural capital is basically our natural environment, and is defined as the stock of environmentally provided assets (such as soil, atmosphere, forests, water, wetlands), which provide a flow of useful goods or services. The flow of useful goods and services from natural capital can be renewable or non-renewable, and marketed or non-marketed. Sustainability means maintaining environmental assets, or at least not depleting them. "Income" is sustainable by the generally accepted Hicksian definition. Any consumption that is based on the depletion of natural capital should not be counted as income. Prevailing models of economic analysis tend to treat consumption of natural capital as income, and therefore tend to promote patterns of economic activity that are unsustainable. Consumption of natural capital is liquidation, the opposite of capital accumulation.

Natural capital is distinguished from other forms of capital, namely human capital or social capital (people, their capacity levels, institutions, cultural cohesion, education, information, knowledge), and man-made capital (houses, roads, factories, ships). From the mercantilists until very recently capital referred to the form of capital in the shortest supply, namely man-made capital. Investments were made in the limiting factor, such as sawmills and fishing boats, because their natural capital complements - forests and fish - were abundant. That idyllic era has ended.

Now that the environment is so heavily used; the limiting factor for much economic development has become natural capital as much as man-made capital. In some cases, like marine fishing, it has become the limiting factor. Fish have become limiting, rather than fishing boats. Timber is limited by remaining forests, not by saw mills; petroleum is limited by geological deposits and atmospheric capacity to absorb CO2, not by refining capacity. As natural forests and fish populations become limiting we begin to invest in plantation forests and fish ponds. This introduces a hybrid category that combines natural and human made capital - a category one may call "cultivated natural capital". This category is vital to human well-being, accounting for most of the food we eat, and a good deal of the wood and fibbers we use. The fact that humanity has the capacity to "cultivate" natural capital dramatically expands the capacity of natural capital to deliver services, but does not avoid entirely the limiting role of such capital.

In an era in which natural capital was considered infinite relative to the scale of human use, it was reasonable not to deduct natural capital consumption from gross receipts in calculating income. That era is now past. The goal of environmental sustainability is thus the conservative effort to maintain the traditional meaning and measure of income in an era in which natural capital is no longer a free good, but is more and more the limiting factor in development. The difficulties in applying the concept arise mainly from operational problems of measurement and valuation of natural capital, as emphasized elsewhere in this report, and by Ahmad et al. (1989), and El Serafy (1991).

Sustainability has several levels - weak, sensible, strong and absurdly strong depending on how strictly one elects to hew to the concept of maintenance or non declining capital. One recognizes that there are at least four kinds of capital: Manmade (the one usually considered in financial and economic accounts), natural capital (as defined previously, and leaving for the moment the case of cultivated natural capital), human (investments in education, health and nutrition of individuals), and social (the institutional and cultural basis for a society to function).

  1. Weak sustainability is maintaining total capital intact without regard to the composition of that capital between the different kinds of capital (natural, manmade, social or human). This would imply that the different kinds of capital are perfect substitutes, at least within the boundaries of current levels of economic activity and resource endowment.
  2. Sensible sustainability would require that in addition to maintaining the total level of capital intact, some concern should be given to the composition of that capital between natural, human-made, human and social). Thus oil may be depleted as long as the receipts are invested in other capital (e.g.: human capital development) elsewhere, but that, in addition, efforts should be made to define critical levels of each type of capital, beyond which concerns about substitutability could arise and these should be monitored to ensure that the patterns of development do not promote a total decimation of one kind of capital no matter what is being accumulated in the other forms of capital. This assumes that while human-made and natural capital are substitutable over a sometimes significant but limited margin, they are complementary beyond that limited margin. The full functioning of the system requires at least a mix of the different kinds of capital. Since one does not know exactly where the boundaries of these critical limits for each type of capital lie, it behooves the sensible person to err on the side of caution in depleting resources (especially natural capital) at too fast a rate.
  3. Strong sustainability requires maintaining different kinds of capital intact separately. Thus for natural capital, receipts from depleting oil should be invested in ensuring that energy will be available to future generations at least as plentifully as enjoyed by the beneficiaries of today's oil consumption. This assumes that natural and man-made capital are not really substitutes but complements in most production functions. A sawmil (human-made capital) is worthless without the complementary natural capital of a forest. The same logic would argue that if there are to be reductions in one kind of educational investments they should be offset by other kinds of education, not by investments in roads.
  4. Absurdly strong sustainability would never deplete anything. Non-renewable resources absurdly - could not be used at all; for renewables, only net annual growth rates could be harvested, in the form of the overmature portions of the stock.

This schematic presentation highlights the general direction to be taken for this immediate discussion, which can usefully be limited for the time being to the perceived tradeoffs between human-made capital and natural capital, fully recognizing that the issues are more complex than will be exposed here.

The implications of implementing environmental sustainability are immense. One must learn how to manage the renewable resources for the long term; one has to reduce waste and pollution; one must learn how to use energy and materials with scrupulous efficiency; one must learn how to use solar energy in all its forms; and one must invest in repairing the damage, as much as possible, done to the earth in the past few decades by unthinking industrialization in many parts of the globe.

Environmental sustainability needs enabling conditions which are not integral parts of environmental sustainability: not only economic and social sustainability but democracy, human resources development, empowerment of women, genuine decentralization, and much more investment in human capital than common today (i.e. increased literacy, especially ecoliteracy, Orr, 1992).

The sooner one starts to approach environmental sustainability the easier it will become. For example, the demographic transition took a century in Europe, but only a decade in Taiwan: technology and education make big differences. But the longer one delays, the worse the eventual quality of life (e.g., fewer choices, fewer species, more risk), especially for the poor who do not have the means to insulate themselves from the negative effects of environmental degradation.

Many writers have expressed concern that the world is hurtling away from environmental sustainability at present, although consensus has not yet been reached. But what is not contestable is that the current modes of production prevailing in most parts of the global economy are causing the exhaustion and dispersion of a one-time inheritance of natural capital, such as topsoil, groundwater, tropical forests, fisheries, and biodiversity. it is obvious that if pollution and environmental degradation were to grow at the same rate as economic activity, or even population growth, the damage to ecological and human health would be appalling, and the growth itself would be undermined and even self-defeating. However, a transition to sustainability is possible, although it will require changes in policies and the way humans value things. The key to the improvement of the well-being of millions of people lies in the increase of the added value of output after properly netting out all the environmental costs and benefits and after differentiating between the stock and flow aspects of the use of natural resources. Without this needed adjustment in thinking and measurement, the pursuit of economic growth that does not account for natural capital and counts depletion of natural capital as an income steam will not lead to a sustainable development path. The global ecosystem, which is the source of all the resources needed for the economic subsystem, is finite and has now reached a stage where its regenerative and assimilative capacities have become very strained (see the case of some regions in Ethiopia). It looks inevitable that the next century will witness a doubling of the number of people in the human economy, depleting sources and filling sinks with their increasing wastes. if we emphasize the latter, it is because human experience seems to indicate that we have tended to overestimate the environment's capacity to cope with our wastes, even more than we overestimates the "limitless" bounty of such resources as the fish in the sea.

A single measure - population times per capita consumption of natural capital encapsulates an essential dimension of the relationship between economic activity and environmental sustainability. This scale of the growing human economic subsystem is judged, whether large or small, relative to the finite global ecosystem on which it so totally depends, and of which it is a part. The global ecosystem is the source of all material inputs feeding the economic subsystem, and is the sink for all its wastes. Population times per capita consumption of natural capital is the total flow throughput - of resources from the global ecosystem to the economic subsystem, then back to the global ecosystem as waste. In the long gone "empty world" case, the scale of the human economic subsystem is small, relative to the large, but non-growing global ecosystem. In the "full world" case, the scale of the human economic subsystem is large and still growing, relative to the finite global ecosystem. In the full world case, the economic subsystem has already started to interfere with global ecosystematic processes, such as altering the composition of the atmosphere, or the now nearly global damage to the ozone shield.

2. Sustainability and population factor

Carrying capacity as we have said elsewhere is a measure of the amount of renewable resources in the environment in units of the number of organisms these resources can support. It is thus a function of the area and the organism: a given area, could support more lizards than birds with the same body mass. Carrying capacity is difficult to estimate for humans because of major differences in affluence, behaviour, and technology. An undesirable "factory-farm" approach could support a large human population at the lowest standards of living: certainly the maximum number of people is not the optimum. The higher the throughput of matter and energy, or the higher the consumption of environmental sources and sinks, the fewer the number of people that can enjoy it.

Ehrlich and Holdren (1974) encapsulate the basic elements of this concept in a simple and forceful, though static, presentation: The impact (I) of any population or nation upon environmental sources and sinks is a product of its population (P), its level of affluence (A), and the damage done by the particular technologies (T) that support that affluence.

There are a number of ways of reducing environmental impacts of human activities upon the environment. These include changing the structure of production and demand (i.e. more high-value, low-throughput production and service industries) and investing in environmental protection (e.g. for the amenity value, if for nothing else). But for the simplicity, we will first proceed with the static analysis of the Ehrlich and Holdren formulation before we move to adding a more dynamic understanding of sustainability issues. As a start, we will look at reducing environmental impacts of human activities upon the environment through the three variables in the caution, namely: limiting population growth; limiting affluence; and improving technology, thereby reducing throughput intensity of production. There is much to be done to limit the impact of human activities upon the environment, although so far many of the measures have proven politically unpopular and difficult to achieve. The changes in variables - population, affluence, technology - through which the impact can be limited, are each examined in more detail below.

Population control and stability are fundamental to environmental sustainability. Today's 5.5 billion people are increasing by nearly 100 million a year. Just the basic maintenance of 100 million extra people per year needs an irreducible minimum of throughput in the form of clothing, housing, food, and fuel. There is so much momentum in population growth that even under the United Nations most optimistic scenario, the world's population may level off at 11.6 billion in 21501 Since under current inequitable patterns of production, consumption and distribution, we have not provided adequately for one-fifth of humanity at today's relatively low population, the prospects for being either able or willing to provide better for double that number of people look grim indeed, unless major changes in attitudes and practices were to happen. We do not want to cast a political problem (willingness to share) as a biophysical problem (encountering limits to total product). We urge much greater sharing. However, we do not want to make the opposite error of suggesting that more equitable sharing will permit us completely to avoid the issue of biophysical limits to total production in the face of mounting population pressure. Responsible stewardship of the earth requires that we redouble efforts to slow down population growth, especially in the poorest and most vulnerable countries in Africa, where population is currently growing fastest and people are suffering most.

The Production-Population relation is one which must be monitored carefully if we want to maintain and increase sustainably the level of "Human Individual Well Been (HIWB)". In fact, in the equation:

  1. Population (Pop): if not controlled, can be increased indefinitely.
  2. Production (Prod): is limited by available quantity of natural resources as it totally depends on the finite global ecosystem and safe and sustainable technology.

Consequently, while we strive to increase production (the numerator) sustainably, without sacrificing future generations, we should endeavour to control Population (the denominator) if we want HIWB to increase or to remain at least constant in a sustainable manner.

The human population is totally dependent on energy from the sun, fixed by green plants, for all food, practically all fibber (cotton, wool, paper), most building materials (wood), and most of the cooking and heating fuels in many developing countries (fuelwood). The human economic subsystem now appropriates 40 per cent of all that energy, according to Vitousek et al. Yet the sun provides enough energy to cover 6,500 times the total commercial energy consumption of the world. Instead of harnessing this massive source of clean and renewable energy, the bulk of energy research funds are still going to nuclear energy. This speaks poorly or the priorities of energy research worldwide and is a measure of how far we still have to go to get the concept of sustainability thoroughly incorporated into the priorities of those allocating the energy research money.

Whether the issue will be joined over the energy fixed by photosynthesis or not, there are reasons to be concerned. Several factors are al! working in the same direction to reduce irreversibly the energy available globally through plants. Greenhouse warning, damage to the ozone shield, and unstable climates seem inescapable and may have started. Depending on the models used, these will reduce agricultural, forest, fisheries, rangeland and other yields. The increases in ultra violet b light reaching the earth through the damaged ozone shield may decrease the carbon-fixing rates of marine plankton, one of the biggest current carbon sinks. In addition, ultra violet b light may damage young or germinating crops. According to some reports, tiny temperature elevations have already begun to increase the decomposition rates of the vast global deposits of peats, soil organic matter, and muskeg, thus releasing stored carbon. Only in mid-1992 did the circumboreal muskeg and tundra become net global carbon sources (instead of being net C-sinks). Some claim that at least an immediate 50 per cent reduction in global fossil fuel use is necessary to stabilize atmospheric composition. Whether one accepts this estimate or not, it dramatizes the gravity of the situation. There really is no ground for complacency.

Over consumption by the OECD countries contributes more to some forms of global unsustainability than does population growth in low income countries. If energy consumption is used as a crude surrogate for environmental impact on the earth's life support' systems, (crude since the type of energy used is not taken into account), then "A baby born in the United States represents twice the impact on the Earth as one born in Sweden, three times one born in Italy, 13 times one born in Brazil, 35 times one in India, 140 times one born in Bangladesh or Kenya, and 280 times one born in Chad, Rwanda, Haiti or Nepal". Although Switzerland, Japan and Scandinavia, for example, have recently made great progress in reducing the energy intensity of production, the key question is: can humans lower their per-capita impact (mainly in OECD countries) at a rate sufficiently high to counterbalance their explosive increases in population (mainly in low income countries)? The affluent are reluctant to acknowledge the concept of sufficiency - to begin emphasizing quality and nonmaterial satisfactions.. Redistribution from rich to poor on any significant scale is, at present, felt to be politically impossible. But the questions of increasing equity in sharing the earth's resources and its bounty must be forcefully put on the table.

3. Sustainability and technological factor

Increased affluence, especially of the poor, thus need not inevitably hurt the environment. Indeed, used wisely. economic growth can provide the resources needed to protect and enhance the environment in the poorest developing countries where environmental damage is caused as much by the lack of resources as it is by rapid industrialization. Indeed if Africa is to have any hope of protecting its forests and soils. accelerated economic and human development is imperative. African farmers destroy their environment just for cheer survival for like of options and opportunities to earn a discent living and an employment.

Thus, there is a nexus of problems linking poverty, environmental 'degradation, and rapid population growth. Breaking this nexus of problems is essential if the poor are not to continue to be the victims, as well as the unwitting cause, of environmental degradation.

Technology continues to play a vital role in driving a wedge between economic activity and environmental damage. Illustrations of this occur in virtually every field of human activity. In energy, for example, the introduction of mechanical and electrical devices in power generation over the past four decades has reduced particulate emissions per unit of energy generated by up to 99 per cent and newer technologies, such as flue gas desulphurisation and fluidized bed combustion are dramatically reducing emissions of sulphur and nitrogen oxides. But it will be the transition to non-fossil based sources that will make-the permanent difference. Here, the technological progress has been remarkable - with costs of solar generation of electricity (where Africa has tremendous potential) falling by 95 per cent in the past two decades but not Vet enough. Renewable energy continues to receive much too small a share of public research funds.

Technological innovation and application has also done much to make agriculture more sustainable. New technologies have enabled a doubling of food production in the world in just 25 years, with more than 90 per cent of this growth deriving from yield increases and less than 10 per cent from area expansion. More recently, the dissemination of Integrated Pest Management approaches has enabled pesticide application to be cut dramatically with no less of productivity. Biotechnology is in the verge of adding substantially to this improvement.

Despite such remarkable progress, it may be a mistake to place too much optimism in technological change. New technology is often adopted in order to improve labour productivity, which in turn can raise material standards of living, but without adequate attention to the environmental impacts of the manner in 'which the Improvements are reached. The impact of a particular technology depends on the nature of the technology, the size of the population deploying it, and the population's level of-affluence. The World Bank, along with others, is increasing investments in more sustainable technologies, such as on wind and solar energy, which have limited or benign impacts on the relations of humanity to the ecosystem that supports us all.

4. Sustainability and affluence factor

But the level of affluence currently enjoyed by the citizens of the OECD countries, for example, cannot be generalized to the rest of the world's current population, much less the massively larger population of the developing countries (especially in Africa) 40 years from now, no matter what the improvements in technology are likely to be

Experts in development are well aware that bringing the low income countries up to the affluence levels in OECD countries, in 40 or even 100 years, is an unrealistic goal.. One may well accuse us of attacking a straw man - who ever claimed that global equality at current OECD levels was possible? We acknowledge the force of that objection, but would suggest that most politicians and most citizens have not yet accepted the unrealistic nature of this goal. Most people would accept that it is desirable for low income countries to be as rich as the North - and then leap to the false conclusion that it must therefore be possible! They are encouraged In this non sequitur by the realization that if greater equality cannot be attained by growth alone, then sharing and population control will be necessary. Politicians find it easier to revert to wishful thinking than to face those two issues. Once we wake up to reality, however, there is no further reason for dwelling on the Impossible, and every reason to focus on what is possible. One can make a persuasive case that achieving per capita income levels in low income countries of $1,500 to 82,000 {rather-than $21,000) is quite possible. Moreover, that level of income may provide 80 per cent of the basic welfare provided by a $20,000 income - as measured by life expectancy, nutrition, education, and other measures of social welfare. But to accomplish the possible, we must stop idolizing the impossible.

The foregoing discussion of Population, Technology and Affluence is based on the static formulation of the Ehrlich and Holdren identity, presented some 20 years ago. More recent work brings nuance and shading to this generalization. Particularly important are the inter-relationships among the three factors, and their links with shifts in the structure of the economy.

Three questions need to be asked as we seek to monitor progress towards sustainability:

  1. First, given the political unreality of a voluntary decline in the overall affluence of industrial countries, how is the "pattern" of this affluence shifting? Specifically, is the economic structure of the economy shifting away from environmentally damaging activities (e.g. heavy and toxic industries) and towards less "natural capital-depleting" sectors (e.g. services}. Recent research shows that structural shifts can have powerful impacts on natural resources consumption.
  2. Second, what is the trend in the consumption of natural resources per unit of output? Two mechanisms need to be monitored here: improvements in economic efficiency (inputs per unit of output), and the degree of substitution away from environmentally critical inputs. Policy instruments, including taxes and user charges, can help promote such transitions, especially when the environment costs are not captured in the marketplace.
  3. Third, to what extent is the pollution impact per unit of economic activity declining? Here it is important to distinguish between the innovation of new technologies, and their dissemination and application. Many of the most profound forms of environmental damage in today's world (soil erosion, lack of clean water, deforestation, municipal waste, etc. ) do not require new technologies, but simply the application of existing ones. This in turn requires (a) that decision-makers are persuaded that the benefits of using such technologies exceed the costs, and (b) that resources are available for putting them in place. Public policies can be targeted towards meeting both conditions.

Interactions among the driving factors - scale, structure, efficiency, technology and investment in environmental protection - together with the key feedback loops between economic activity and human behaviour - such as the powerful impact of income on fertility - explain why in some situations, economic growth and technological progress will cause increased environmental damage and sometimes less. The now-famous "humps" in the relationship between certain forms of pollution and income illustrate this point. For effective policy making, it is essential that these various paths be disentangled so that policies may be targeted in a manner that induces changed behaviour away from environmentally damaging inequitable growth and towards accelerated sustainable poverty reduction.