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3 Sustaina ble De velopment Sustainab Dev
INTRODUCTION The concept of sustainable development is of recent origin. The term “sustainable development” was first used by the World Conservation Strategy presented by the International Union for the Conservation of Nature and Natural Resources in 1980. It was commonly used and defined for the first time by the Brundtland Report, entitled Our Common Future, of the World Commission on Environment and Development in 1987.1 MEANING There are many definitions of sustainable development. But the most popular definition is by the Brundtland Report. It defined sustainable development as “meeting the needs of the present generation without compromising the needs of future generations.” 1. A few other sources are D.W. Pearce, E. Barbier and A. Markandaya, Sustainable Development, 1990; M. Redcliff, Sustainable Development : Exploring the Contradictions, 1987; World Development Report 1992, World Bank, 1992; D.W. Pearce and A. Markandeya, The Benefits of Environmental Policy: Monetary Evaluation, 1989.
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Sustainable development means that development should “keep going”. It emphasises the creation of sustainable improvement in the quality of life of all people through increases in real income per capita, improvements in education, health and general quality of life and improvements in quality of natural environmental resources. Thus sustainable development is closely linked to economic development. It is a situation in which economic development does not decrease over time. Sustainable development is development that is everlasting and contributes to the quality of life through improvements in natural environments. Natural environments, in turn, supply utility to individuals, inputs to the economic process and services that support life. As pointed out by Pearce and Warford, “Sustainable development describes a process in which natural resource base is not allowed to deteriorate. It emphasises the hitherto unappreciated role of environmental quality and environmental inputs in the process of raising real income and the quality of life.” OBJECTIVES OF SUSTAINABLE DEVELOPMENT Sustainable development aims at the creation of sustainable improvements in the quality of life for all people as the principal goal of development policy. Accordingly sustainable development has many objectives. Besides increasing economic growth and meeting basic needs, the aim of lifting living standards includes a number of more specific goals such as “bettering people’s health and education opportunities, giving everyone the chance to participate in public life, helping to ensure a clean environment, promoting intergradational equity.” Thus meeting the needs of the people in the present generation is essential in order to sustain the needs of future generations. Further, sustainable development aims at maximising the net benefits of economic development, subject to maintaining the stock of all environmental and natural resource assets (physical, human and natural) over time. In this context, economists distinguish between the concepts of strong sustainability and weak sustainability. Strong sustainability requires that the natural capital stock should not decrease. On the other hand, weak sustainability requires that the total value of physical, human and natural capital stock should not decrease. Pearce and others favour weak sustainability because increase in other capital stocks can substitute for decreases in the natural capital stock. Thus sustainable development in its weak form implies “that the rate of change of development over time is generally positive over some selected time horizon.” To conclude, sustainable development aims at accelerating economic development in order to conserve and enhance the stock of environmental, human and physical capital without making future generations worse off. ENVIRONMENTAL PROBLEMS The environmental problems of a country depend on its stage of development, economic structure, production techniques in use and its environmental policies. For instance, the less developed countries face the problems of inadequate sanitation and clean drinking water due to lack of economic development while developed countries suffer from air and water pollution due to industrialisation. The following are some of the environmental problems facing the less developed countries: 1. Air Pollution. Urbanisation which is the concomitant result of economic development and industrial growth has led to atmospheric pollution. Increasing vehicular traffic is the most important source of air pollution in big cities. Other reasons for this are two stroke engines, old
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vehicles, traffic congestions, bad roads and obsolete automotive technologies and lack of traffic management system. The problem of industrial pollution is acute in areas where petroleum refineries, chemicals, iron and steel, non-metallic products, pulp and paper and textile industries are concentrated. Even small scale industries like foundries, chemical manufacturing and brick making are significantly air polluters. Another important source of air pollution is thermal power generation plants. People residing in shanty towns, slums and poorly ventilated houses and using household stoves, wood and coal for cooking further increase air pollution. Smoky indoor air mainly affects the health of women and children. Noise of vehicles, diesel generation sets, construction activities, loud speakers, etc. are other sources of atmospheric pollution in cities. Thus air pollution is a serious problem in cities and urban manufacturing areas. There is particulate matter in the form of dirt, dust and solid waste thrown in the air that is harmful for humans, animals and plants. Acid rain on forests and water bodies destroys them in the long run. So are chemicals in gaseous form harmful. Some are directly poisonous such as carbon monoxide which is also produced by automobiles. Other gases damage the ozone layer of the atmosphere. 2. Water pollution. Water pollution is similarly a result of economic growth. The main sources of water pollution are flushing waste down the domestic sewage, industrial effluents containing organic pollutants, and wastes of chemicals, heavy metals and mining activities. The major water polluting industries are refineries, fertilizers, pesticides, chemicals, leather pulp and paper, and metal plating. Sewage waste and industrial effluents flow into lakes, canals, rivers, coastal areas and underground water sources. Since they are untreated, they endanger aquatic resources like fish and other water creatures, and commercially important marine flora and fauna. The polluted and untreated water causes water borne diseases like diarrhoea, hepatitis, gastroenteritis, trachoma, etc. Moreover, providing safe drinking water to people increases the costs of municipal corporations. Water shortages lead to inconveniences and retard economic activities. 3. Solid and Hazardous Wastes. Solid wastes also create air and water pollution in urban areas. Unregulated urban growth without such facilities as collection, transportation, treatment and disposal of solid wastes pollutes the atmosphere and water resources. Rotting garbage and blocked drains spread communicable diseases and pollute groundwater resources. 4. Deforestation. Deforestation also causes environmental problems. Deforestation leads to felling of trees and of natural plant growth for setting up industries, and building towns, roads, highways, dams, etc. This destroys flora and fauna. It leads to localised flooding in hilly and adjoining areas. There is loss of human and animal life. The green landscape changes into factories, residential and commercial buildings. They produce more heat, noise and pollution which bring environmental degradation and ultimately result in death of humans and cause of birth defects and genetic mutations. . 5. Soil Degradation. Another environmental problem is of soil degradation which is caused by water and wind. Soil erosion in hilly areas is caused by rain and rivers thereby leading to landslides and floods. Deforestation, overgrazing and step-farming in hilly areas further cause soil erosion. Floods in rivers in the plains cause soil erosion. Waterlogging on irrigated lands and intensive agriculture lead to salination and soil degradation. Areas in the proximity of deserts suffer from wind erosion caused by expansion of desert, dust storms, and whirlwinds. All types of soil degradation reduce soil fertility. 6. Loss of Biodiversity. Every country is endowed with unique phytogeographical and agro-
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ecological diversity comprising of a wide variety of agro climate zones and plenty of plant and animal species. The biodiversity is found in forests, grasslands, mountains, wetlands, deserts and marine ecosystems. Economic growth leading to expansion of agriculture, reckless exploitation of forest and mineral wealth and development of projects in biodiversity areas has led to the destruction of habitats. Consequently, there has been extinction of plant, animal and microbiological species and loss of genetic resources. CAUSES OF ENVIRONMENTAL DEGRADATION Environmental degradation is caused by such diverse factors as population growth, poverty, rural development, urbanisation, etc. They are discussed as under: 1. Population Growth. Rapid population growth is a major cause of environmental degradation and rapid use of resources leads to increased pressure on the use of country’s resources with the result that there is air and water pollution, loss of biodiversity and soil degradation. Rapid population growth depletes resources and threatens sustainable development. Thus rapid population growth and environmental degradation go hand in hand. 2. Poverty. Poverty is both the cause and effect of environmental degradation. Poverty encourages unsustainability because the poor use and deplete more natural resources than others because they have easy access to them. They work for sustenance on land and water and in mines and forests. On the other hand, degraded environment generates more poverty because the poor depend directly on natural resources for their livelihood. 3. Agricultural Development. Agricultural development in underdeveloped countries has been a major factor in environmental degradation. Intensive farming and excessive use of fertilizers and pesticides have led to over exploitation of land and water resources. These have led to land degradation in the form of soil erosion, water logging and salination. 4. Industrialisation. To industralise rapidly, underdeveloped countries are causing environmental degradation. The establishment of such industries as fertilizers, iron and steel, chemicals, refineries, etc. has led to land, air and water pollution. The use of fossil fuel, minerals and timber as sources of industrial energy is depleting these natural resources and degrading natural eco-systems. 5. Transport Development. Underdeveloped countries are developing transport facilities for the expansion of trade and commerce. But they are also bringing about environmental degradation in the form of air pollution, noise pollution and sea pollution. The development of ports and harbours have led to oil spills from ships and adversely affected fisheries, coral reefs, mangroves and landscape. 6. Urbanisation. Rapid and unplanned urbanisation has led to degradation of urban environment. Slums and shanty towns pollute air and water and generation of solid and hazardous wastes have contributed to environmental degradation on a vast scale. 7. Foreign Indebtedness. Foreign indebtedness is another cause of environmental degradation in underdeveloped countries. In order to repay their debt, they produce commercial crops for export that displace subsistence crops which are subsequently grown on marginal lands. They also export minerals by exploiting them recklessly, thereby depleting them at a great cost to future generations. 8. Market Failure. An important cause of environmental degradation is market failure. It means poor functioning of markets for environmental goods and services. It reflects failure of government policy in removing market distortions created by price controls and subsidies.
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Market failure, also called externalities, is caused by lack of individual property rights and jointness in either production or consumption. For instance, individual farmers living in hilly areas cause soil degradation through deforestation and overgrazing of land that flood areas of people living in lower areas. Negative externalities (costs and adverse effects on people in lower areas) are not considered by the inhabitants of hilly areas. The effects of such environmental degradation are not controlled by market forces. Hence they reflect market failure. POLICIES FOR SUSTAINABLE DEVELOPMENT Agricultural and industrial development along with urbanisation and spread of infrastructure combined with population growth have led to environmental degradation. Environmental degradation “harms human health, reduces economic productivity and leads to the loss of amenities”. The damaging effects of economic development on environmental degradation can be reduced by a judicious choice of economic and environmental policies and environmental investments. Choice between policies and investments should aim at harmonising economic development with sustainable development. We discuss some policy measures as under: 1. Reducing Poverty. Such development projects should be started which provide greater employment opportunities to the poor. The government should expand health and family planning services and education so as to reach the poor that will help reduce population growth. Further, making investments in providing civic amenities like the supply of drinking water, sanitation facilities, alternate habitats in place of slums, etc. will not only improve welfare but also environment. 2. Removing Subsidies. To reduce environmental degradation at no net financial cost to the government, subsidies for resource use by the private and public sectors should be removed. Subsidies on the use of electricity, fertilisers, pesticides, diesel, patrol, gas, irrigation water, etc. lead to their wasteful use and environmental problems. Subsidies to capital intensive and highly polluting private and public industries lead to environmental degradation. Removing or reducing subsidies will bring both economic and environmental benefits to the country. 3. Clarifying and Extending Property Rights. Lack of property rights over excessive use of resources leads to degradation of environment. This leads to overgrazing of common or public lands, deforestation, and overexploitation of minerals, fish, etc. Clarifying and assigning ownership titles and tenurial rights to private owners will solve environmental problems. Places where the use of common lands, forests, irrigation systems, fisheries, etc. is regulated and rules for their proper use are laid down by the community, the ownership rights should be clearly specified in the administrative records. 4. Market Based Approaches. Besides regulatory measures, there is urgent need for adopting market based approaches for the protection of environment. They aim at pointing to consumers and industries about the cost of using natural resources on environment. These costs are reflected in the prices paid for goods and services so that industries and ultimately the consumers are guided by them to reduce air and water pollution. The Market Based Instruments (MBIs) approach is used in both developed and developing countries. MBIs are of two types: quantity based and price based. They are in the form of environmental taxes that include “pollution charges (emission tax/pollution taxes), marketable permits, depositor fund system, input taxes/product charges, differential tax rates and user
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administrative charges and subsidies for pollution abatement equipment for air and water resources.” 5. Regulatory Policies. Regulatory policies also help in reducing environmental degradation. Regulators have to make decisions regarding price, quantity and technology. In making decisions, they have to choose between the quantity or the price of pollution or resource use or technologies. The regulating authority has also to decide whether policies should target the environmental problem directly or indirectly. It lays down technical standards and regulations and charges on air, water and land pollutants. Regulators should be impartial in applying environmental standards to both public and private sector polluters or resource users. 6. Economic Incentives. Like regulatory policies, economic incentives relate to price, quantity and technology. Incentives are usually in the form of variable fees to resource users for the quantity of pollutants in air, water and land use. They are given rebates if less waste or pollution is generated than the emission standards laid down. 7. Trade Policy. Trade policy in relation to environment has two implications: first, concerning domestic policy reforms; and second, relating to international trade policy. Domestic trade policy emphasises on the establishment of less polluting industries away from the cities and the use of environmental friendly processes for polluting industries by adopting cleaner technologies. As regards the relation between international trade and environmental quality is concerned, controversy has been going on as to whether liberalised trade causes environmenal degradation. The controversy leads to the conclusion that “overall, trade liberalisation is likely to produce negative environmental externalities, but also some environmental gains.” The former does not imply that free trade should be stopped. Rather, such cost-effective policies should be adopted that optimize externalities. Environmental degradation from free trade should be reduced by strict domestic policy measures based on the “polluter pays principle”. It is better to insist on the foreign company to transfer clear technology and assist in cleaning the environment for existing industries. 8. Public Participation. Public awareness and participation are highly effective to improve environmental conditions. Conducting of formal and informal education programmes relating to environment management and environmental awareness programmes can go a long way in controlling environmental degradation and keeping the environment clean. For instance, the scheme of eco-labelling of products helps consumers to identify products that are environment friendly. In Japan, there are consumer co-operatives that popularise green products which are recyclable, biodegradable, rechargeable, onzone friendly and unleaded. As a further step, firms, industries and other establishments in some countries have to disclose in their Annual Reports the extent to which they are adopting environmental friendly measures. Public participation can also render costless and useful assistance in afforestation, conservation of wildlife, management of parks, improvements of sanitation and drainage systems and flood control. Use of indigenous institutions and local voluntary organisations can render much help in educating the masses about the harmful effects of environmental degradation and the benefits of keeping the environment clean. 9. Participation in Global Environmental Efforts. There are many international conventions and agreements on environmental protection and conservation which every country is expected to follow. They include the Montreal Protocol regarding the phasing out of ozone-depleting chemicals. The Basel Convention which relates to the control of the transboundary movement
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and disposal of hazardous wastes. Among others, there is the Rio Declaration on Environment and Development and the Agenda 21 which is the operational programme for sustainable development. Then, there are the GATT Clauses on Environment. Not all countries are signatories to the various agreements and conventions. There is threat of trade sanctions against countries that do not honour agreements relating to biodiversity protection or greenhouse gas emissions but many countries do not adhere to them. MEASURING SUSTAINABLE DEVELOPMENT Measuring sustainable development is a difficult task which involves the valuation of environmental damage and comparing it with the costs of preventing it. There are also the problems of measuring the capital stock needed for sustainable development, of natural resource accounting, and the use of an appropriate discount rate for maintaining an optional balance between the use and preservation of natural resources. We discuss a few methods and their implications on sustainable development. 1. Measuring Natural Capital Stock. The stock of natural resource assets or of environmental assets includes “soil fertility, forests, fisheries, the capacity to assimilate waste, oil, gas, coal, the ozone layer and biogeochemical cycles.” The necessary condition for sustainable development is that the natural capital stock should be conserved and improved. This is interpreted to mean that the natural capital stock should remain at least constant. This can be measured in terms of the cost-benefit analysis of changes in the natural capital stock. If it is reduced, say in terms of clearing forests for cultivating land or for habitation, etc., there will be benefits in terms of the use of the land for more productive purposes. Similarly, when the atmosphere is kept clean, it is a benefit and the damage of polluted environment is a cost. So sustainability is consistent with maintaining and improving natural capital assets. Some economists do not agree that more importance should be attached to natural capital than to man-made capital and human capital. According to them, sustainable development relates to the conservation and improvement of the overall capital stock comprising natural, man made and human capital. This view is consistent with efficiency and intergenerational equity. Taking the overall capital stock means that natural and man-made capital can be substituted for each other. This can be done on the basis of social rate of return. This presumes that if a natural capital asset is being depleted, the proceeds from this are invested on man-made capital in order to obtain a high rate of return. But this seldom happens because the proceeds from environmental degradation are consumed and not invested. Another problem is of valuation of the proceeds from natural capital and their investment on man-made capital. It is not possible to evaluate the environmental damage correctly on the basis of market prices. The use of shadow prices is not an accurate measure of environmental services. 2. Natural Resource or Green Accounting. Another measure of sustainable development is green accounting. It permits the computation of income for a nation by taking into account the economic damage and depletion in the natural resource base of an economy. It is a measure of sustainable income level that can be secured without decreasing the stock of natural assets. This requires the adjustment of the system of national income accounts in terms of stock of natural assets. The computation of gross national product (GNP) would be replaced by a measure of national output that includes the economic cost of degrading natural resources which are required to produce goods and services directly and indirectly. Thus GNP would include the
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stocks of natural assets and the measure of sustainable can be NNP = GNP - DN where DN is depreciation of the monetary value of natural assets during the year. But the computation of such a measure of sustainable income is a complex matter, particularly the computation of monetary valuation of non-marketed natural assets and externalities. Thus green accounting would require numerous and controversial computations and valuations. 3. Measuring Environmental Values. Another problem of measuring environmental damage is to evaluate it and compare it with the cost of preventing it. It concerns comparing the benefits of environmental protection with the costs incurred on it. In this connection, several indicators are being computed by economists. World Development Report 1992 suggests the following four approaches for economic valuation of environmental damage: (1) Market Prices. When there are adverse health effects and loss In productivity due to environmental damage, market prices are to evaluate them. The procedure is to evaluate damages due to soil erosion, deforestation, and air and water pollution. For this purpose, the ecological relationship between environmental damage and its effects on production or health are estimated on the basis of prices to derive monetary values. Welfare losses relating to health risks due to polluted environment are measured by income foregone because of illness or premature death. Such estimates are difficult to compute because they rely on loss in income. (2) Costs of Replacement. People and firms invest in installing alternate devices to avert environmental damage of air, water and land. Such investments can provide an estimate of environmental damage. But the effects of damages cannot be evaluated. (3) Surrogate Markets. The effects of environmental damages on other markets like property values and wages of workers are also evaluated. Valuation in the case of property is based on risks involved in evaluating the value of property due to environmental damage. Similarly, jobs with high environmental risks will have high wages which will include larger risk premiums. But this technique is impracticable because property owners and workers are ignorant of the effects of environmental damages. (4) Surveys. Surveys relating to the effects of environmental damage and effects to improve environment are being used in developing countries to determine the amenity value of species or landmarks. 4. Social Discount Rate. Environmental degradation leads to costs and environmental improvements confer benefits on resource users. The problem is how to measure costs and benefits of environmental effects on the present and the future generations. For this, a rate of discount is needed for discounting all costs and benefits. But there is lot of confusion and differences among economists in discounting environmental costs and benefits on the following grounds: Critics do not favour discounting in general and high discount rates in particular. According to them, there is no unique relationship between high discount rates and environmental degradation. When discount rates are high, the level of investment falls which discourages development projects and slows down the pace of development. It thus shifts the burden of high costs to future generations. Even demand declines for resources on which investments are to be made. But the main problem is how to choose a social discount rate. This cannot be the market rate of interest because of uncertainties and imperfections of capital markets. Therefore, the majority of economists measure the social rate of discount at government’s borrowing rates on long-
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term securities because they are riskless. But there are numerous borrowing rates on government securities relating to different time periods. The problem is which rate to choose as the social discount rate. Many economists, therefore, favour social rate of time preference and opportunity cost of capital in measuring the cost and benefit of environmental degradation. But like the social discount rate, they have their problems of measurement and the effects on environmental degradation on the present and future generations are unclear. Thus no acceptable method has been evolved to measure sustainable development in a proper way.
