Environmental and Development

8/3/2019 Environmental and Development

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A discussion Paper on the interplay between

Economic development and the Environment

Presented for Panel discussion on EnhancingEnvironmental Protection for Sustainable

Development at Wollega University, Nekemte

BY:Mekonnen Bersisa

June, 2010


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Outline

Development Vs Growth: ConceptsHow we measure Economic growth anddevelopment

Natural and Environment ResourceEconomic development Vs Environmentresource

What is sustainable development

Poverty and the environment

Conclusions


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Growth Vs Development: Concepts

Economic growth may be one aspect ofeconomic development but is not the same

Economic growth:

A measure of the value of output ofgoods and services within a time period

Economic Development:A measure of the welfare of humans in a

society


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Growth Vs. Development: Concepts

ED refers to social and technologicalprogress

It a in the waygoods andservices are produced, not merely an

in production achieved using the oldmethods of production on a wider scale.


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Measure of Economic Growth


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Measure of Economic Growth

Approaches: Value of income, expenditure and output

GDP Gross Domestic Product The value of output produced within a country during a time

period

GNP Gross National Product

The value of output produced within a country plus netproperty income from abroad

GDP/GNP per head/per capita Takes account of the size of the population

Real GDP/GNP

Accounts for differences in price levels in different periods


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Economic Growth

Using measures ofeconomic growth can givedistorted pictures of thelevel of income in a

country the incomedistribution is not takeninto account.

A small proportion of thepopulation can own a largeamount of the wealth in a

country. The level ofhuman welfare for themajority could therefore bevery limited.

This might be a

common picture

But this could be just

around the corner!


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Economic Growth

Shopping Hall in SaudiArabia

Dubai Skyline

High economic growth fuelled through capital spending can hide anumber of underlying economic problems how is the income andwealth distributed? Who is doing the spending and will it trickle downto the poor?


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National Income: Problems withusing GDP/GNP

Reliability of data?

How accurate is the data that is collected?

Distribution of income?

How is the income distributed does asmall proportion of the population earn ahigh % age of the income or is incomemore evenly spread?


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NI Problems with usingGDP/GNP

Quality of life?

Can changes in economic growth measurechanges in the quality of life?

Does additional earnings power bring with itadditional stress, increases in working hours,increased health and family problems?

Impact of exchange rate? Difference in exchange rates can distort the

comparisons need to express in onecurrency, but which one and at what value?


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NI Problems with using GDP/GNP

It might not be pleasant, butwhat he finds among therefuse could be all he has.

Black/informal economy?

Some economic activity notrecorded subsistence

farming and barter activity, forexample

Some economic activity iscarried out illegally building

work cash in hand, drugdealing, etc.

Work of the non-paid may notbe considered but may

contribute to welfare charitywork, housework, etc.


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Economic Development

Development incorporates thenotion of a measure/measures ofhuman welfare

As such it is a normative concept open to interpretation and

subjectivity What should it include?


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Normative concepts of Devt


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Indicators of Economic Development


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Measure of Economic Development


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Human Development Index (HDI)

According to various issues of HDR, HDI : a socio-economic measure focusing on

three dimensions of human welfare:

Living a long and healthy life --- Lifeexpectancy at birth

Being educated--- Access to education,

literacy rates Standard of living GDP per capita:

Purchasing Power Parity (PPP)


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Where Ethiopia stands?

According to the reports of UNDP, WorldBank, UNICEF, WFP (2009)

Population: 71.3 million

Pop. growth rate: 1.8%GDP per capita: US$64.73

Pop. below poverty line: 50%

Life expectancy at birth: 54.7years (HDR2009)

Infant mortality: 110.4 per 1000

HIV prevalence: 4.4%


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Where Ethiopia stands?

Access to clean water: 22%

Literacy rate: 49% (men), 34% (women)

GDP-Real growth rate = 11.1% Gini index = 29.97% (0.3)

Income distribution: the richest 10%

hold 33.7% of national incomeBetween 1995 and 2007 Ethiopia's HDI

rose by 3.13% annually from 0.308 to

0.414 today


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Country profile

The HDI of Ethiopia (0.414), gives thecountry a rank of 171st out of 182 countriessee facts below given below
http://var/www/apps/conversion/current/tmp/scratch16264/HDI%20Ethiopia.dochttp://var/www/apps/conversion/current/tmp/scratch16264/HDI%20Ethiopia.doc


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HDI Trends


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Environmental Resources

Environmental resources are resourcesprovided by nature that are indivisible.

example: an ecosystem, an ozone layer,or the lower atmosphere

They are not consumed directly, butpeople consume the services theseresources provide (Kahn 1995:5).


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Ethiopias position

Carbon efficiency = 0.15 CO2emission/$GDP

Deforestation; overgrazing; soil erosion;desertification; water shortages in someareas from water intensive

farming and poor management (someenvironmental problems)


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Economic system and theEnvironment

Air pollutionEnergy

AirSold Waste

Water Waste, Heat

Amenities

Raw materials Water pollution


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Link

The knowledge of the relationship betweenthe environment and the economy help usto design an appropriate policy that

prevents undue depreciation of the value ofthese special assets, the environment, sothat it may continue to provide aesthetic

and life sustaining services.


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Link

In line with this fact, modern ecologistshave the stand point saying that theenvironment possesses a unique carrying

capacity to support humans, and once thatcapacity is exceeded widespread ecologicaldestruction occurs with disastrous

consequence for humanity. The focus is nolonger on individual societies but on thesurvival of the planet.


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Economic system Vs. Environment

There have long been massive debate onthe relationships b/n economic activity andthe environment/natural resources: to put

some: The Limit to growth model (Pessimists

view point)

The Optimist View points The Environmental Kuznets Theory


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1.The Limits to growth

The Limit to growth (Meadow et al,1972) came with the concept claimingthat environmental limits would cause

the collapse of the economic system inthe middle of the 21st century.

The issue was long been debated

among economists (and otherintellectuals) and the book was roundlycondemn by most economists.


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The Limit to growth

Yet it was a stimulus to the re-emergencyof interest in natural/environmentalresources on the part of economists in the

early 1970s.A system dynamic was built to incorporate

five major trends of global concerns:

accelerating industrialization

Rapid population growth


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Limit to growth

Widespread malnutritionDepletion of non-renewable resources and

A deteriorating environment

The interconnections and

interdependency among thesevariables were shown byincorporating:


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Limit to growth

i. a limit to the amount of land available foragriculture;

ii. a limit to the amount of agricultural outputproducible per unit of land in use;

iii. a limit to the amount of non-renewableresources available for extraction;

iv. a limit to the ability of the environment toassimilate wastes arising in productionand consumption , which limits falls as the

level of pollution increase.


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Limits to growth

The conclusions derived from the modelwere :

1.If the present growth trends in worldpopulation, pollution, food production, andresource depletion continue unchanged,the limits to growth on this planet will be

reached sometime within the next 100years. The most probable result will be asudden and uncontrollable decline in both

population and industrial capacity.


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Limit to growth

2. It is possible to alter these trends and toestablish a condition of ecological andeconomic stability that is sustainable far

in to the future.

The state of global equilibrium could bedesigned so that the basic material needs

of each person on earth are satisfied andeach person has an equal opportunity torealize his or her individual human

potential.


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Limit to growth

3. If the worlds people decide to strive forthis second outcomes rather than the first,the sooner they begin working to attain it,

the greater will be their chance of success.

Standard growth model.doc
http://var/www/apps/conversion/current/tmp/scratch16264/Standard%20growth%20model.dochttp://var/www/apps/conversion/current/tmp/scratch16264/Standard%20growth%20model.doc


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2.The Optimist model

As a reply for the limits to growth model,Herman Khan and his associate presentedan alternative vision in a book titled The

Next 20 years: A Scenario for Americaand the world.

This vision is an optimistic one based in

large part on the continuing evolution of aform of technological progress that servesto push back the natural limits until they

are no longer limiting.


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Optimist model

For the most part, the optimists placedfaith in future technological progress to tapnew sources of energy, overcome any

resource limitations, and control pollutionproblems

The saying ofNecessity is the mother ofInvention supports the basic optimistmodel


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Optimist model

They conclude that:

The future path of population growth isexpected by Khan and his associates toapproximate an S-shaped logistic curve.


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Khans perspective on prospective of

Humanity (in fixed 1975 dollars)

2176:

15 million people

$300 trillion GNP

$20,000 per capita

1976:

4.1 billionPeople

$3.5 trillionGNP

$1300 percapita

1776:

750 million people

$150 billion GNP

3 E i t l K t


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3. Environmental Kuznetshypothesis

It has been hypothesized that the relationshipbetween economic growth and some form ofenvironmental degradation has a unique

patter. Such a relationship is called an

Environmental Kuznets curve (EKC) after

Kuznets (1955) , who hypothesized aninverted U-shape for the relationship betweena measure of inequality in distribution of

income and the level of income.


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EKC

The notion of the hypothesis is thatEconomic growth means higher emissionsper capita until per capita income reaches

the turning point, and there after actuallyreduce emission per capita.

If the EKC hypothesis held generally, it

would imply that instead of being a threat tothe environment ( The Limit to growth),economic growth is the means to

environmental improvement.


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EKC

i.e. a countries develop economically, movingfrom lower to higher levels of per capitaincome, overall levels of environmental

degradation will eventually fall.

EKC

Environmentald

egradation

C


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Empirical evidences on the EKChypothesis

The hypothesis has been area of empiricalstudy employing econometric models, andthus debating conclusions have been

made by various economists. Example Shafik and Bandyopadhyay (1992) :

estimated the coefficients of relationship

between environmental degradation andper capita income for 10 differentenvironmental problems


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EKC empirics

They conclude: Majority of the relationship proven to fit to

the hypothesis

But CO2 emissions, a major contributionto the greenhouse gases , do not fit theEKC hypothesis.

Panayotou (1993) investigated the EKChypothesis for: SO2,NO2, Suspendedparticular material(SPM) and

deforestation.


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EKC empirics

all the fitted relationship are inverted U-shaped

Yet the basic question is weather thisholds for the Long run or not!!!!


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What is sustainable Development?

According to UNCED(1987) : the term sustainable development,

refers to progress that meets the needs of

the present without compromising theability of future generations to meet theirown needs.

Sustainability means not only the survivalof the human species but also maintainingthe productivity of natural, produced, andhuman assets from generation to

generation.


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Sustainable Devt

Equity in economic efficiency. Knowing the capacity of the environment

and using that capacity to the maximum of

it and not beyond that.Survival of future depends on present

generation.


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What is sustainable Development?

There should be equitable distribution ofresources among generations.

There should not be absorptive limit.


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Objectives of sustainable

development

Economic objective:-promoting growth andefficiency e.g. income redistribution,employment, targeted assistance, increase of

PCI of poor and decrease uncompensatedfuture cost

Social Objectives:- fulfilling peoples cultural,

material, and spiritual needs in equitablemanner (e.g. popular participation, consultation,pluralism)

Environmental objectives:- maintaining and


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Signs of unsustainable development

Poverty- a billions of population lives underabsolute poverty. The level of poverty isgetting most horrible overtime

Increasing world population andconsumption of resources: - the worldpopulation increased from 4.4 billion in 1940

to 5.6 in 1970 and to 6.2 billion in 2000 ---- Resource depletion: - in less than 200

years, the planet has lost 6 million km2 offorests.


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Signs of unsustainable development

Pollution:- an increase in industrializationleads to an increase in pollution which inturn leads to increase in cancer in

developed countries Global climate change: - because of

depletion of Ozone layer the world

temperature has been increasing; rain falldecreases by 20% to 40% and worldtemperature has increased from 0.4% to

0.8%.

Poverty and the Environment


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Poverty and the Environment

Both environmental degradation and poverty

alleviation are urgent global issues that have alot in common, but are often treatedseparately.

Consider the following:

Human activities are resulting in mass speciesextinction rates higher than ever before,

currently approaching 1000 times the normalrate;

Human-induced climate change is threatening

an even bleaker future;


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Poverty and the Envt

At the same time, the inequality of humansocieties is extreme:

The UN 1998 HDR reveals that:

Globally, the 20% of the worlds people in thehighest-income countries account for 86% oftotal private consumption expendituresthepoorest 20% a minuscule 1.3% ;

To highlight this inequality further, considerthat approximately 1 billion people suffer fromhunger and some 2 to 3.5 billion people have a

deficiency of vitamins and minerals


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Poverty and the Envt

Yet, some 1.2 billion suffer from obesity

One billion people live on less than a dollar aday, the official measure of poverty

However, half the world nearly three billionpeople lives on less than two dollars a day.

Yet, just a few hundred millionaires now ownas much wealth as the worlds poorest 2.5billion people


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Poverty and Envt

Poverty and third world debt has beenshown to result in resource stripping just tosurvive or pay off debts.

For example, Nepal and Bangladesh havesuffered from various environmentalproblems such as increasingly devastating

floods, often believed to be resulting fromlarge-scale deforestation.


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Poverty and Envtal stress

Grinding poverty and impatience may spur

people to strive for immediate gain,

forgetting long-term sustainability,especially when property or use rights are

unclear.


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To survive, impoverished people:

degrade and destroy their immediate environment;

Cut down forests for fuelwood and export earnings;

overuse marginal agricultural land;

migrate to shrinking areas of vacant land, and

destroy habitat for biological species essential for

pharmaceuticals and seed varieties


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Forests around the world face increasedpressures from timber companies, agriculturalbusinesses, and local populations that use

forest resources. Some environmentalists, from rich nations

especially, also raise concerns about

increasing populations placing excessiveburdens on the worlds resources as thecurrent major source of environmental

problems.


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According to U.N.World Commission onEnvironment and Development (1987):

Impoverished people forego maintenance ofvegetation, forests, and the biosphere.

At subsistence levels of living, when peoplessurvival is at stake, hand-to-mouth economicsprevail in which the future is infinitely discounted;


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People overexploit natural resources and under

invest in conservation and regeneration,

Leading to resource depletion and species loss.In this economic climate, people make

irreversible decisions, foreclosing options by

logging and mining of rain forests and other

economic options that reduce species

(Panayotou 1993; Flavin 1989).


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Conclusion poverty and envt

Poverty and environmental

stress end up with Viciouscycle of poverty


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So what? (Green accounting)

Green accounting incorporatesenvironmental assets and their source andsink functions into national and corporate

accounts. It is the popular term for environmental

and natural resource accounting.


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Green Accounting

Conventional national accounts largelyignore:

New or newly observed scarcities of

natural resources, which threaten toundermine the sustainability of economicperformance and growth, and

Environmental degradation as anexternal (social) cost of economic activity

.


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Green accounting

Further critique refers to a possibledistortion from counting environmentalprotection expenditures as an increase in

national income, despite the fact that suchdefensive expenditure tends to maintain,rather than increase, the welfare of

society. In response, the United Nations issued in

1993 and revised in 2003 a handbook on

a System for integrated Environmental


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Conclusion

Thus to bring sustainabledevelopment there must be a

balance between the threeobjectives of sustainable

development.


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End

Thank You!

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Environmental and Development