Sustainable Development and Competitive Performance in Mexican Cities: Economic and Environmental Accounts

Jaime Sobrino

Presentation

Objective To study the environmental accounts in Mexico, its disintegration

from sectoral to a spatial context, and the relationships between local economic growth and environment protection in the largest Mexican cities

Contents

Main concepts about environmental accounts Operation of the environmental accounting system in Mexico Empirical analysis about the relationship between local economic

growth and environmental effects for Mexico’s largest cities Final remarks about local economic growth, competitiveness, and

environmental affairs.

Three main concepts

Sustainable / sustainability Used for the first time by the Club of Rome (The Limits to

Growth) The need to ensure a better quality of life for all, and into the

future, in a just and equitable manner, while living within the limits supporting ecosystems

Pillars: environment, economy, equity Areas of concern: quality of life; present and future generations;

justice and equity in resource allocation; living with ecological limits

Sustainable development Political and policy framework for improving the way we live, the

way we distribute goods and externalities, and the way we do business with finite resources

Three main concepts

Natural capital

Stock of resources and the environmental services involved into production

Includes the following: i) natural resources (soil, water, minerals, fossil fuels); ii) natural environment (natural parks, biosphere reserves, coasts, islands); iii) water bodies (rivers, lakes, marshes); iv) geological landscapes, and v) ecosystems

Scenarios on relationship between natural capital and local economic growth

The long-term rate of innovation exceeds any adverse effect of shortage on natural capital

As a result of the shortage of natural capital, long-term effects may either affect individual innovations or nullify technical and social innovation

The indiscriminate depletion and degradation of natural capital can be translated into limits to the long-term rate of growth

Indicators for measuring sustainability

The best known: Agenda 21 by the UN in the world conference in Rio de Janeiro in 1992. Indexes to measure environmental consequences of economic growth

The most popular: the UN Millennium Development Goals in 2000: i) eradicate extreme poverty and hunger; ii) achieve universal primary education; iii) promote gender equality and empower women; iv) reduce child mortality; v) improve maternal health; vi) combat HIV/AIDS, malaria and other diseases; vii) ensure environmental sustainability, and viii) global partnership for development

Another tool: environmental accounts

Satellite account from the national accounts

Attempt to apply numerical magnitudes to environmental factors and the use of natural capital

The key challenge is to include the Gross External Damages into the social accounting, and the need for adding external effects either as an input or as an output in the accounting framework (It is, how to measure natural capital?)

Examples in measuring natural capital

Measure the annual expenditure on air pollution control (USA)

Measure the physical endowment of natural resources and their variation over time (France and Norway)

Assign a value to natural capital changes over time (the Netherlands)

International trends

Pressure on nature and income, 1970-2008 Distributions of components across income groups

Source: A. A. Aşici, 2013

The Mexican economic and ecological accounts

Present information about Depletion of natural Resources (DNR): woods, timber forests,

hydrocarbons, and groundwater Environmental Degradation (ED): emission levels in air (pollution), soil

(garbage and solid waste), and water (aquifer contamination) Expenditure on Environmental Protection (EEP) from private and public

agencies

Year GDP TCEDDa EGDPb EEPc TCEDD / GDP EEP / TCEDD2003 806 214 68 372 737 843 4 694 8.5 6.92008 951 454 71 308 880 146 7 535 7.5 10.62012 1 029 603 65 175 964 427 9 466 6.3 14.5

a Total Costs for Environmental Depletion and Degradation.b Ecological GDP.c Expenditure on Environmental Protection

Source: prepared by the author with data from INEGI, 2014.

Table 1Mexico: main values of the economic and environmental accounts, 2003-2012

(in constant 2005 million dollars)

Environmental costs on GDP

0

2

4

6

8

10

12

14

16

2002 2004 2006 2008 2010 2012 2014

Per

cent

ages

TEC / GDPEEP / TEC

Economic and environmental costs by sector, 2008

68%

32%

DNR

ED

22%12%

30%

36%

HouseholdsPrimarySecondaryTertiary

0

5

10

15

20

25

Tra

nspo

rtat

ion

Min

ing

Agr

icul

tura

l

Oth

er ser

vice

s

Man

ufac

turing

Oth

erac

tivi

ties

BillionDollars

Urban GDP and environmental costs

Metropolitan Area GDP TECa EGDPb TCEDD / GDP

Mexico 951 454 71 308 880 146 7.5

Largest MA 604 400 39 332 565 067 6.5

Mexico City 226 748 11 561 215 187 5.1

Monterrey 66 967 3 131 63 836 4.7

Ciudad del Carmen 50 193 10 586 39 607 21.1

Guadalajara 46 807 2 223 44 584 4.7

Puebla 24 375 1 090 23 285 4.5

Toluca 18 178 872 17 306 4.8

León 14 398 914 13 484 6.3

Torreón 14 202 881 13 321 6.2

Tijuana 14 189 688 13 502 4.8

Querétaro 13 516 794 12 722 5.9

San Luis Potosí 12 860 618 12 242 4.8

Chihuahua 12 467 428 12 039 3.4

Ciudad Juárez 12 333 615 11 718 5.0

Saltillo 12 035 519 11 516 4.3

Reynosa 11 519 1 271 10 248 11.0

Veracruz 11 277 1 035 10 242 9.2

Mérida 11 073 504 10 569 4.6

Hermosillo 10 651 526 10 126 4.9

Tampico 10 650 524 10 125 4.9

Mexicali 9 963 554 9 409 5.6

Rest of the country 347 054 31 976 315 079 9.2a Total Environmental Costs.b Ecological GDP.

Table 3

Mexico: GDP and EGDP on largest metropolitan areas, 2008

(in constant 2005 million dollars)

The role of environmental costs on urban competitiveness

Variable β se (β) p > | t | β se (β) p > | t |Constant 119.878 20.220 0.000 -38.613 27.513 0.172

Ln(Pob) -6.455 1.440 0.000 3.957 1.963 0.054EC PC -0.012 0.005 0.016 -0.011 0.006 0.084Sec -0.193 0.109 0.088 0.210 0.149 0.170

R2 0.584 0.227P > F 0.000 0.062Source: preparedby the author with data from INEGI (2014).

Model 1 (Long-term) Model 2 (Short-term)

Table 4Regression results

Model 1: Long-term competitiveness Index rankModel 2: Short-term competitiveness Index rank

Control variables:Ln(Pob) Natural log of populationECPC Environmental costs per capitaSec Share of secondary sector on local GDP

Final remarks Urban competitiveness refers to the ability of a city to attract

investment

Mexican cities with the best competitive performance were not the same in each short-term economic cycle occurred since 1980

National economic growth has been slower during globalization era

There has been a significant redistribution of economic activity from Mexico City towards other urban agglomerations

Among the largest cities in the country, a better economic performance, a higher environmental cost

ljsobrin@colmex.mx