United States
Environmental Protection
Agency
Policy, Planning,
And Evaluation
(2134)
EPA 230-K-95-001
May 1995
c/EPA
President's Council On
Sustainable Development
Principles, Goals, And
DefinitionTask Force
Background Papers
EPA
230
K
95
001
c.2
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ACKNOWLEDGEMENTS
The following background papers were prepared by the Principles, Goals, & Definition Task Force
at the request of (he Task Force Chairs, Jay Hair and William Ruckelshans, and were presented to
the frill Council at its meeting in Seattle, Wa, on January 13, 1994. The papers draw on a variety
of sources and are intended to provide insights into contemporary thinking on issues related
specifically to principles of sustainable development. Any opinions expressed in these papers are
not attributable to the PCSD, If.S. EPA, or to other organizations represented on the Task Force.
Drafting, Research,
Editing:
Research Assistance:
Editorial Review:
Lea Swanson, U.S. EPA, Office of Policy, Planning &
Evaluation
Delores Gregory, Consultant for Browning-Ferris Industries
Alex Cristofaro, U.S. EPA, Office of Policy, Planning &
Evaluation
Richard Goodstein, Browning-Ferris Industries
Lynn Greenwalt, National Wildlife Federation
Task Force:
Co-Chairs
Jay Hair, President and CEO, National Wildlife Federation
WillianrRuckelshaus, Chairman and CEO, Browning-Ferris Industries
Mem hers
Bruce Babbitt, Secretary, U.S. Department of the Interior
James Baker, Under Secretary for Oceans and Atmosphere, NOAA
Ronald Brown, Secretary, U.S. Department of Commerce
Carol Browner, Administrator, U.S. EPA
Benjamin Chavis, Environmental Justice Advocate
Thomas Donahue, Secretary-Treasurer, AFL-CIO
Michele Perrault, International Vice President, Sierra Club
Timothy Wirth, Under Secretary for Global Affairs, U.S. Department of State
PCSD:
David Buzzelli and Jonathan Lash, Co-Chairs
Molly Harriss Olson, Executive Director
Peggy Duxbury, Principles, Goals, & Definition Task Force Coordinator
<£>
13
o
US L-TAfi.W.^'.iriyrs Librae
''-^-'04
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TABLE OF CONTENTS
SECTION 1:
KEY CONCEPT PAPERS
* Economic Progress/Economic Growth
* Integrating Economic and
Environmental Decision making
* Population, Poverty, and
Economic/Environmental Progress
* Intra-generational Equity
* Inter-generational Equity
* Dealing with Risk
* National Security
* Participation and Responsibility
* Polluter Pays Principle
* Economic Instruments
* Technology and the Environment
* Trade and the Environment
PAGE
1
2
4
9
12
15
19
21
24
26
29
31
SECTION 2:
KEY REPORTS - EXTRACTS
34
SECTION 3:
GLOSSARY OF TERMS
62
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SECTION 1:
KEY CONCEPT PAPERS
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ECONOMIC PROGRESS/ECONOMIC GROWTH
Since the World Commission on Environment and Development's Report (QurCommon
Future) was published in 1989, debate about the definition of sustainable development has
continued. An important part of that debate concerns whai from an economic, environmental,
and social perspective - is being sustained. According to Herman E. Daly1, "many people in the
development community who use the term sustainable development cannot tell you what is being
sustained whether a level of economic activity or a rate of growth of economic activity." Two
terms, says Daly, are frequently used more or less synonymously: "sustainable growth" and
"sustainable development". In making this observation, Daly distinguishes "growth" as expansion
in the scale of the physical dimensions of an economic system, from "development" which he says
refers to "qualitative change of a physically nongrowing economic system in a state of dynamic
equilibrium maintained by its environment." For Daly, the term development means that the earth
is not growing, but it is developing. "Any physical subsystem of a finite and nongrowing earth
must itself also eventually become nongrowing. Therefore the term sustainable growth implies
an eventual impossibility, while the term sustainable development does not. It is development that
can have the attribute of sustainability, not growth. What is being sustained in sustainable
development is a level, not a rate of growth, of physical resource use. What is being developed
is the qualitative capacity to convert that constant level of physical resource use into improved
services for satisfying human wants."
The Business Council for Sustainable Development (BCSD)2 challenges Daly's perspective,
noting that "many environmentalists, looking at the damage which they feel has been caused
already by economic growth, argue that no further increment is desirable. Others argue that
further growth in the industrial nations is potentially destructive to global ecosystems. They add
that unlimited sustainable growth is impossible for any organic system, and that for all systems
there is a size at which efficiency is optimised." The BCSD goes on to offer three reasons why
sustainable growth is necessary for the foreseeable future. "First, over one billion people out of
a global population of well over five billion live in poverty, according to the World Bank, unable
to meet daily needs for adequate food, clean water, safety, housing, education and health care.
Alleviating this situation will require economic growth over a vast area of the globe. Second, the
global population is expected to at least double within the next century, most probably within the
next 40 years. Over 90 percent of this increase is expected in the developing world. What will
meet their needs unless it is economic growth? Third, people do not limit the sizes of their
families until they are confident that they can keep their children alive. For this, they require
adequate food, health care, education and job opportunities. Some very poor areas of the world
have managed to make such development available for the poorest, those who are having the most
children. But, given the numbers involved, economic growth will be required to slow current
Herman E. Daly, "Sustainable Development: From Concept and Theory Towards Operational Principles",
Population and JDavelopmentRfivifiw, Hoover Institution Conference, 1989.
Business Council for Sustainable Deveiopmenl, "A Business Perspective on Sustainable Development," Based
on Changing Course, MIT, 1992.
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population growth rates." In addition, the BCSD points to the broad foundation of the market
system that individuals entering the market can make their businesses grow. It is this foundation,
says the BCSD, that enables the market system to deliver the benefits of widespread opportunity,
efficiency, and innovation. "So those who theorise that there has been enough growth in the
industrial North, must devise a whole new market system which can deliver opportunity,
efficiency and innovation, while the participants in that system remain satisfied with stagnation."
On the other hand, notes the BCSD, "those who believe that the free, competitive market is the
best system for all, must prove that it is compatible with the goal of sustainable development. Or
they must show how the system can be refined without lessening its benefits to be compatible
with that sustainable development goal. In its report, Changing Course, the BCSD shows how
the system must be refined.
In this document, the terms "economic progress" and "economic growth" are used
interchangeably:
Economic Progress/Economic Growth:
Economic progress refers to quantitative and qualitative progress, in the context of clean
and equitable improvements to socio-economic systems. Quantitative improvements are
those that meet the essential needs of the present and depend, in part, on achieving full
growth potential without compromising the ability of future generations to meet their own
needs. Qualitative improvements reflect the capacity to convert physical resource use into
improved services for satisfying human wants. Given the large technological and
productive capacity of business, any progress toward sustainable development requires the
active leadership of business.
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INTEGRATING ECONOMIC AND ENVIRONMENTAL DECISIONMAKING1
In the economist's idealized world of perfect competition, the interaction of profit-
maximizing producers and utility-maximizing consumers gives rise to a situation that is called
Pareto-optimal. In this state, prices reflect the true marginal social costs, scarce resources are
efficiently allocated and, for a given income distribution, no one person can be made better off
without making someone else worse off. However, conditions are likely to be far from ideal in
the real world. Furthermore, the reliance on strict efficiency criteria for determining economic
welfare implies the passive acceptance of the existing income distribution which may be socially
and politically unacceptable.
Distortions due to monopoly practices, external economies and diseconomies such as
environmental impacts which are not internalized in the private market, interventions in the market
process through taxes, import duties and subsidies, all result in market (or financial) prices for
goods and services which may diverge substantially from their shadow prices or true economic
values. For example, company profit and loss accounts seldom register the true costs of pollution,
which are passed on to the rest of society. And subsidized pricing persists even though it is
generally agreed that improving the price system and correcting for market failures will not only
help the environment, it will reduce waste and thereby increase efficiency. Subsidized energy
prices, for example, lead to wasteful use of energy, which, in turn, results in excessive emissions
of particulates and sulphur dioxide. Removing subsidies in this example would result in less waste
and less pollution. While prices that reflect baseline economic costs are clearly important, a more
comprehensive environmental pricing approach requires accurately valuing environmental
degradation. If a damaging externality can be economically valued or shadow priced, then a
charge or tax may be levied on the perpetrator (polluter-pays-principle), to compensate for and
limit the damage. Unfortunately, many externalities are not only difficult to measure in physical
terms but even more difficult to convert into monetary equivalents that is, to measure the
willingness to pay of the parties affected by the externalities.
Ideally, environmental cost and benefits should be quantified economically and integrated
into traditional cost benefit analysis. Conceptually, the total economic value of a resource consists
of its (i) use value and (ii) non-use value. Use values can be broken down further in to the direct
use value, the indirect use value and the option value. One major category of non-use value is
existence value.2 The basic concept of economic valuation underlying the different valuation
techniques is the willingness to pay of individuals for an environmental service or resource.
Willingness to pay itself is based on demand. A number of techniques - including contingent
valuation, replacement cost estimation, shadow projects, shadow pricing, and the use of
"surrogate" markets -- have been developed for estimating the value of nonmarketed
Refer Munasinghe, EnvLTijiiinenLdl_EcQiiQmics aiui SiLsLaiiiahk Development, The World Bank, July 1993;
Munasinghe, Cruz, Warford, "Are Economywide Policies Good for the Environment?" in Einance_&
Development, September 1993; The .World. Development Report 1992, The World Bank, May 1992;
Human Development Report 1393, United Nations Development Programme, 1993.
Munasinghe, op.cit. See Glossary of Terms, "Economic Value" for definitions.
4
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environmental services.3 In cases where valuation of environmental impacts is problematic,
techniques such as multicriteria analysis may be used to incorporate environmental concerns into
investment decisions and policies. Multicriteria analysis draws on nonmonetary measurements to
identify contributions to social and environmental goals that are not easily quantifiable.
Valuation techniques have usually been employed to inform decisions at the project and
sectoral level, but they also need to influence decisions and how we measure progress at the
national level. The limitations of conventional measures of economic activity, such as GNP and
national income, as indicators of social welfare are well known. Based on the United Nations
System of National Accounts, these indicators do not accurately reflect environmental degradation
and the consumption of natural resources. Leaving out the services provided by natural resources,
for example, ignores the impact of economic activity on the environment in its role both as a
"sink" for wastes and a "source" of inputs. It is argued that ignoring these services and their
effects on economic activity makes the national income accounts misleading for formulating
economic policies. To overcome these deficiencies in presently used accounting techniques it is
necessary to develop a System of National Accounts that is capable of yielding an
Environmentally-adjusted net Domestic Product and an Environmentally-adjusted net Domestic
Income. Various approaches to natural resource and environmental accounting have been
developed,4 with the simplest approaches attempting to measure more accurately the responses to
environmental degradation and protection that are already imperfectly measured in the national
income accounts. Ongoing work in the United States on estimating pollution abatement
expenditures is an example. A second approach responds to the inconsistent treatment of natural
capital and attempts to account explicitly for the depletion of natural resources. Other approaches
attempt to improve the information available for environmental management. Supplementary
environmentally-adjusted national accounts and associated performance indicators would
encourage policymakers to reassess the macroeconomic situation in light of environmental
concerns, and to trace the links between economywide policies and natural resource management.
Munasinghe, op.cit.
See, for example, Envimnmental^Acccmntiiig forJJustainahle Development, ed. Ahmad, Serafy, Lutz, The
World Bank, 1989; Munasinghe, 1993, op.cit.
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POPULATION, POVERTY, AND
ECONOMIC/ENVIRONMENTAL PROGRESS1
In the long run, the welfare of the few cannot be disentangled from that of the many.
In 1992, 51 nations registered per capita incomes of less than $610. Yet those nations
support 58% of the world's population. In the same year, 4-2 nations registered per capita incomes
greater than $7,650. Those nations support only 16% of the world's population. Moreover, the
average population growth rate of the low income nations is around 2%, which is significantly
higher than the 0.6% population growth rate of the high income nations. And behind the low
income nations' population growth rate lies a birth rate of 31 per 1000 population and a death rate
of over 10 per 1000. High income nations have a significantly lower birth rate of just over 13 per
1000 population, and a death rate of just under 9 per 1000 population. Another telling statistic is
the infant mortality rate. In low income nations the infant mortality rate is 75 per 1000 live births,
compared with 8 per 1000 live births for high income nations."' Falling in between the two poles
of low income and high income nations, 90 nations registered per capita incomes between $611
and $7,649. Those nations support around 20%3 of the world's population, and have an annual
population growth rate of approximately 2%, the same as for low income nations.4
The interacting forces of population density and resource scarcity in low income nations
reflected in the above statistics, tend to reinforce poverty at the microeconomic level, strain public
support systems,5 and exacerbate environmental degradation. "Poor families feel obligated to have
many children to provide household help, protection and old-age support, thus increasing the
Refer World-Population Projections 1991-93.Edition, The World Bank, November 1992; Hainan Development Report
1993, United Nations Development Programme, 1993, Finance ADevelupincnl. June 1992: The World.Bank Research
Observer, Vol. 8. No.2, July 1993, "Environmental Protection -- Ha-s it been Fair?," EPA Journal, April/May 1992.
Bos, Eduard, et.al., World Population.Projections 1992-9,'i Edition. The World Bank, The Johns Hopkins
University Press, Baltimore, Md., November 1992.
Bos, Eduard, et.al.. op.cit. The remaining 6% of nations are non-reporting, non-member nations.
The low income population growth rate is 2.05% compared with lower-upper middle income group's rate of
2.04%. The difference is not as large as may he expected. The reason for this is the inclusion of China and
India, which both have moderate growth rates, in the low-income group. As the overall growth rate is an
average of country growth rates weighted by population size, China and India depress the low-income growth
rate. Without China and India, the low-income countries would have the highest growth rate (2.5% per
year).
As a proportion of gross national product, public spendirg in developing countries is lower than that in
industrial countries. However, governments in developing countries do offer some relief to the poor, for
example, through the distribution of food supplements for children, and they may organize labor-intensive
public works programs to provide income especially in times of disaster. But in practice, most people in
developing countries have to rely on support from their families or communities in times of difficulty. To
maintain adequate and efficient social safety nets for their vulnerable groups, many countries will need to
increase public spending. Human DevjilflpmentJtepoj-t J993. United Nations Development Programme, New
York, Oxford University Press, 1993.
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reliance on natural resources for household food and energy".6 As children can produce more than
they consume in the short term, the demand for child labor in developing countries remains high.
In addition, struggling at the edge of subsistence levels of consumption, the very poor have limited
scope to plan ahead and make natural resource investments such as soil conservation. Thus poor
families emerge as agents of environmental degradation. In other examples, poor families are the
victims of environmental degradation. The poor are the most vulnerable in terms of exposure to
certain types of pollution such as unclean water that carries infectious and parasitic diseases. They
also suffer disproportionately from indoor air pollution that results from burning unclean, but
affordable, bio-fuels. I^ower productivity is another effect of environmental degradation as poor
families are forced to divert more time to routine household tasks such as fuelwood collection. In
industrialized countries, such as the United States, limited resources mean that "poor people do
not have the means to buy their way out of polluted neighborhoods. Also, land values tend to be
lower in poor neighborhoods, and the neighborhoods attract polluting industries seeking to reduce
the costs of doing business. The residents tend to be unaware of policy decisions affecting them;
they are not organized; and they lack the resources for taking political action."7 One approach to
this complex problem in developing and developed countries alike, lies in improving peoples'
health and education to strengthen the demand for smaller families, and providing better family
planning services/ Access to quality education can enable the adoption of more sustainable
practices in agriculture, industry, and household management, and improve participation in
decisionmaking processes. Access to public health services and information can enable the poor
to follow preventive measures capable of reducing environmental health risks.
At the macroeconomic level, many developing countries (and some developed countries)
face national debt -- driven by resource mobilization programs aligned to the primacy of gross
domestic product growth targets.9 And this drive for rapid growth has also resulted in
environmental degradation, particularly in developing countries where immature social structures
and technologies has led to consumption of environmental resources beyond sustainable levels.
Debt matters because it inhibits the development of the infrastructure needed to provide adequate
education, health care, nutrition and family planning services. National debt also restricts the
development of adequate transportation and communication infrastructure needed to encourage
Sharma, Nareiulra, and Rowe, Raymond, "Managing the World's Forests", Fina.nct; & Development, June
1992.
Mohai and Bryant, "Race, Poverty, and the Environment," EPA Journal, Volume 18.k Number 1,
March/April !992.
Summers, Lawrence H., Thomas, Vinod, "Recent Lessons of Development," The World Bank Research
Observer, Vol.8, No.2. July 1993, pp.241-254.
Shilling, John D., "Reflections on Debt and the Environment," Finance & Development, June 1992.
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foreign direct investment10 and stimulate the development of domestic markets and export
opportunities, which in turn can help reduce the national debt. Furthermore, debt feeds pressures
to continue to convert natural resource wealth into current income in order to restore income
growth and increase exports to repay debt. The vicious circle of reinforced debt, poverty, and
inadequate investment although not yet environmental degradation has been broken by some
developing countries, which in turn has led to economic disparities wilhin the developing world.
And the gap between the fast developers, such as China and Mexico, and the slower developers,
such as the Philippines and Zambia, is likely to widen during the next decade. It is the fast
developers that attract foreign direct investment. "Of total foreign investments in the developing
world in the 1986-91 period, 55% went to just six countries -- Mexico, China, Malaysia,
Argentina, Brazil and Thailand."" This catch-22 of fast-slow-development is paralleled within
both developing and developed nations.12
The fast-slow-development paradox draws attention to the imperfections of free markets.
Free markets provide the most efficient mechanism yet devised for the exchange of goods and
services, and most developing countries have moved towards more market-oriented policies. Yet,
they are not without their distortions and "can be associated with increasing inequality and
poverty, as well as large-scale unemployment."1^ These distortions are not insurmountable. Indeed
it is argued that an important role of government is to provide the institutional framework for
exchanges that will enable the efficient development and operation of markets. This institutional
framework would a) prevent the development of monopoly power; b) enable equal opportunity
for market entry and participation through such services as education, access to credit and
training, and c) enforce the internalization of external costs and benefits "be it pollution
(external cost) or the prevention of communicable diseases (external benefit)."14
10 Human Development Report J993, op.cit. In the 1950s and 1960s, most flows of foreign direct investment
to developing countries were to the manufacturing sector with well-protected markets and adequate supplies
of raw materials. A recent analysis showed that apart from relatively open trade policies, investors attached
much importance to the quality of physical, human, and institutional infrastructure. Also, U.S.-owned
affiliates tend to locate in countries with large internal markets and high propensities to trade; labor cost is
not an influential factor. Access to fast growing markets is also of major importance for foreign investors.
11 Carrington, Tim, "Economic Disparities Vex Developing World," The Wall Street Journal, September 27,
1993. Carrington also notes that "the disparities in the developing world aren't limited to economic
measures. In Vietnam, 12% of the people can't read; in Gambia, 73% can't. A baby born in Martinique can
expect to live 76 years; one in Guinea-Bissau will probably die before age 40."
12 See Key Concept Paper entitled "Intra-generational Equity" for a discussion of income disparities within the
United States.
" Human Development Report 199J, op.cit.
14 ibid.
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INTRA-GENERATIONAL EQUITY1
The concept of equity embraces notions of fairness and social justice. In economics, equity
is usually studied in terms of the distribution of income and wealth. However, while command
over resources is clearly a major aspect of equity, it is not the full story. The principle of equity
embraces also the interrelated notions of fairness, impartiality, justice, non-discrimination, and
human and social rights.
In the Brundtland Report, equity is seen chiefly in terms of poverty in the developing
world, where the links between environmental stress and hunger are so apparent. Nonetheless,
in some developed nations, relative poverty is a significant and growing economic and social
problem. The percentage of Americans living in poverty is now 14.5 percent, up from 11 percent
in 19732. In the specific context of environmental degradation, it is argued that the impacts of
some types of environmental problems fall disproportionately on disadvantaged groups, who may
be clustered in areas particularly affected by industrial pollution and urban congestion, and who
may lack the mobility to move away. This argument is supported by studies on the potential for
exposure of minority population groups to substandard outdoor air quality.1 In the United States,
excluding Alaska and Hawaii, the studies show that higher percentages of both African Americans
and Hispanics live in areas with reduced air quality than do whites. For instance, 52 percent of
all whites live in counties with high ozone concentrations; for African Americans the figure is 62
percent, and for Hispanics, 71 percent. Moreover, a comparison between poor African American
and Hispanic percentages shows that these minority groups are more concentrated in such counties
than the poor population in general. This suggests that more than low income is a factor in the
above-average percentages of African Americans and Hispanics in areas with reduced air quality.
Air pollutants that cause substandard air quality come from many and varied sources including
traffic, industry, and even fireplaces. Industrial and electricity-generating facilities are major
sources of some of the contaminants of concern. Almost half of the nearly 3,000 major air-
polluting facilities nationwide are in the South, followed in order by the North Central, West, and
Northeast regions. Likewise, 63 percent of the facilities are in urban counties. Of all the U.S.
counties considered urban, only 12 percent have high percentages of minorities, but these high-
minority counties contain 21 percent of all urban facilities. Thus, the air-polluting facilities are
disproportionately concentrated in counties with high percentages of minorities. Similar evidence
is available with regard to toxic waste dumps. However, a note of caution has also been expressed
Refer Ecologically Sustainable Qevelopineni Working Group Chairs: Intersecloral Issues Report,
Commonwealth of Australia. November 1991; Human Development Report 1993, United Nations
Development Programme, 1993; World DevelopjnenLRgpartJ992, The World Bank, March 1992;
Environmental Protection: Has It Been Fair?, EPA Journal, Volume 18, Number 1, March/April 1992;
Frances Caincross, Casting lhe_ Earth, 1992.
Jason DeParle, "Debris of Past Failures Impedes Poverty Policy," The New York Times, November 7, 1993.
"Breathing Polluted Air", EPA.Journal, Volume 18, Number 1, March/April 1992, Wernette and Nieves.
The studies were undertaken at Argonne National Laboratory, and focused on areas identified by the
Environmental Protection Agency as failing to attain national ambient air quality standards.
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in linking race and environmental health risk. According to the Director of the U.S.
Environmental Protection Agency's Office of Health Research,4 it is difficult to separate the
effects of socioeconomic status from the effects of race on environmental health risk. Poor
people, typically, are less well informed about environmental health issues, lack adequate health
care, have a substandard diet, and are more likely to have stressful and unhealthful lifestyles. The
situation is complicated by the fact that minorities are statistically more likely to be disadvantaged
in terms of their income, education, and occupation than their white counterparts. Consequently,
although there is substantial anecdotal and circumstantial evidence suggesting that class and race,
taken together, affect exposure levels, we do not now have sufficient data to differentiate between
the two. Nonetheless, there is evidence, as already noted, to suggest that exposures to some
environmental pollutants vary according to socioeconomic and ethnic variables. These differences
in exposures result from the fact that disadvantaged people, including ethnic minorities, tend to
come into contact with higher pollution levels because of where they live, what they eat and drink,
and how they earn their living.
Thus the environmental equity question can only be addressed by exploring the issue of
income equity. Conventional economics argues that it is important to sort out efficiency questions
first, and to leave equity or welfare problems to a separate process in the formulation of economic
policy that is to a single process of income redistribution, for example through a progressive
taxation system. Such a view has been increasingly reflected in economic policy in advanced
industrialized countries over the last decade or so. In pursuit of greater economic efficiency and
more rapid economic growth, governments have implemented policies of deregulation,
privatization, reductions in public sector outlays and other measures, in an attempt to allow
markets to operate more freely. Although properly functioning markets can be effective creators
of wealth, they are very poor distributors of wealth,5 and in many capitalist countries the
redistributive mechanisms in place have been insufficient to maintain existing patterns of income
distribution over time, let alone to reduce inequality. As a result the gap between rich and poor,
as measured by most of the standard indicators, has widened.
It is generally argued that this widening gap between the incomes of the rich and the poor
is an undesirable outcome. However, an alternative viewpoint has been expressed,6 and refers to
recent research that identifies important developments that underlie the changes in income
distribution in the United States. These developments include an increase in the spread between
the wages of skilled and unskilled workers, and a sharp increase in the non-wage income reported
by the rich. The research reveals that in the 1980s, for example, the wages of highly educated
workers rose sharply relative to those of less educated workers. This changing wage pattern
reflects technological advances, including the proliferation of computers, that make worker skill
more important in the production process. One conclusion drawn from this research is that
"Cause for Concern," EEA. Journal, Volume 18, Number I, April/May 1992, Sexton.
Human Development Report L993, United Nations Development Programme, 1993.
"Inequality and Its Charms," Wall Street Journal, February 10, 1993, Robert J, Barro (Harvard economics
professor).
10
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"economic forces are at work that governments cannot and should not seek to control. Rather,
a useful governmental role might involve improved access to education and training, not efforts
to redistribute income or policies like trade protection that would retard the spread of new
technologies. "7
In whatever way government decides to approach equity questions, intragenerational equity
has at least two important consequences for economic policy. The first is that the lessening of
economic inequality will have to be seen as a primary goal of economic policy rather than as a
secondary or separate process. In other words, measures to reduce income inequities will need
to become more closely integrated with policies aimed at improvement in economic efficiency and
structural reform. The second consequence is that the evaluation of policies aimed at other aspects
of sustainable development will need to take explicit account of equity impacts as part of a process
of overall assessment of such policies. For example, energy policy might call for an increase in
fuel prices. Since: fuel costs as a component of household expenditure are proportionately higher
for low-income families than for others, a rise in fuel prices would have a regressive distributional
impact.
International Aspects8
An often heard argument is that countries have a greater responsibility to the poor within
their own borders than to the less well-off in other countries. In any case there is scope for
designing aid packages (for example, in the area of education) which in the short to medium term
can yield benefits for the United States as well as for the countries receiving the aid. In the longer
term, the potential benefits to the industrialized world from growth in developing countries have
been well documented, such that even if ethical arguments for provision of increased development
assistance by rich countries are thought by some to be unpersuasive, there is still a case in terms
of self-interest.
ibid.
See Key Concept Paper entitled "Population, Poverty, and Economic/Environmental Progress"
discussion of economic and environmental inequity from an international perspective.
11
for a
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INTER-GENERATIONAL EQUITY1
Although it is often argued that as a society we should pass on to future generations no less
than we inherited, we have little by the way of effective measures against which to judge overall
increases or decreases in global capital. Assessments are therefore inevitably substantially
judgmental. Most observers would accept, however, that the previous generation did hand on to
the present generation a larger stock of capital on balance than they themselves received, notably
in respect of the development of knowledge and technology over a range of social and economic
issues. For its part, the current generation is expanding knowledge very rapidly as well as
building up the physical capital that will be passed onto future generations. As far as
environmental capital is concerned, despite the lack of adequate indicators, in many respects
environmental quality of life in the United States has improved. This is particularly true in the
field of environmental health (despite the emergence of other environmentally linked health
hazards) with the substantial reduction of environmentally-related illnesses such as cholera,
typhoid, and tuberculosis, as well as occupationally-related diseases such as asbestosis, respiratory
ailments and hearing loss. For the physical environmental itself, however, the picture is mixed,
with some areas of substantial environmental improvement offset by some significant
deterioration, as in land degradation and water quality. At a global level, environmental
deterioration is already evident, and the belief is widely held that without substantial change the
present generation will pass on to future generations a diminished stock of natural capital. This
concern arises from the argument that in at least three respects, the global community is living
unsustainably. Firstly, the rates of loss of animal and plant species, arable land, water quality,
tropical forests and cultural heritage are considered to be serious. Secondly, and perhaps more
widely recognized, is the fact that we will not pass on to future generations the ozone layer or
global climate system that the current generation inherited. A third factor that contributes to
concerns about the first two is the prospective impact of continuing population growth and
environmental consequences if rising standards of material income around the world produce the
same sorts of consumption patterns that are characteristic of the currently industrialized countries.
Two questions arise in considering how to approach inter-generational equity in a way that
fits effectively into decisionmaking processes: (1) how to evaluate future costs and benefits; and
(2) how to define the relationship between human-produced and natural capital. Discounting is
the process by which costs and benefits that occur in different time periods may be compared.
Economists typically use a forward-looking approach in which past (or sunk) costs and benefits
are ignored, while a discount rate is applied to future costs and benefits to yield their present
values. The long-term perspective required for sustainable development suggests that the discount
rate might play a critical role in intertemporal decisions concerning the use of environmental
resources. Two concepts help shape the discount (or interest) rate in a market economy. First,
there is the rate of time preference which determines how individuals compare present-day with
Refer Munasinghe, Environmental Eccnoniics_Jand Sustainable Development, The World Bank, 1993;
Ecologically.Sustainable Development Working Grou|i_£ hairs: IntersectoraLIssues Report, Commonwealth
of Australia, 1992; Frances Caincross, Costing the JEarth, 1992; World Development fieport. 1592, The
World Bank, 1992.
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future consumption. Second, there is the rate of return on investment (or opportunity cost of
capital), which determines how an investment (made by forgoing today's consumption) would
yield a stream of future consumption (net of replacement). In an ideally functioning market, the
interest equals both the marginal rates of time preference and return on capital. In practice,
government policy distortions and market failures lead to divergences between the rates of time
preference and return on capital. Furthermore, the social rate of time preference may be less than
the individual time preference rate, because long-lasting societies are likely to have a bigger stake
in the more distant future than relatively short-lived individuals.
Higher discount rates may discriminate against future generations. This is because projects
with social costs occurring in the long term and net social benefits occurring in the near term, will
be favored by higher discount rates. Projects with benefits accruing in the long run will be less
likely to be undertaken under high discount rates. It is therefore a logical conclusion that future
generations will suffer from market discount rates determined by high rates of current generation
time preference and/or productivity of capital. Some environmentalists have argued that discount
rates should be lowered to facilitate environmentally sound projects meeting the benefit-cost
analysis criteria. But this could lead to more investment projects of all types, thereby possibly
threatening the environmentally fragile resource bases. It has been argued that lowering discount
rates can in fact worsen environmental degradation ~ by reducing the cost of capital and thereby
lowering the cost of production such that more is consumed in the near term relative to the case
where discount rates were higher/' Many environmentalists believe that a zero discount rate
should be employed to protect future generations. However, employing a zero discount rate is
inequitable, since it would imply a policy of total current sacrifice, which runs counter to the
proposed aim of eliminating discrimination between time periods especially when the present
contained widespread poverty.
Since the discount rate may be an inappropriate tool to facilitate such intergenerational
transfers, a better alternative might be to impose a constraint, whereby current well-being is
maximized without reducing the welfare of future generations below that of the current generation.
The aim would be to ensure that the overall stock of capital is preserved or enhanced for future
generations. In practice, this would entail monitoring and measurement of capital stocks (human-
made, human and natural) and an overarching investment policy that sought to ensure that
compensating investments offset depreciation of existing assets. Apart from attempts to include
depreciation of natural resource stock in national income accounting, little has been accomplished
in this area. Simple rules that limit specific environmental impacts, such as groundwater pollution
standards, may be a useful first step to protect the rights of future generations.
In the cases of projects leading to irreversible damage, such as destruction of natural
habitats, the benefits of preservation may be incorporated into standard benefit-cost methodology.
Benefits of preservation will grow over time as the supply of scarce environmental resources
decreases, demand (fueled by population growth) increases, and existence value possibly
See Munasinghe, "Framework for Environmental-Economic Decisionmaking," in Environmental Economics
and Suslainahle_Develapment, op.cit.
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increases. One approach3 incorporates the increasing benefits of preservation by including
preservation benefits foregone within project costs. The benefits are shown to increase through
time by the use of a rate of annual growth. While this approach has the same effect on the overall
benefit-cost analysis as lowering discount rates, it avoids the problem of distorted resource
allocations caused by arbitrarily manipulating discount rates.
Giving greater weight to future generations is a critical aspect of achieving sustainable
development since it ultimately relates to the survival of the biosphere. In making the judgment
about what that means in any particular context, however, it is necessary to try and estimate future
costs and benefits in the light of prospective economic values, and how they relate to likely
community health, social, cultural and ecological impacts. Questions of our capacity to measure
changes in the natural environment are also important.
ibid.
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DEALING WITH RISK
Uncertainty
Uncertainty is with us in all activities. Technological and scientific uncertainties may
result in the premature use of technologies damaging to the natural environment or to public
health, or alternatively, may slow the introduction of technologies that might advance the
protection of human health and the environment.1 In addition, demand uncertainties affect our
assessment of the future values of environmental resources. People differ in their response to
these as well as other aspects of risk and uncertainty. Nor do they respond consistently to
different kinds of risk and uncertainty. Some are optimistic in the belief that there will emerge
technological solutions to the problems. Others are more concerned to avoid risk and
uncertainty.2
Two forms of uncertainty can be distinguished in the context of sustainable development:
1) ambiguity, and 2) uncertainty without ambiguity. Where ambiguity obtains there is variation
in beliefs about the probability distribution of outcomes, as well as variability in the likely
outcomes themselves. Without ambiguity, the probability distribution of outcomes is known, but
there is still variation in the likely outcomes within a given probability distribution.3 Concerns
expressed in the World Development Report 1992 aptly demonstrate the significance of these
distinctions. Sustainable development, says the Report, is development that lasts, and
"Intergenerational choices are reflected in the discount rate used to assess investments."
Unfortunately, assessment of whether the regenerative capacity of a natural resource has been
exceeded is complicated by ambiguity about the effect of economic activity on the environment.
In the case of global warming, the possible consequences of ambiguity are catastrophic. And even
in those cases where the probability distribution of outcomes is known, uncertainty about the
extent of degradation can still lead to "environmental degradation ... when those who make
decisions about using natural resources ignore or underestimate the costs of environmental damage
to society." Thus the relationships between human activity and the environment may be
For example, it has been argued that, by imposing more stringent, and therefore more costly, screening
procedures on new innovations, environmental protection agencies may delay or even discourage the market
entry of potentially safer pesticides and chemicals. Even the less costly process of meeting government
standards can arguably impede innovation. Once a technology is characterized as the "best available", there
is little incentive tor firms to improve upon that standard. Rather, the compulsion is to minimize costs and
risks in complying with that standard. Refer Aaron Wildavsky, Searching for Safety, Social Philosophy and
Policy Center, and Transaction Publishes, New Brunswick, USA, 1989.
For a provocative view of risk avoidance, see Wildavsky, op.cit., "...this dread (of failure) leads to a
supercaution, in which the effective criterion of choice becomes "do nothing new" or "avoid blame." While
it does not excuse culpable negligence, a positive attitude toward failure can contribute to learning." See
also H. Brooks, "The Typology of Surprises in Technology, Institutions, and Development," in Sustainable
De_yeJopmenLof the Biosphere, ed. W.C. Clark and R.E. Munn, Cambridge University Press, 1986, who
notes that one cannot explore and experiment without making errors.
This distinction between uncertainty with and without ambiguity is made by Pankaj Ghemawat (professor of
business administration), Harvard University, Commitment: The Dynamic of Strategy, 1991.
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"discontinuous"; that is, when under stress, an ecosystem may "crash" irreversibly in a manner
and at a time that could not have been predicted. This seriously complicates decisionmaking and
makes conventional approaches to risk management assigning values to possible outcomes and
adding an insurance premium onto project costs ~ difficult to implement.
Ir reversibilities
In today's circumstances, a special problem with the running down of environmental
capital is that it may well lead to irreversible losses. There are degrees of such irreversibilities.
An ozone layer may repair itself over, perhaps, fifty to one hundred years; tropical forests may,
again over the very long term, be capable of regenerating, and degraded land can ultimately be
restored. The loss of species is an extreme example of irreversibility, and the uncertainty
surrounding the impact of lost biological diversity is an extreme example of our lack of
knowledge. Biodiversity is the product, and in turn the provider, of all life on earth. It is
generally seen as encompassing three main levels of organization that are the basic life support
systems that underpin all life on earth:
(1) genetic diversity - the total range of genetic information contained in the genes of all
living things;
(2) species diversity the variety of species of organisms on earth; and
(3) ecosystem diversity -- the variety of habitats, biotic communities, and ecological processes
and interactions that characterize the biosphere.
Some species are seen to be repositories of key genetic naterial; others are seen as of marginal
genetic significance. But our knowledge in this area is quite limited. Among the benefits4
provided by biodiversity is the retention of options. Because every species represents a unique
solution to the biological problem of survival and because we understand very little about the
consequences for survival that may flow from future environmental change, it has been argued
that it is prudent to keep open as many options as possible.5 But public willingness to pay to save
a myriad of species (such as minor insects and plants) is not evident, and the cost of saving all
species may be prohibitive.6
Non-substitutability
Lack of clear knowledge of the likely future value of natural resources creates ambiguity
in the concept of substitutability of natural capital. Ultimately, if a species is lost, it is
questionable whether something else can be validly regarded as a substitute for it, at least until we
Other benefits provided h> biodiversity include: consumptive use values (food, fuel, shelter, etc.); non-
consumptive use values (ecosystem functions such as photosynthesis, climate regulation, etc.); productive use
values (harvesting and marketing of natural resources), anci existence rights (involving the concepts of
beauty, humanity and hegemony, that all species have an inalienable right to exist)
See, for example, Edward O. Wilson (Frank B. Baird Jr. Professorship of Science at Harvard University),
"Is Humankind Suicidal?," The New York Times Magazine, May 30, 1993.
Refer "Making Development Sustainable," Finance.&. Development, December 1993, Ismail Serageldin,
Vice-President, Environmentally Sustainable Development, The World Bank.
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are certain precisely what the attributes of that asset were. Of course, for those whom intrinsic
values are themselves important, there is no question of substitutability. The problem of
substitutability becomes greater when we think in terms of the ozone layer or the global climate,
or the rate at which degraded areas of land are expanding. Such natural assets are not capable of
being substituted for by human-made capital.
Research on Risk and Priority Setting
The U.S. Environmental Protection Agency's Science Advisory Board recommended that
the agency target available resources -- within statutory limits -- at the greatest risks to human
health and the environment.7 In making its recommendations, the Board noted that the "concept
of environmental risk, together with its related terminology and analytical methodologies, helps
people discuss disparate environmental problems with a common language. It allows many
environmental problems to be measured and compared in common terms, and it allows different
risk reduction options to be evaluated from a common basis. Scientists have made some progress
in developing quantitative measures for use in comparing different risks to human health.
"Although current ability to assess and quantify ecological risks is not as well developed, an
increased capacity for comparing different kinds of risks more systematically would help
determine which problems are most serious and deserving of the most urgent attention. An
improved ability to compare risks in common terms would also help society choose more wisely
among the range of policy options available for reducing risks.""
Researchers continue to work on the development of analytical methods to evaluate risks
to human health and the environment. One approach to priority setting is found in the work of a
team at Harvard University.9 The team's method follows on the U.S. Environmental Protection
Agency's pioneering work10 and consists of deriving a common set of indicators based on impacts
on human health, productive assets, and ecological functions. From this matrix of hazards, sorted
according to various criteria such as their spatial and temporal pervasiveness, and their total
consequences (current and future), it is possible to clarify the basis for establishing priorities for
addressing different environmental hazards.
Other research considers how to account for environmental risk in decisionmaking
models." As the risk of an event may be estimated by its probability of occurrence, the risk
7 Refer Preserving Our Future Today: Strategies And Framework, U.S. Environmental Protection Agency.
September 1992.
8 Refer Reducing Risk: Selling Priorities And Strategies Hot Environmental Protection, U.S. Environmental
Protection Agency, September 1990.
9 Coursework notes: "A Methodology tor the Comparative Assessment of Environmental Problems," 1990.
Norberg-Bohm, et.al.
10 Refer Unfinished Business:-A Comparative Assessment, uf Environmental Problems, Office of Policy,
Planning & Evaluation, 1987.
" Refer Munasinghe, Environmental Economics and Sustainable Development, The World Bank, July 1993.
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probability and severity of damage could be used to determine an expected value of potential
costs, which then would be used in the benefit-cost analysis. However, the use of a single number
(or expected value of risk) does not indicate the degree of variability or the range of values that
might be expected. Additionally, it does not allow for individual perceptions of risk. If the future
cannot be perceived clearly, then the speed of advance should be tailored to the distance over
which the clarity of vision is acceptable. Global warming is an illustrative example. In the past,
the greenhouse effect of CO2 emissions was not known or recognized as a risk. At the present
time, there is still considerable uncertainty about the future impacts of global warming, but given
the large magnitude of potential consequences, caution is warranted. As more understanding of
the phenomenon is gained, the uncertainty may be transformed into estimates of future risk
probability.
One approach to valuing environmental risk is the application of option values and quasi-
option values which are based on the existence of uncertainty. Option value is essentially the
premium that consumers are willing to pay to avoid the risk of not having something available in
the future. Quasi-option value is the value of preserving options for future use in the expectation
that knowledge will grow over time. If a development takes place that causes irreversible
environmental damage, the opportunity to expand knowledge through scientific study of flora and
fauna is lost. Recently, the applicability of option value has come into question insofaras it is
incorporated in option price, and therefore redundant.
Environmental policy formulation is said to be complicated by the presence of numerous
forms of uncertainty.12 To illustrate the point, six different aspects of uncertainty are identified
in the case of air pollution resulting from acid deposition. They are (i) identification of the sources
of particular pollutants; (ii) ultimate destination of particular emissions; (iii) actual physical
impacts at the point of destination; (iv) human valuation of the realized impacts at the point of
destination; (v) the extent to which a particular policy response will have an impact on the
abovementioned factors; and (vi) the actual cost level and the incidence of those costs that are the
result of policy choice. According to research reports," the way in which policymakers address
these uncertainties depends on their perception of the existing entitlement structure. The interests
of the future are only protected by an entitlement structure that imposes a duty on current
generations to consider the rights of future generations. In the absence of such a structure,
decisionmakers may tend to follow a policy that ignores costs to future generations, and minimizes
costs to current generations at the expense of the future. If the entitlement structure is adjusted,
the policymaker can then examine three policy instruments to ensure that future generations are
not made worse off; mandated pollution abatement; full compensation for future damages (e.g.
by taxation); and an annuity that will compensate the future for costs imposed in the present.
12 ib!d.
13 ibid.
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NATIONAL SECURITY1
"We must define a new national security policy to build on the victory of freedom in the
Cold War. It must express rights and responsibilities that challenge our people, our leaders, and
our allies to work together to build a safer, more prosperous, and more democratic world."2
In order to meet this challenge of defining a new national security, the United Nations
argues that the concept of security must first be changed from an exclusive stress on national
security to a much greater stress on people's security, from security through armaments to security
through human development, from territorial security to food, employment and environmental
security.3
Some steps towards changing the concept of security have already been taken. For
example, in 1992 the Security Council of the United Nations widened its definition of what
constitutes a threat to peace and security in today's world, saying this now includes proliferation
of all weapons of mass destruction as well as nonmiJitary sources of instability in the economic,
social, humanitarian and ecological fields.4 Around the same time, the news media increasingly
reflected recognition that National security was taking on a new meaning in the post-cold war era.
Rather than focusing almost exclusively on foreign policy, it has been argued that National
security in the post-cold war period should rest on a new trinity of military, economic and
environmental security. The argument goes something like this:5
Militarily, the U.S. would forge ahead of the post-Soviet commonwealth in reducing
strategic and conventional arms. The United States would initiate sweeping cuts in strategic
weapons, sponsor dismantling of superpower and allied arsenals and set a timetable for verified
demilitarization of the cold war victor as well as vanquished. We would recognize that
conventional arms also consume our common future. On a planet where poor nations squander
$50 billion a year on weapons, we would shed old military clients and quarantine arms merchants.
And with billions of dollars saved by that new containment, the U.S. would invest in equally
essential commercial security.
Economically, the U.S. would respond to a multipolar world with international trade and
domestic industrial policies as concerted as was our commitment in the cold war. The U.S. would
mount a comprehensive public investment strategy, promoting a new preparedness economically,
Refer Human Develop in en [.Report 1993, United Nations Development Programme, 1993; Herman E. Daly
and John Cohh, Fur the Common Good, From World Domination to National Security (Chap. 18), 1989;
Roger Morris, "Toward a Policy that's no longer Foreign," The New York Times, February 1992.
Governor Bill Clinton, Senator Al Gore, Putting People First, Times Bks, 1992.
Human.Development Report 1993, op.cit.
Quoted in The New York Times, "As the U.N.'s Annies Grow, the Talk is of Preventing War," March 1,
1992, Paul Lewis.
Refer Toward a Policy That's No Longer Foreign, op.cit.
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educationally and fiscally. The U.S. would continue its devotion to free trade6, yet would
strategically manage domestic markets and international businesses, preventing the exploitation
of people and the environment at home and abroad as a matter of national interest. We would
understand that security depends not only on a dynamic dorr.estic economy but on the well-being
of all nations. The U.S. would set: clearly that we cannot live safely in a world where four billion
to five billion people are excluded from economic opportunity, where there persists an immense
transfer of wealth from poor countries to rich, where eleven million children die every year. The
U.S. would promote world-wide reinvestment in human capital, in education, jobs and land
reform in the poorer nations. Using the billions now spent on third world arms, it would be a
high dividend purchase of new security; international economic justice and the resulting stability
would create vast new markets for U.S. goods and services.
Environmentally, the U.S. would organize a collective body to oversee environmental
action, with planetary management of resources and technology. This world alliance would
mobilize scientific and managerial talent to confront crises of climate and conservation, population
and pollution. It would address dangerous imbalances of technology and resources, mass
population migrations and the spurting growth of sovereignties. Like cold war alliances, such a
collective would be integral to US. security. It would epitomize international cooperation amid
exploding nationalism and open new avenues for U.S. science, technology and business.
Finally, policy no longer foreign, it is argued, would fulfill the poignant promise of
George Washington the promise of an America not safe or prosperous by what it possessed but
in what it was, "a nation," he hoped, "which would have a meliorating influence on all mankind."
According to the Human Development Report 1993, a good start has been made: global
military expenditures have declined cumulatively by around $240 billion since 1987; nuclear
warheads will be cut by two-thirds by the year 2003 as a result of the US-Russia agreement; more
than two million people have been demobilized from the armed forces since the beginning of the
1990s; defence industries are expected to have cut nearly a fourth of their workforce by 1992.
This is a beginning, says the Report, but notes a formidable agenda ahead for policymakers.
Note that Daly argues for caution in this regard, stating that exports only serve a purpose if they finance
useful imports. He is concerned, he says, that the virtues or" free trade are overestimated, noting that financial
imbalances from deregulated trade have led to debts that are unrepayable, and attempts to repay them by
rapid export of raw materials can be environmentally destructive. See Ten Reasons Why Northern Income
Growth is not the Solution to Southern Poverty, The Work! Bank, February 1992. Nonetheless, Daly (For the
Common Good, op.cit) certainly agrees that lack of economic self-sufficiency is a major threat to national
security, and proposes policies that "will reduce dependence on imported raw materials and foreign markets,
as well as insuring adequate food and production capability."
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PARTICIPATION AND RESPONSIBILITY1
Participation can take place in the economic, social and political arenas, and each person
necessarily participates in many ways, at many levels. In economic life as a producer or a
consumer, an entrepreneur or an employee. In social life as a member of a family, or of a
community organization or ethnic group. And in political life as a voter, or as a member of a
political party or perhaps a pressure group. All these roles overlap and interact, forming patterns
of participation that interconnect with, and often reinforce each other.
In this regard, the United Nations reports that the world seems to be going through a
period of positive change: participation of all kinds seems to be on the upswing. Close to two-
thirds of humankind now live in countries that are moving towards, or are already enjoying,
democratic forms of government. The transition to market economies is also gathering pace all
over the world as governments dismantle state controls and open new doors for participation and
entrepreneurial activity. Privatization is creating new avenues for participation in the economies
of many countries. The information revolution is bringing reports of global events to everyone's
home. Now, through radio and TV, people have a much greater sense of participation in
international events. And people now have many different ways of communicating within their
own countries, from fax machines to videocassettes, that are much less vulnerable to censorship,
making it much harder for governments to monopolize the flow of information. Non-
governmental organizations (NGOs) have increased substantially in recent years. In 1990, there
were an estimated 50,000 NGOs in developing countries working in a range of fields including
health care and informal education. Moreover, they have taken on an important advocacy role
on such issues as gender discrimination, human rights and environmental concerns. In some
countries the impetus for these changes has come from the government in power. In others, it has
been the outcome of popular rebellion. The results have likewise been diverse. Some countries
have succeeded in strengthening democratic institutions and enjoyed steady increases in efficiency.
Others have suffered economic crisis, social chaos, ethnic disruptions, and even civil war.
Despite the accumulating forces for greater participation, the United Nations also reports
the large numbers of people continue to be excluded from the benefits of development.
The poorest people find that their very poverty is a formidable barrier to entering many
aspects of social, economic and political life. Markets, in theory open to everyone, in practice
exclude those whose poverty renders them uncreditworthy. For millions of people all over the
world, the daily struggle for survival absorbs so much of their time and energy that, even if they
live in democratic countries, genuine political participation is, for all practical purposes, a luxury.
Women are the world's largest excluded group. Even though they make up half the adult
population, and often contribute much more than their share to society, inside and outside the
home, they are frequently excluded from positions of power. They make up just over 10% of the
The following discussion is drawn from the Human Development Report 1931, United Nations Development
Programme, 1993.
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world's parliamentary representatives, and consistently less than 4% of cabinet ministers or other
positions of executive authority. In many industrial counaies, the female human development
index is around 80% that of males. Women participate inadequately in empJoyment, and in some
industrial countries, women's earnings are less than half those of men.
Minorities and indigenous peoples often find it difficult to participate fully in societies
that consistently operate in favor of the dominant groups. Sometimes this discrimination is
embedded in the legal framework -- denying minority groups equal access to education, to
employment opportunities or to political representation. But exclusion is generally less a matter
of official policy than everyday practice. In the United States, where everyone is "created free
and equal", there is a marked difference between white and black populations. For blacks, the
disadvantage starts at birth. The infant mortality rate for whites is 8 per 1,000 live births, but for
blacks it is 19. And black children are much more likely than white children to grow up in single-
parent homes. In 1990, 19% of white children were growing up in single-parent households,
compared with 54% of black children. Children in black families are also more likely to grow
up in poverty. The real GDP per capita for whites in 1990 was around $22,000, but for blacks
it was around $17,000.
People in rural areas have very restricted participation in economic and social life in the
developing world. The rural per capita income in many countries is around half that in towns and
cities. And rural people have much less access to government services. Despite making up
around two-thirds of the population, they receive on average less than a quarter of the education,
health, water and sanitation services. Urban biases are a predominant feature almost everywhere.
The disabled make up at least 10% of the world's population. They include all those who
have experienced injury, trauma or disease that results in long-term physical or mental changes.
Disability is common to both industrial and developing countries, but the sources tend to be
different: in the industrial countries, the principal causes are degenerative diseases associated with
ageing, while in the developing world the causes are more likely to be disease, malnutrition and
war. Disability, even in industrial countries, is closely linked with poverty. In the United States,
blacks and native Americans are twice as likely to be disabled as whites. And children in poor
families are 13% more likely to be mentally retarded than those in middle- and upper-income
families. The disabled face many barriers to participation. They tend, for example, to have less
access to education. And they are more likely to be unemployed. Some countries have taken
measures to give the disabled greater opportunities. The United States, for example, has far-
reaching legislation: the 1992 Americans with Disabilities Act sets a large number of standards
to be achieved in working life. For most of the world's disabled, full participation is still a long
way off.
Poor nations cannot participate on an equal footing in international markets or extend
market opportunities to their own people. Poverty is a formidable barrier to participation, whether
within or between nations. The very poverty of poor nations denies them international credit, and
barriers on the movement of both goods and people cut their potential earnings.
Taking these and other excluded groups together, the United Nations estimates that fewer
than 10% of the world's people participate fully in political, economic, social and cultural life.
For the vast majority, real participation will require long and persistent struggle. Indeed,
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participation is a plant that does not grow easily in the human environment. Powerful vested
interests, erect numerous obstacles to block off the routes to people's political and economic
power. These obstacles include:
Legal systems: In too many countries, legislation fails to measure up to ideals of
transparency, accountability, fairness, and equality before the law.
Bureaucratic constraints: Many developing countries have shackled their people with
innumerable regulations and controls, demanding all sorts of permits and permissions for even the
most modest business initiative.
Social norms: Even when laws change, many old values and prejudices persist, whether
against women or different tribes, castes or religious groups, and are often deeply embedded in
everyday language and behavior. Laws may promote equality, but it is usually left to the
discriminated group to struggle against prejudice. Thus, working women, for example, even
when they prove themselves better, are not given equal treatment.
Maldistribution of assets: Whether in urban or rural areas, vested interests that currently
enjoy economic, financial, political or social power are usually determined to defend their position
- either individually or through close-knit associations, well-financed lobbies and even violence.
Changing the power equation requires the organization of a countervailing force. People's
organizations -- be they farmers' cooperatives, residents' associations or consumer groups -- offer
some of the most important sources of countervailing power.
In the United States, participation is every person's right, and every person's
responsibility. Thus fighting for civil rights means more than protecting individual liberties. It
means "providing equal economic opportunity," and supporting "anti-poverty initiatives that
reflect the values most Americans share: work, family, individual responsibility, community."'
Governor Bill Clinton, Senator Al Gore, Putting.People First, Times Books, 1992.
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POLLUTER PAYS PRINCIPLES1
The growing severity and pervasiveness of pollution in the industrialized economies had
led the OECD to elaborate, and in 1972 to adopt, the Polluter Pays Principles (PPP) as a
background economic principle for environmental policy. The principle implies that the polluter
should bear the cost of pollution reduction measures necessary to bring the environment to an
"acceptable state" as defined by public authorities. The Recommendations on the Implementation
of the PPP (adopted in 1974) specifies that Member countries should not assist polluters in bearing
these costs, with some exceptions related to industries where PPP would create severe
difficulties, transition periods for countries otherwise facing socio-economic problems in
consequence of their environmental policies, situations where no serious trade and investment
distortions were to be expected. Basically, PPP is a non-subsidization principle.
The origins of the PPP can be traced to welfare economics ideas which state that ideally
prices of goods and services should reflect the full social costs including the environmental costs
as related to pollution, resource exploitation and other forms of environmental degradation. Prices
should "tell the truth" on the costs of producing and consuming goods and services. Making the
polluter pay is one way of internalizing these environmental externalities; it is a way that could
be considered economically desirable. This notion should not be confused with that of judicial
liability or responsibility; PPP declares the polluter (whoever that is according to national
legislation) to be the primary accountable agent, but the principle does allow these agents to pass
on to their customers their environmental costs. PPP has been described by environmental
economists as an institutional manifestation of the opportunity cost principle: it allocates the
equivalent of the benefits foregone by pollution to those agents that cause it. It can be applied
once environmental quality targets have been established by environmental authorities.
Several points are left unspecified in the OECD-elaboration of PPP. There is no explicit
definition of which agent is to be regarded as the polluter. Also, there is no specific indication
as to how much the polluter should pay.
In 1989 the OECD adopted a Recommendation on the Application of the PPP to Accidental
Pollution. This links the economic principle and the legal principle relating to damage
compensation. The 1991 Council Recommendation on the use of economic instruments in
environmental policy also emphasizes the necessity to internalize damage costs. These two
Recommendations eventually lead to a specification of PPP that extends beyond the costs of
(preventive) measures and includes damage costs (extended PPP). At present, the
Recommendation on accidental pollution renders the polluter accountable for the costs of measures
to prevent accidents, measures to limit and contain damage after an accident has occurred, and the
costs of cleaning-up and decontamination operations; it does not include damage cost.
More recently, policy agencies such as the EC agreed that environmental quality can be
achieved and maintained by a variety of measures and procedures (regulation, taxes, charges, state
aids, permits, agreements). The choice of instruments is now seen as depending on
Refer "Integrating Environment and Economics: The Role of Economic Instruments," Organisation for
Economic Co-operation and Development (OECD), Environment Directorate, Paris, 4 June 1993.
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circumstances, administrative and legal frameworks, the nature of the environmental problem to
be tackled, etc, rather than as a matter of principle. Notions on an extended PPP have created
support for the idea that polluters should also pay for pollution below the levels compatible with
an acceptable state of the environment, as the environmental capacity to absorb waste is scarce.
PPP could be used to integrate utilization of the environment (including its waste assimilation
capacity) into the economic sphere through price signals via economic instruments such as
pollution charges and permits. It should be noted that problems have been identified2 with PPP
in choosing cost-effective policies when polluters or resource users are difficult to identify and
monitor. Problems also arise in identifying polluters for cleaning up past pollution, as the
experience in the United States with Superfund testifies.
The Declaration on Environment and Development of Rio de Janeiro (June 1992) has
established that "national authorities should endeavor to promote the internalization of
environmental costs and the use of economic instruments, taking into account the approach that
the polluter should, in principle, bear the cost of pollution, with due regard to the public interest
and without distorting international trade and investment". This amounts to the adoption, at least
in principle, of PPP as one basis for global environmental policy, and offers hope for the adoption
of the principle in notably the economies in transition and the developing countries.
An extension of PPP discussed increasingly is to regard resource use as falling within its
scope: the "polluter and user should pay," or "P(U)PP." Resource pricing is one area next to that
of pollution control, where prices do not reflect the full social costs of exploitation; notably, the
so-called user costs are often disregarded.
Several developments in factual environmental policy (e.g. ideas on "joint
implementation," debt-for-nature swaps, etc.) indicate that there is increasing recognition of the
need to develop views on the desirability, domain and scope of a "Victim Pays Principle" in the
area of global environmental policy. Such a principle could allow for transitional and level of
income related side payments only, as intermediate steps towards PP(U)P, and in the context of
a recognized prime position of the PP(U)P.
2 Refer WarMJkYelapment-Repnrt 1992, The World Bank, 1992.
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USE OF ECONOMIC INSTRUMENTS TO ACHIEVE ENVIRONMENTAL GOALS'
Economic instruments affect estimates of costs and benefits of alternative actions open to
economic agents. They are intended to influence decision-making and behavior in such a way that
alternatives are chosen that lead to an environmentally more desirable situation than in the absence
of the instrument. That is, actors view each unit of pollution from the first one on as having a
cost. Economic instruments, as opposed to direct regulations, thus leave to actors the freedom
to respond to certain stimuli in a way they themselves think most beneficial; if a certain
environmental target is to be reached, economic instruments will at least in theory induce cost-
effective behavior. Non-financial instruments of environmental policy, for example trading
schemes, may be aimed at achieving least cost methods of attaining certain ambient quality
standards or overall discharge levels. Such instruments are included in the above definition of
economic instruments. Overlap with direct regulation may occur when market creation or
provisions to enable interventive behavior are seen as institutional arrangements to influence
indirectly environmental quality changes in relation to economic behavior.
Direct regulation often has a financial or monetary component attached to it: the outcome
in terms of pollution discharge then may depend on both technical and monetary considerations.
In some cases the regulation is accompanied by charges that have no intended impact on behavior,
but in reality do affect it drastically. The above definition of economic instruments restricts this
notion to instruments that have intended impacts on factual behavior of economic agents by
modification of costs and benefits as assessed by the actors themselves. Hence, many factual
charges systems would not qualify as economic instruments under this definition.
A narrower definition is to consider an instrument as economic when in fact (and
disregarding intentions) it has an observable impact on behavior. Other descriptions refer to the
involvement of money: instalments are often seen as 'economic' if there is a direct financial
component. This definition would rule out recognized types of instruments such as emissions
trading. Again other descriptions would suggest that instruments are economic only if they use
or simulate market-type mechanisms. Normally, instruments of environmental policy are not used
in pure, isolated form: typically economic instruments are parts of wider combinations, often
together with command and control instruments. Most charges are linked with a permitting
system, and trade in emission permits by definition occurs within politically determined
boundaries.
Thus the notion of an 'economic' instrument has come to mean different things in different
contexts and as perceived from different views of what economics is about. In the absence of rigid
definition, it is useful to distinguish the following categories of economic instruments:
Refer "Integrating Environment and Economics: The Role of Economic Instruments," Organisation for
Economic Development Co-operation and Development (OECD), Paris, 4 June, 1993; "Economic Incentives:
Options for Environmental Protection," U.S. Environment! Protection Agency, Office of Policy, Planning &
Evaluation, March, 1991.
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Charges: There are various types of charges, including, charges of emissions or
effluent charges; product charges or taxes, and administrative charges. Within
these types of charges, four categories of charges can be distinguished - (i) charges
intended to have an incentive function and operating as such; (ii) charges intended
to have an incentive function but operating mainly as revenue or funds raising; (iii)
charges intended to raise funds and operating as such, and (iv) charges intended to
raise funds but with a substantial incentive impact.
Subsidies: The overall orientation of the OECD approach to environmental policy
as based o the PP-Principle is aversive of subsidies allowing for some well-defined
exceptions. Also, a very wide range of smaller or larger subsidy schemes with
environmental relevance may be in existence, but it is difficult to obtain an
oversight and assess the situation. One example comes from the Netherlands,
where 10 to 15 percent of the municipalities guarantee newspaper collectors
(usually schools and charities) a minimum fixed price for collected paper to
stabilize the collection process in the face of highly variable prices that would
otherwise be offered by recycling firms.
Deposit-refund systems: A surcharge is laid on the price of potentially polluting
products. When pollution is avoided by returning these products or its residuals
to a collection system, a refund of the surcharge follows. A distinction can be
made between deposit-re fund systems which aim at enhancing reuse, and return
premia which provide an incentive for recycling. Numerous deposit-refund
systems exist in OECD countries for beer and soft-drink bottles. Most were
introduced by the private sector for economic reasons.
Market creation: Markets can be created where actors might buy "rights" for
actual or potential pollution or where they can sell their "pollution rights" or their
process residuals (recycled materials). Types of market include:
emissions trading: dischargers operate under some multi-source emission
limit and trade is allowed in permits adding up to that limit. Such systems
can also operate in cases of single source permits: if a discharger releases
less pollution than its limit allows, the firm can sell or trade the differences
between its actual discharges and its allowable discharges to another firm
which then has the right to release more than its initial limit allows. Trades
can take place within a plant, within a firm or among different firms.
market intervention: price intervention might create or facilitate the
continued existence of a market. An example would be the case of
potentially valuable residuals being either dumped or offered for low-value
treatment and reuse.
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liability: legally establishing liability of polluters for environmental damage
or clean up costs associated with emissions or the storage of wastes
generated, may lead to the creation of a market in which risks for damage
penalties are transferred to insurance companies.
U.S. emissions trading programs are the premier examples of market creation in
the environ mental area. Germany has followed the U.S. lead with an air emissions
trading program.
Financial enforcement incentives: This category is sometimes considered as a legaJ
rather than an economic instrument: noncompliance is 'punished' either ex ante (by
asking a payment returnable upon compliance) or ex post (by asking a fine when
noncompliance is occurring). However, enforcement incentives may provide an
economic rationale for compliance, when noncompliance is a seriously considered
decision alternative. Examples include: non-compliance fees are imposed when
polluters do not comply to certain regulations; performance bonds are payments to
authorities in expectation of compliance with imposed regulations. Refunding takes
place when compliance has been achieved.
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TECHNOLOGY AND THE ENVIRONMENT1
The two themes of ecological and economic interdependence are strongly linked through
a third theme the development and diffusion of technology. The view that greater economic
activity inevitably hurts the environment is based on static assumptions about technology, tastes,
and environmental investments. According to this view, as populations and incomes rise, a
growing economy will require more inputs and will produce more emissions and wastes. As the
scale of economic activity increases, the earth's carrying capacity will be exceeded. In reality, the
relationships between inputs and outputs and the overall effects of economic activity on the
environment are continually changing. Moreover, the scale of the economy is only one of the
factors that will determine environmental quality. The key question is whether the factors that
tend to reduce environmental damage per unit of activity can more than compensate for any
negative consequences of the overall growth in scale. A factor that can play a particularly
important role is clean technologies and management practices - that is, the ability to reduce
environmental damage per unit of input or output.
Price and institutional reforms also have an important role to play and have the advantage
of encouraging reductions in all polluting emissions (including carbon dioxide) per unit of output.
However, they are not sufficient to achieve maximum pollution reduction. Low-polluting methods
of generation are also required to reduce pollution significantly. Less damaging and efficient
technologies and practices can change the way in which goods and services are produced and will
also generate benefits that can increase human welfare. For example, new industrial and
agricultural technologies - information technologies, biotechnologies, materials technologies,
energy generation technologies and advances in end-use efficiency in the consumption of energy,
transportation and communication technologies - can lead to dramatic reductions over time in the
amount of environmental deterioration per unit of output of goods and other human amenities.
And this reduction in environmental impact per unit of output can lead to improvement in labor
and productivity as well.
The most promising areas for realizing the gains of environmental technology today relate
to energy use and the development of alternative fuels, to agricultural practices that use less
harmful pesticides developed through biotechnology, and to the reduction and prevention of
pollution in industrial production processes. In fact, technological advance has put developing
countries in a better position to reduce all forms of pollution from electric power generation than
the industrial countries were in as recently as twenty years ago. In industrial countries the capital
stock takes about thirty years to turn over, and retrofitting is costly. Developing countries, on the
other hand, are making new investments and have the opportunity to install less-polluting plant
right away.
Refer The World Development Report 1992; Reports of the Carnegie Commission, including "Enabling the
Future, Linking Science and Technology to Societal Goals," September 1992; and "International
Environmental Research and Assessment," July 1992; H. Brooks, "The typology of surprises in technology,
institutions, and development," 1986.
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Industry is moving quickly to develop environmentally sound technologies that will use
energy more efficiently and generate less waste, leading in turn to lower production and disposal
costs. Industry's focus on environmental concerns results not only from the need to meet
governmental standards; an even greater incentive is the potential for seizing new business
opportunities and realizing economic gains. The potential market for new and emerging
technologies in air pollution control, composite material*., nonfossil fuels, bioengineering, and
other fields is large,2 and industry is racing to capture it through its environmental R&D efforts.
"Environmentally friendly" has become a powerful marketing tool as well, as producers aim to
attract consumers with products that have less harmful impacts on the environment.
The dangers to our environment are well known, and the knowledge that could be used to
improve our environment is abundant. Yet population growth and increasing consumption of
resources have led to deforestation and watershed destruction throughout the world, have
destroyed species, have changed the atmosphere in potentially serious ways, have increased
vulnerability to extreme natural events, and have posed difficult problems in managing solid and
toxic wastes. The only way to resolve these dilemmas is through sustainable development which
will be possible only with major advances in innovative technologies that will allow us to use our
resources more efficiently without damaging the environment.' And to further advance innovation
in this context, the Report of the National Commission on the Environment4 says, "the most
important and immediate target of U.S. environmental policy is to encourage the development and
adoption of technologies compatible with sustainable development." This challenge has not gone
unheard. In a recent report on environmental technologies in the United States,5 the Secretary of
Commerce stated that: "New environmentally sound technologies for products, processes, and
services create jobs and growth without environmental harm. Expanding world trade brings the
benefits of these technologies and knowledge to the rest of the world. Together, they create a
reinforcing cycle of sustainable development."
The world market today is estimated to be $200-300 billion, according to the OECD, and is forecast to see
sustained growth over the next decade.
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. Impact equals population times affluence times
technology. Refer Robert Goodland and Herman Daly, "Ten Reasons Why Northern Income Growth is not
eh Solution to Southern Poverty," The World Bank, February 1992.
Choosing a Sustainable Future, Report of the National Commission on the Environment. Russell E. Train,
Chairman, World Wildlife Fund, Washington, D.C. 1992
F.nvirnnmenlai.TtichjiQlQfeies-Exports:-Strategic. Framework for U.S. Leadership, Interagency Environmental
Technologies Exports Working Group, November 1993
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TRADE AND THE ENVIRONMENT1
The fear that the environmental effects of trade liberalization are generally negative has
led to calls for amending trade policies to take explicit account of environmental goals. Recent
controversies have concerned the negative effects of the proposed North American Free Trade
Agreement (NAFTA) on air and water quality in Mexico and the southwestern United States, of
liberalized cassava exports to the EC on soil erosion in Thailand, and of exchange rate
depreciation on deforestation in Ghana. Yet, as the World Bank argues, using trade restrictions
to address environmental problems can be inefficient and ineffective. As liberalized trade fosters
greater efficiency and higher productivity2 it may actually reduce pollution by encouraging the
growth of less-polluting industries and the adoption and diffusion of cleaner technologies.1
The force behind the World Bank's argument is that the primary cause of environmental
problems is not liberalized trade but the failure of markets and governments to price the
environment appropriately. Trade policies are an uncertain tool for environmental management
when they influence the use of environmental resources only indirectly. Usually, more direct
instruments than trade policies are available for combating deforestation, soil erosion, or industrial
pollution.
However, where trade is an intrinsic part of the initial problem, trade measures and the
threat of such measures, can potentially further environmental goals in various ways. They can
help convince a country to join an international environmental agreement or to behave according
to certain environmental norms; deny a country economic gain from failing to follow such norms;
prevent a country's actions from undermining the environmental effectiveness of other countries'
efforts; and remove the economic incentive for certain environmentally undesirable economic
activity. An example is the Convention on International Trade in Endangered Species (CITES),
which seeks to preserve certain listed endangered and threatened species by prohibiting or
restricting trade in them. In this case it seems that trade restrictions can be effective. When the
demand for such species comes from export markets, prohibiting trade will reduce the commercial
incentive to harvest listed species. Another example is the Basel Convention on the Control of
Transboundary Movements of Hazardous Wastes and Their Disposal. The Convention seeks to
Refer World Kconomie Outlook, International Monetary Fund, May 1993; World Development Report 1992;
Trade and Environment: Conflicts and Opportunities, Office of Technology Assessment, May 1992:
Environmental Impacts of a North American Free Trade Agreement. Grossman and Krueger, October 1991.
World Economic Outlook, International Monetary Fund, May 1993: An important way in which lower
harriers to trade and access to world markets raise incomes is by promoting productive activity, increasing
competition, stimulating foreign and domestic investment, and facilitating the exploitation of economies of
scale and the transmission of technology and best-practice techniques.
For an alternative view, see Herman E. Daly, The Perils of Free Trade, Scientific American, November
1993. "The free traders seek to maximize profits and production without regard for considerations that
represent hidden social and environmental costs. They argue that when growth has made people wealthy
enough, they will have the funds to clean up the damage done by growth. Conversely, environmentalists and
some economists, myself included, suspect that growth is increasing environmental costs faster than benefits
from production -- thereby making us poorer, not richer."
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prevent the environmentally improper disposal of hazardous wastes; to that end, it bans export of
hazardous waste where improper disposal would appear to be a likely result (e.g. wastes sent to
countries lacking adequate regulations or the technical capacity for proper disposal). Similarly,
the Montreal Protocol is intended to phase out ozone-depleting chemicals by banning trade in
products containing CFCs.
There is also evidence to suggest that developing countries do not compete for foreign
investment in "dirty" industries by lowering their environmental standards. The main reason is
that environmental costs are a small share of output value -- about 0.5 percent, on average, for
all U.S. industries in 1988 and only 3 percent for the most-polluting industry. So foreign
investment flows do not shift dramatically toward locations with lax environmental standards (so-
called pollution havens). Rather, the World Bank reports that anecdotal data from Chile and
elsewhere suggest the opposite; because it is cheaper for multinational corporations to use the
same technologies as they do in industrial countries, these firms can be potent sources of
environmental improvement-
In general, data and methodologies to determine unambiguously whether NAFTA, GATT,
or other regimes are contributors to or detractors from environmental quality are lacking.
Liberalized trade might offer benefits and harm simultaneously, and trade-offs are likely. There
can be circumstances in which freer trade and environmental improvement are complementary.
There can also be circumstances in which trade hastens environmental degradation. A study4
comparing sulfur dioxide and smoke levels in several cities with differing income levels identified
three separate mechanisms by which a change in trade and foreign investment policy can affect
(i) the level of pollution, and (ii) the rate of depletion of scarce environmental resources:
1. Scale Effect: capturing the simple intuition espoused by environmental advocates. That
is, if trade and investment liberalization causes an expansion of economic activity, and if
the nature of that activity remains unchanged, then the total amount of pollution generated
must increase. Environmental groups point to the U.S./Mexico border area as an example
of how unregulated expansion in response to trade opportunities can create risks to worker
safety and public health.
2. Composition Effect: that results from any change in trade policy. When trade is
liberalized, countries specialize to a greater extent in the sectors in which they enjoy
competitive advantage. If competitive advantage derives largely from differences in
environmental regulation, then the composition effect of trade liberalization will be
damaging to the environment. On the other hand, if the sources of international
comparative advantage are the more traditional ones, namely cross-country differences in
factor abundance and technology, then the implications of the composition effect for the
state of the environment are ambiguous.
Grossman and Krueger, op.cit.
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3. Technique Effect: output need not be produced by exactly the same methods subsequent
to a liberalization of trade and foreign investment as it has been prior to the change in
regime. In particular, the output of pollution per unit of economic product need not
remain the same. There are at least two reasons to believe that pollution per unit of output
might fall, especially in a less developed country. First, foreign producers may transfer
modern technologies to the local economy when restrictions on foreign investment are
relaxed. More modem technologies typically are cleaner than older technologies due to
the growing global awareness of the urgency of environmental concerns.'' Second, if trade
liberalization generates an increase in income levels, then the body politic may demand a
cleaner environment as an expression of their increased national wealth. Thus, more
stringent pollution standards and stricter enforcement of existing laws may be a natural
political response to economic growth.
Of course not all environmental problems are local. Global problems include stratospheric
ozone depletion and the greenhouse effect. As noted by Jagdish Bhagwati, former economic
policy adviser to the director-general of the GATT, these global problems "raise more issues that
require cooperative, multilateral solutions. Such solutions must be both efficient and equitable"*
to avoid trade-offs that, while efficient, result in unfair burdens being placed on poorer nations.
In many developing countries, the lack of existing industrial and public infrastructure limits the market for
"retrofit" or end-of-pipe/pollution control technologies to address existing problems. However, this creates
the opportunity to encourage investment in pollution prevention technologies aimed at avoiding the
generation of pollution in the first place.
Refer: En₯iranmental_Techno.lflgies Exports: Strategic FrainewarkJor-U-S. Leadership, Interagency
Environmental Technologies Exports Working Group, November 1993.
Jagdish Bhagwati, "The Case for Free Trade," Scientific -American, November 1993.
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PRESIDENTIAL EARTH DAY ADDRESS (April 21, 1993)
Our environmental program is based on three principles. First, we think you can't
have a healthy economy without a healthy environment. We need not choose between
breathing clean air and bringing home secure paychecks. The fact is that our
environmental problems result not from robust growth, but from reckless growth. The fact
is that only a prosperous society can have the confidence and the means to protect its
environment. And the fact is healthy communities and environmentally sound products
and services do best in today's economic competition. That's why our policies must protect
our environment, promote economic growth, and provide millions of new high-skill, high-
wage jobs.
Second, we want to protect the environment at home and abroad. In an era of
global economics, global epidemics, and global environmental hazards, a central challenge
of our time is to promote our national interest in the context of its connectedness with the
rest of the world.
Third, we must move beyond the antagonisms among business, government, and
individual citizens.
Our long term strategy invests more in pollution prevention, energy efficiency, and
solar energy; in renewable energy, environmental restoration, and water treatment.
AGENDA 21 (Centre for Our Common Future, 1993)
National action plans for sustainable development need to be created in all
countries, based on broad public participation and community involvement. They should
be backed up by specific programs to deal with human needs, and the sustainable use and
conservation of the environment.
The only way to have long-term economic progress is to link it with environmental
protection. This will only happen if nations establish a new and equitable global
partnership involving governments, their people and key sectors of societies. They must
build international agreements that protect the integrity of the global environment and the
development system.
The Rio principles include:
* people are entitled to a healthy and productive life in harmony with nature
* development today must not undermine the development and environment needs
of present and future generations
* nations have the sovereign right to exploit their own resources, but without causing
environmental damage beyond their borders
* nations shall develop international laws to provide compensation for damage that
activities under their control cause to areas beyond their borders
* nations shall use the precautionary approach to protect the environment
* eradicating poverty and reducing disparities in living standards in different parts
of the world are essential to achieve sustainable development and meet the needs
of the majority of people
* nations shall cooperate to conserve, protect and restore the health and integrity of
the Earth's ecosystems. The developed nations bear responsibility in pursuit of
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*
*
sustainable development in view of the pressures their societies place on the global
environment and of the technologies and financial resources they command
nations should reduce and eliminate unsustainable patterns of production and
consumption, and promote appropriate demographic policies
environmental issues are best handled with the participation of all concerned
citizens
nations shall enact effective environmertal laws, and develop national law
regarding liability for the victims of pollution and other environmental damage
nations should cooperate to promote an open international economic system that
will lead to economic growth and sustainable development in all countries.
Environmental policies should not be used as an unjustifiable means of restricting
international trade
the polluter should, in principle, bear the cost of pollution
nations shall warn one another of natural disasters or activities that may have
harmful transboundary impacts
sustainable development requires better scientific understanding of the problems.
Nations should share knowledge and innovative technologies to achieve the goal
of sustainability
the full participation of women is essential to achieve sustainable development.
The creativity, ideals and courage of youth and the knowledge of indigenous people
are needed too. Nations should recognize and support the identity, culture and
interests of indigenous people
warfare is inherently destructive of sustainable development, and nations shall
respect international laws protecting the environment in times of armed conflict,
and shall cooperate in their further establishment
peace, development and environmental protection are interdependent and
indivisible
PUTTING PEOPLE FIRST (Governor Clinton, Senator Gore, 1992)
We need to adopt an aggressive market-based national strategy to cut pollution and
slow the generation of solid waste. We also need to take more effective measures to clean
up the pollution and waste that have already harmed our environment.
Four Goals:
1. reduce solid and toxic waste and air and water pollution to ensure we leave our
nation cleaner and healthier
2. preserve places of natural beauty and ecological importance -- such as our national
parks, wilderness areas, old growth forests, and wetlands so that we can pass on
America's natural splendor to our children
3. shatter the false choice between environmental protection and economic growth by
creating a market-based environmental protection strategy that rewards
conservation and "green" business practices while penalizing polluters
4. exert international leadership to advance our own nation's interest in a healthier
global environment, a stable global climate, and global biodiversity. Reduce
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American and worldwide use of fossil fuels and airborne chemicals that destroy the
ozone layer and work to keep our world's delicate environment in balance
MANDATE FOR CHANGE (ed. Marshall and Schram, The Progressive Policy Institute, 1993)
The progressive challenge for environmentalists in the 1990s is to harness the
power of markets, which can be more effective and far-reaching than centralized
regulations. Market-based policies start with the notion that they best way to protect the
environment is to give firms and individuals a direct and daily self-interest in doing so.
They aim to strengthen environmental protection by changing the financial incentives that
face millions of firms and individuals in their private decisions about what to consume,
how to produce, and where to dispose of their wastes. The polluter ought to pay.
Mandate for Action:
1. create a tradable permit system to promote solid-waste recycling, and explore its
application for water pollution and other environmental challenges
2. create national deposit-refund systems for lead-acid batteries and some solvents
3. promote "unit pricing" for trash pickup at the state and local level
4. enact carbon charges domestically, with revenues recycled to consumers by
lowering other taxes, if needed to achieve internationally established and
enforceable long-term goals for controlling greenhouse gases
5. enact a moderate increase in the gasoline tax to reduce air pollution and traffic
congestion, with revenues used to reduce Social Security payroll taxes
6. expand scientific research on, and use of, risk assessment as part of a national
effort to set environmental priorities
SUSTAINABLE DEVELOPMENT: LINKAGES AND PARTNERSHIPS FOR THE
DEVELOPING WORLD (EPA Journal, April/June 1993)
Four priorities for EPA:
1. prevent pollution. We have to integrate pollution prevention into every single
thing that we do.
2. protect ecosystems. The challenge for us is to reach across those media-specific
programs, to bring them together in a coordinated ecosystem protection manner.
3. build partnerships. We must build partnerships with state and local government,
nonprofit organizations, the business community.
4. incorporate equity into our mission and programs. We must make sure that our
programs are fair and protective for all.
OUR COMMON FUTURE (World Commission on Environment and Development, 1987)
Sustainable development is development that meets the needs of the present without
compromising the ability of future generations to meet their own needs. It contains within
it two key concepts:
* the concept of 'needs', in particular the essential needs of the world's poor, to
which overriding priority should be given; and
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* the idea of limitations imposed by the state of technology and social organization
on the environment's ability to meet present and future needs
Development involves a progressive transformation of economy and society.
Physical sustainability cannot be secured unless development policies pay attention to such
considerations as changes in access to resources and in the distribution of costs and
benefits. Even the narrow notion of physical sus'uiinability implies a concern for social
equity between generations, a concern that must logically be extended to equity within
each generation.
EARTH IN THE BALANCE (Senator Gore, 1992)
The task of restoring the natural balance of the earth's ecological system is both
within our capacity and desirable for other reasons including our interest in social
justice, democratic government, and free market economics.
What does it mean to make the effort to save the global environment the central
organizing principle of our civilization? For one thing, it means securing widespread
agreement that it should be the organizing principle, and the way such a consensus is
formed is especially important because this is when priorities are established and goals are
set.
Adopting a central organizing principle one agreed to voluntarily - means
embarking on an all-out effort to use every policy and program, every law and institution,
every treaty and alliance, every tactic and strategy, every plan and course of action -- to
use, in short, every means to halt the destruction of the environment and to preserve and
nurture our ecological system.
COSTING THE EARTH (Frances Caincross, 1991)
Rapid economic growth can harm the environment; and the environment, if
mismanaged, can limit economic growth. But growth also brings potential environmental
benefits, of two main kinds. First, it may bring improvements in technology, which will
lower the cost of preventing environmental damage. Second, higher income levels have
proved in the past three decades to go hand in hand with greater environmental concern
and a willingness to see a rising share of national wealth spent on environmental
protection.
As countries grow richer, they become more willing to take some of the proceeds
of growth and spend them on protecting the environment. The waste that economic
activity creates is not necessarily polluting, unless it exceeds the capacity of the planet to
absorb it. By investing in environmental preservation, it may be possible to increase this
absorptive capacity. This may mean researching techniques of biotechnology for waste-
disposal sites or installing proper sewage treatment in third world cities or building terraces
to stop soil erosion. All these investments in environmental maintenance buy a bit of time.
Companies that take the environment seriously change not only their processes and
products but also the way they run themselves. Often these changes go hand in hand with
the general quality of management. Companies that try hardest to reduce the damage they
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do to the environment are usually well managed.
In American management terms, environmental responsibility has become an aspect
of the search for total quality. The concept recognizes that defects in the production
process cost most to remedy if a product has left the factory gates. Recalling faulty cars,
for instance, is costly. Close parallels may be drawn between aiming for total quality and
cradle-to-grave environmental management. For example, cleaning up after an
environmental accident is most expensive and costly in terms of reputation. Less
expensive is end-of-pipe technology to remove pollutants at the end of the manufacturing
process. Least expensive in the long run, and safest too, is pollution prevention: cutting
down on the toxics used in a plant.
The pursuit of quality may also explain why some companies insist on setting
common environmental guidelines for subsidiaries all over the world. As a well-run
company would not willingly set lower quality targets for third world plants, so those that
take environmental management seriously want common goals for greenery.
THE ECONOMY OF THE EARTH (Mark Sagoff, 1988)
There are important shared values, for example, health, well-being, safety,
cleanliness, and respect and reverence for nature, that, unlike the goal of efficiency, justify
governmental intervention in markets, whether or not these markets are efficient. These
values provide a sound basis for social regulation.
Defense of a negative thesis: Market failure is not the basis of social regulation.
This thesis should not be surprising. The statutes that give authority to agencies like EPA
and OSHA generally instruct them to achieve stated ethical, aesthetic, and cultural
objectives such as a cleaner environment and a safer workplace. These laws do not, as a
rule, instruct these agencies to improve, ensure, simulate, or attend to the efficiency of
markets. Although we may construe some environmental, public health, and public safety
in terms of market failures, to do so consistently requires a willing suspension of disbelief.
Attempts to explain or justify popular social policies for example, the protection of
endangered species as necessary to "correct" market failures are often so implausible
that they must bring into disrepute either the policy or the explanation.
Defense of a positive thesis: Social regulation expresses what we believe, what we
are, what we stand for as a nation, not simply what we wish to buy as individuals. Social
regulation reflects public values we choose collectively, and these may conflict with wants
and interests we pursue individually. It is essential to the liberty we cherish, of course,
that individuals are free to try to satisfy their personal preferences under open and
equitable conditions. Social regulation most fundamentally has to do with the identity of
a nation.
INTERNATIONAL CHAMBER OF COMMERCE
The International Chamber of Commerce drafted a "Business Charter for
Sustainable Development," which was launched in April 1991 at the Second World
Industry Conference on Environmental Management. The Charter, endorsed by 600 firms
worldwide by early 1992, encourages companies to "commit themselves to improving their
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environmental performance in accordance with (the Charter's) 16 Principles, to having in
place management practices to effect such improvement, to measuring their progress, and
to reporting this progress as appropriate internally and externally."
Principles for Environmental Management:
1. Corporate priority - recognize environment among the highest corporate priorities
and a key determinant to sustainable development
2. Integrated management - integrate environmental policies, programs and practices
fully into each business
3. Process of improvement - continue to irrprove corporate policies, programs and
environmental performance
4. Employee education - educate, train and motivate employees to conduct their
activities in an environmentally responsible manner
5. Prior assessment - asses environmental impacts before starting a new activity or
project and before decommissioning a facility or leaving a site
6. Products and services - develop and provide products or services that have no
undue environmental impact
7. Customer advice - advise and, where relevant, educate customers, distributors and
the public in the safe use, transportation, storage and disposal of products provided
8. Facilities and operations - to develop, design and operate facilities and conduct
activities taking into consideration the efficient use of energy and materials, the
sustainable use of reusable resources, the minimization of adverse environmental
impact and waste generation, and the safe and responsible disposal of residual
wastes
9. Research - conduct or support research on the environmental impacts of new
materials, products, processes, emissions, and wastes associated with the enterprise
and on the means of minimizing such adverse impacts
10. Precautionary approach - modify the manufacture, marketing or use of products or
services or the conduct of activities consistent with scientific and technical
understanding, to prevent serious or irreversible environmental degradation
11. Contractors and suppliers - promote the adoption of these principles by contractors
acting on behalf of the enterprise, encouraging and, where appropriate, requiring
improvements in their practices to make them consistent with those of the
enterprise; and to encourage the wider adoption of these principles by suppliers
12. Emergency preparedness - develop and maintain, where significant hazards exist,
emergency preparedness plans in conjunction with the emergency services,
relevant authorities and the local community, recognizing potential transboundary
impacts
13. Transfer of technology - contribute to the transfer of environmentally sound
technology and management methods throughout the industrial and public sectors
14. Contributing to the common effort - contribute to the development of public policy
and to business, governmental and intergovernmental programs and educational
initiatives that will enhance environmental awareness and protection
15. Openness to concerns - foster openness and dialogue with employees and the
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public, anticipating and responding to their concerns about the potential hazards
and impacts of operations, products, wastes or services including those of
transboundary or global significance.
16. Compliance and reporting - measure environmental performance; conduct regular
environmental audits and assessments of compliance with company requirements,
legal requirements and these principles; and periodically to provide appropriate
information to the Board of Directors, shareholders, employees, the authorities and
the public
PARADIGMS OF PROGRESS (Hazel Henderson, 1991)
A post-Cartesian Scientific Worldview - based on global view, biological and
systemic life sciences, rather than inorganic, static, equilibrium or mechanistic models.
Principles:
* Interconnectedness at every system level
* Redistribution -- recycling of all elements and structures
* Heterarchy networks and webs, intercommunication rather than hierarchies;
many interactive systems variables; self-organization, autopoesis, mutual causality
* Complementarity replaces either/or, dichotomous logic and re-frames with meta-
logic of "yin-yang" and "win-win" rather than zero-sum games
* Uncertainty from static, equilibrium, and mechanistic models to probabilistic,
morphogenetic, oscillating and cyclic models. Biological view of self-organizing,
self-replicating, self-referential living systems
* Change - focus on irreversible phenomena as well as traditional reversible models,
evolutionary view, macroscopic time/space, change as fundamental, certainty as
limited
UNITED NATIONS CONFERENCE ON ENVIRONMENT, STOCKHOLM, 1972
1. Asserts human rights, condemns apartheid, colonialism
2. Natural resources must be safeguarded
3. Earth's capacity to produce renewable resources must be maintained
4. Wildlife must be safeguarded
5. Non-renewable resources must be shared and not exhausted
6. Pollution must not exceed environment's capacity to clean itself
7. Damaging oceanic pollution must be prevented
8. Development is needed to improve the environment
9. Developing countries therefore need assistance
10. Developing countries need reasonable prices for exports to carry out environmental
management
11. Environment policy must not hamper development
12. Developing countries need money to develop environmental safeguards
13. Integrated development planning is needed
14. Rational planning should resolve conflicts between environment and development
15. Human settlements must be planned to eliminate environmental problems
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16. Governments should plan their own appropriate population policies
17. National institutions must plan development of states' natural resources
18. Science and technology must be used to improve the environment
19. Environmental education is essential
20. Environmental research must be promoted, particularly in developing countries
21. States may exploit their resources as they wish but must not endanger others
22. Compensation is due to states thus endangered
23. Each nation must establish its own standards
24. There must be cooperation on international issues
25. International organizations should help to improve the environment
26. Weapons of mass destruction must be eliminated
FOR THE COMMON GOOD (Herman Daly and John Cobb, 1989)
An economics for community is committed to serving the national well-being. It
sees that well-being in comprehensive ways, and security is a prominent part thereof.
There are several threats to the security of the United States. One is environmental: the
erosion of its soil, the pollution of its air and water, the extinction of species, the
poisoning of the land by chemicals and nuclear wastes, and the combined threat of ozone
depletion and the greenhouse effect. A second is the decline of national morale, Nations
collapse as often because of the lack of will to do what is needed to survive as they do
because of conquest from without. The increase of drug abuse and alcoholism, the
continuing rise of crime, the decay of the family and other community institutions, the
decline in the quality of education, lessening participation in political processes, and
rampant consumerism bode ill for the future. A third threat to national security is
economic decline.
WORLD DEVELOPMENT REPORT 1992 (The World Bank)
The Brundtland Commission's definition of the term sustainable development is
strongly endorsed by this Report. We also believe that meeting the needs of the poor in
this generation is an essential aspect of sustainably meeting the needs of subsequent
generations. There is no difference between the goals of development policy and
appropriate environmental protection. Both must be designed to improve welfare.
Societies may choose to accumulate human capital (through education and
technological advance) or man-made physical capital in exchange, for example, for
running down their mineral reserves or converting one form of land use to another. What
matters is that the overall productivity of the accumulated capital including its impact
on human health and aesthetic pleasure, as well as on incomes more than compensates
for any loss from depletion of natural capital.
HUMAN DEVELOPMENT REPORT 1993 (United Nations Development Programme, 1993)
People-friendly markets allow people to participate fully in their operation and to
share equitably in their benefits. When markets alone do not produce a desirable outcome,
the state needs to regulate and correct. This should, of course, be done cautiously and
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only where necessary. But caution must not be confused with indecision.
Corrective actions must be effective, though limited. This includes protection of the
environment.
The pricing of environmental resources or more effective regulation -- can ensure
that everyone works under the same rules, and that today's production does not pass on
some of its costs to society in general or deplete resources that need to be conserved for
future generations. Making the polluter pay or banning certain types of pollution -- are
among the most effective ways of ensuring sustainable development. Domestically, this
requires antipollution legislation, as well as taxes on the consumption of non-renewable
energy. Internationally, this would require tradable permits for carbon emissions and other
forms of international taxation on polluting nations. If resources were properly priced and
polluters were paying for environmental costs, the incentive structure would tend to
stimulate development of technologies required to ensure more sustainable development.
In short: stakeholders consumers, workers, nature -- should be given at least as much
consideration as shareholders.
SUSTAINABLE DEVELOPMENT OF THE BIOSPHERE (ed. Clark and Munn, 1986)
A major challenge of the coming decades is to learn how long-term, large-scale
interactions between environment and development can be better managed to increase the
prospects for ecologically sustainable improvements in human well-being. Management
is not the same as prediction. Management can be improved despite the enormous
uncertainties and downright ignorance that will continue to make detailed predictions
illusory.
Bellagio Conference on Science, Technology, and Society (1976) argued that:
Nature offers us many opportunities to readjust our technologies to solve
problems. Nevertheless, some physical limitations, particularly those
imposed by the ecological balance of which man is part, are real and must
be respected. We must not make unreasonable demands for short term
stability. Rather, those long term trends that are more likely to determine
the survivability of human society must be identified and properly
managed. In ecological terms we urge that greater heed be given to
resilience rather than stability.
TRAGEDY OF THE COMMONS (Garrett Hardin, in Science, 1968)
In a reverse way, the tragedy of the commons reappears in problems of pollution.
Here it is not a question of taking something out of the commons, but of putting something
in -- sewage, or chemical, radioactive, and heat wastes in to water; noxious and dangerous
fumes into the air; and distracting and unpleasant advertising signs into the line of sight.
The rational man finds that his share of the cost of the wastes he discharges into the
commons is less than the cost of purifying his wastes before releasing them. Since this is
true for everyone, we are locked in to a system of "fouling our own nest," so long as we
behave only as independent, rational, free-enterprises. Indeed, our particular concept of
private property, which deters us from exhausting the positive resources of the earth,
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favors pollution. The owner of a factory on the bank of a stream -- whose property extends
to the middle of the stream often has difficulty seeing why it is not his natural right to
muddy the waters flowing past his door. The law, always behind the times, requires
elaborate stitching and fitting to adapt it to this newly perceived aspect of the commons.
The pollution problem is a consequence of population. "Flowing water purifies
itself every 10 miles," my grandfather used to say, and the myth was near enough to truth
when he was a boy, for there were not too many people. But as population became
denser, the natural chemical and biological recycling processes became overloaded, calling
for a redefinition of property rights.
The population problem has no technical solution; it requires a fundamental
extension in morality,
ENVIRONMENTAL MANAGEMENT IN DEVELOPMENT (M. Colby, World Bank, 1990)
Many different ideas are emerging, from a wide range of disciplines, about what
environmental management and sustainable development entail. From the primordial
dichotomy of "frontier economics" versus "deep ecology," paradigms of "environmental
protection," "resource management," and "eco-development" are evolving, in a
progression which involves increasing integration of economic, ecological, and social
systems into the definition of development and the organization of human societies.
Eco-development sees most development activity as a form of management of the
relationship between society and nature; environmental management, economic
development, and socio-ecological development might virtually become semantic
distinctions for the same subject. "Eco-" signifies both "economic" and "ecological,".
The use of "Development" rather than "Growth,1 "Management" or "Protection" connotes
an explicit reorientation and upgrading of the level of integration of social, ecological and
economic concerns in planning.
In addition to reliance on efficient, clean, renewable energy sources, sustainable
development might be based more on increasing the information intensiveness, community
consciousness,and experiential quality of economic activity, rather than on increased
material-energy intensiveness.
Eco-development would also attempt to incorporate many of the social equity and
cultural concerns raised in the various schools of deep ecology. Eco-development would
move on from economizing ecology to ecologizing the economy, or whole social systems.
TRADE AND ENVIRONMENT (Office of Technology Assessment, 1992)
In 1972 OECD published a set of "Guiding Principles Concerning the International
economic Aspects of Environmental Policies." OECD put forward four principles:
1. Polluter Pays Principle: If national authorities consider a regulation necessary to
protect the environment, then polluters should bear the costs of satisfying that
regulation. (The polluter may pass those costs on to customers.)
2. Harmonization Principle: Governments should seek to harmonize environmental
policies (that is, make their regulations similar), unless valid reasons for
differences exist such as differences from country to country of the
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environment's capacity to absorb pollution, social priorities, degrees of
industrialization, and population density.
3. National Treatment and Nondiscrimination Principle: Environmental measures
should follow GATT's principles of national treatment and nondiscrimination,
meaning that they should apply alike to domestic and foreign products, and should
not discriminate between imports from different countries, respectively.
4. Compensating Import Levies and Export Rebates Principle: Countries should not
try to neutralize the economic effect of differences in environmental policies by
means of import duties and export rebates, or equivalent measures. In other
words, if producers in one country have higher costs of environmental compliance
than producers in a second country, the first country's government should not try
to neutralize that advantage by extra taxes on imports or by tax rebates or other
subsidies on exports. (OECD stated that if the first three principles are followed,
there should be no need for import levies or export rebates.)
Some new areas of concern include:
5. Trade measures in international environmental agreements
6. Effects of trade policies on the environment
7. Application to the developing countries
Trade and environment concerns considered cross-cutting issues, relevant to several
agenda items, at the June 1992 United Nations Conference on Environment and
Development (UNCED). Delegates included several trade/environment principles in a
draft text on international cooperation for providing a supportive climate to help
developing countries accelerate sustainable development. The text calls on governments,
through the GATT, the United Nations Conference on Trade and Development
(UNCTAD), and other multilateral forums, to "make international trade and environment
policies mutually supportive in favor of sustainable development; to clarify the role of
GATT, UNCTAD, and other international organizations, including in conciliation or
dispute resolution; and to encourage a constructive industry role in dealing with
environment and development issues."
The statement appears in Chapter 1 of Agenda 21 and identifies four key items:
1. promoting sustainable development through trade liberalization
2. making trade and environment mutually supportive
3. providing adequate financial resources to developing countries and for dealing with
international debt
4. encouraging macroeconomic policies conducive to environment and development
CHOOSING A SUSTAINABLE FUTURE: REPORT OF THE NATIONAL COMMISSION
ON THE ENVIRONMENT (Russell E. Train, Chairman, 1992)
Key Recommendations:
* Sustainable development should be the primary goal of environmental and
economic policy
* The most important and immediate target of U.S. environmental policy is to
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*
*
encourage the development and adoption of technologies compatible with
sustainable development
Getting the prices right involves eliminating price-distorting subsidies, taxing
environmentally harmful activities, and revising the way economic activity is
measured
Schools, families, religious institutions, the media, businesses, and government
must cooperate in fostering the development of an environmentally literate citizenry
that respects environmental values and assumes responsibility for putting the values
in to practice
Environmental considerations must become integral to all governmental policies
The United States has a vital interest in leading efforts to protect the global
environment, moderate world population growth, and improve the standard of
living in developing nations
The most critical technologies for sustainable development are energy technologies.
Highest priority should go to energy efficiency
Efforts to halt pollution should become more integrated and holistic; pollution
prevention should take priority over pollution control
Environmentally sensitive management of public and private land is essential to
achieving environmental goals and economic growth over the long term
"THE GLOBAL CHALLENGE" (Remarks by Jacques- Yves Cousteau, First Annual Conference
on Environmentally Sustainable Development, The World Bank, September 30, 1993)
Biodiversity is a major prerequisite for a sound, sustainable environment. When
we speak of biodiversity, we mean diversity of species, of ecosystems and mainly of
genetic diversity, within a species, that guarantees the capabilities of adaptation. The
greater the number of species composing an ecosystem I mean a community -- the
stronger the ecosystem to resist environmental changes.
SUSTAINABLE DEVELOPMENT AND THE ENVIRONMENTAL PROTECTION
AGENCY (Report to Congress, 1993)
Consensus exists on several of the fundamental tenets of sustainable development.
It: 1. requires a long-term perspective for planning and policy development;
2. dictates actions that build on and reinforce the interdependence of our
economy and our environment; and
3. calls for new, integrative approaches to achieve economic, social, and
environmental objectives.
ENVIRONMENTAL ECONOMICS AND SUSTAINABLE DEVELOPMENT (Mohan
Munasinghe, The World Bank, 1993)
Three concepts of sustainable development reflect the economic, the ecological and
the socio-cultural perspectives:
1. The economic approach to sustainability is based on the concept of the maximum
flow of income that could be generated while at least maintaining the stock of
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assets (or capital) which yield these benefits
2. The ecological view of sustainable development focuses on the stability of
biological and physical systems. Of particular importance is the viability of
subsystems that are critical to the global stability of the overall ecosystem.
Protection of biological diversity is a key aspect. Furthermore, "natural" systems
may be interpreted to include all aspects of the biosphere, including man-made
environments like cities.
3. The socio-cultural concept of sustainability seeks to maintain the stability of social
and cultural systems, including the reduction of destructive conflicts. Both
intragenerational equity (especially elimination of poverty), and inter-generational
equity (involving the rights of future generations) are important aspects of this
approach. Preservation of cultural diversity across the globe, and the better use of
knowledge concerning sustainable practices embedded in less dominant cultures,
should be pursued. Modem society would need to encourage and harness pluralism
and grass-roots participation into a more effective decision making framework for
socially sustainable development.
Generally, the identification of sustainable development options requires:
* Good understanding of the physical, biological and social impacts of human
activities
* Better estimates of the economic value of damage to the environment that help to
improve the design of policies and projects and lead to environmentally sound
investment decisions
* Development of policy tools and strengthening of human resources and institutions
to implement viable strategies and manage natural resources on a sustainable basis
"PROTECTING THE GLOBAL ENVIRONMENT AND PROMOTING INTERNATIONAL
TRADE: PRINCIPLES AND ACTION PLAN" (The Business Roundtable, March 1993)
Principles to govern the relationship between trade and environmental initiatives:
1. Environmental problems having impacts beyond the borders of an individual
country should be addressed through international environmental agreements
2. Trade and investment agreements should focus on achieving trade/investment
liberalization, rather than on remedying specific environmental problems
3. Harmonization of product standards and related risk assessment, testing, and
certification procedures should be pursued through bilateral or multilateral
negotiations that include both the public and private sectors
4. A country should not use unilateral trade measures as a means to impose its own
environmental standards or risk management preferences on other countries.
However, it may be appropriate to impose trade restrictions unilaterally when
necessary to enforce a domestic product standard designed to protect health, safety,
or the environment in the host country
5. Dispute resolution mechanisms in both trade and environmental agreements should
be structured so that conflicts can be resolved on an open and informed basis that
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takes into account both trade and environmental concerns
6. National authorities should promote efforts to identify and quantify the costs of
using scarce environmental and natural resources within their respective
jurisdictions. In accordance with the polluter/user pays principle, governments
should, over time, implement measure* designed to allocate those costs
prospectively to the production and/or consumption activities with which they are
associated - preferably through the use of economic instruments or the promotion
of voluntary private sector initiatives
7. Special consideration should be given to wa>s to help developing countries upgrade
their environmental standards and resource management practices, particularly
when the upgraded standards or practices are the product of an international
environmental agreement
UNCTAD's CONTRIBUTION, WITHIN ITS MANDATE, TO SUSTAINABLE
DEVELOPMENT: TRADE AND ENVIRONMENT (United Nations Conference on Trade and
Development, August 1993)
* Sustainable development requires a dynamic international economy and sound
domestic policies. Sustainable development policies in developing countries and
countries in transition must be supported by open markets, financial assistance and
technical cooperation. Trade and trade liberalization can make a substantial
contribution to sustainable development.
* Trade restrictions are usually not "first best" or even "second best" policy relative
to achieving environmental purposes.
The efforts of individual countries to promote the internaJization of externalities
should be encouraged and given wide international support through positive
measures. The achievement of sustainable development without resort to trade
restrictions requires international cooperation, based on the Rio Declaration and
Agenda 21. Such cooperation should aim at accelerating development, maintaining
an open trading system and building institutional capacity to integrate trade and
environment policies in the framework of national policies for sustainable
development.
International cooperation should be based on the principle that all countries have
a common but differentiated responsibility for the main environmental problems.
Furthermore, since resource endowments, assimilative capacities and social
preferences vary considerably across countries, one should take into account that
harmonization of standards is not always appropriate.
Strengthened international cooperation may be particularly relevant to increasing
the mutual support!veness of environmental and trade policies. Important
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objectives of strengthened international cooperation in the field of trade and
environment are as follows:
1. expand the trading opportunities for developing countries
2. prevent trade conflicts and maintain an open trading system
3. seek greater coherence between various policies and measures implemented
by individual countries. For example, international cooperation should
ensure that regulations as well as certain criteria being developed in the
framework of eco-labelling schemes, which are being designed in the light
of environmental concerns in the OECD countries, have no unintended
effects on sustainable-development policies in developing countries.
4. prevent the detrimental effects of environmental policies and measures on
economic growth of developing countries
5. seek greater integration of trade and environmental policies
DEFINING A SUSTAINABLE SOCIETY (Robinson, Francis, Legge and Lerner, Alternatives,
1990)
Principles of Sustainability:
Basic value principles
* The continued existence of the natural world is inherently good.
* Cultural Sustainability depends on the ability of a society to claim the loyalty of its
adherents through the propagation of a set of values that are acceptable to the
populace and through the provision of socio-political institutions that make
realization of those values possible.
Principles of environmental/ecological Sustainability
* Life support systems must be protected. This requires decontamination of air,
water and soil and reduction in waste flows.
* Biotic diversity must be protected and enhanced.
* We must maintain or enhance the integrity of ecosystems through careful
management of soils and nutrient cycles, and we must develop and implement
rehabilitative measures for badly degraded ecosystems.
* Preventive and adaptive strategies for responding to the threat of global ecological
change are needed.
Principles of socio-political Sustainability
* The physical scale of human activity must be kept below the total carrying capacity
of the planetary biosphere.
* We must recognize the environmental costs of human activities and develop
methods to minimize energy and material use per unit of economic activity, reduce
noxious emissions, and permit the decontamination and rehabilitation of degraded
ecosystems.
* Socio-political and economic equity must be ensured in the transition to a more
sustainable society.
* Environmental concerns need to be incorporated more directly and extensively into
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the political decision-making process, through such mechanisms as improved
environmental assessment and an environmental bill of rights.
* There is a need for increased public involvement in the development, interpretation
and implementation of concepts of sustainability.
* Political activity must be linked more directly to actual environmental experience
through allocation of political power to more environmentally meaningful
jurisdictions, and the promotion of greater local and regional self-reliance.
* A sustainable society requires an open, accessible political process that puts
effective decision-making power at the level of government closest to the situation
and lives of the people affected by a decision.
* All persons should have freedom from extreme want and from vulnerability to
economic coercion as well as the positive ability to participate creatively and self-
directly in the political and economic system.
* There should exist at least a minimum level of equality and social justice, including
equality of opportunity to realize one's full human potential, recourse to an open
and just legal system, freedom from political repression, access to high quality
education, effective access to information, and freedom of religion, speech and
assembly.
"SUSTAINABILITY: AN ECONOMIST'S PERSPECTIVE" (Robert M. Solow, The
Eighteenth J. Seward Johnson Lecture, June 14, 1991)
Current environmental protection contributes to sustainability if it comes at the
expense of current consumption - not if it comes at the expense of investment, of
additions to future capacity. A correct principle, a correct general guide is that when we
use up something and by we I mean our society, our country, our civilization, however
broadly you want to think - when we use up something that is irreplaceable, whether it
is minerals or a fish species, or an environmental entity, then we should be thinking about
providing a substitute of equal value, and the vagueness comes in the notion of value. The
something that we provide in exchange could be knowledge, could be technology. It
needn't even be a physical object.
There is a neat analytical result in economics which studies an economy that takes
what we call the rentals, the pure return to a non-renewable resource, and invests those
rentals. That is, it uses up a natural asset like the North Sea oil field, but makes a point
of investing whatever revenues intrinsically irhere to the oil itself. That policy can be
shown to have neat sustainability properties. In a simple sort of economy, it will
guarantee a perpetually constant capacity to consume.
There is also a sort of paradox that arises with a concept of sustainability. The
paradox arises because if you are concerned about people who are currently poor it will
turn out that your concern for them will translate into an increase in current consumption
not into an increase in investment. The logic of sustainability says, "you ought to be
thinking about poor people today, and thinking about poor people today will be
disadvantageous from the point of view of sustainability." Intellectually, there is no
difficulty in resolving that paradox, but practically there is every difficulty in the world
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in resolving that paradox. And I don't have the vaguest notion of how it can be done in
practice.
Think about what it will mean for, say, CO2 discharge when the Chinese start to
burn their coal in a very large way; and then, while you are interested in moral obligation,
I think you should invent for yourself how you are going to explain to the Chinese that
they shouldn't burn the coal, even living at their standard of living they shouldn't burn the
coal, because the CO2 might conceivably damage somebody in 50 or 100 years.
Control of population growth would probably be the best available policy on behalf
of sustainability. You know that, I know that, and I have no particular competence to
discuss it any further; so I won't, except to remind you that rapid population growth is
fundamentally a third world phenomenon to a developed country phenomenon. So once
again, you are up against the paradox that people in poor countries have children as
insurance policies for their own old age. It is very hard to preach to them not to do that.
On the other hand, if they continue to do that, then you have probably the largest, single
danger to sustainability of the world economy.
Don't forget that sustainability is a vague concept. It is intrinsically inexact. It is
not something that you could be numerically accurate about. It is, at best, a general guide
to policies that have to do with investment, conservation and resource use. And we
shouldn't pretend that it is anything other than that.
ECONOMICS, EQUITY AND SUSTAINABLE DEVELOPMENT (David Pearce, Futures,
December 1988)
Sustainable development serves goals which would command wide, though not
universal, assent. Sustainable development is consistent with:
* justice in respect of the socially disadvantaged
* justice to future generations
* justice to nature
* aversion to risk arising from i) our ignorance about the nature of the interactions
between environment, economy and society; and ii) the social and economic
damage arising from low margins of resilience to external 'shock'.
CANADA'S GREEN PLAN (Minister of Supply and Services, Canada, 1990)
The Canadian government adopted seven broad "Principles for Environmental
Action" as the basis for its Green Plan. These are:
1. respect for nature (stewardship);
2. maintaining awareness of the economy-environment relationship;
3. efficient use of resources (utilize renewable resources sustainably, consider impacts
of exploiting nonrenewable resources, avoid overtaxing natural systems, and the
polluter/user pays);
4. shared responsibility (among all levels of government and internationally);
5. federal government leadership (nationally and internationally);
6. informed decision making (science, research, information, education, and public
consultation and participation); and
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7. thinking, planning, and acting in terms of ecosystems (in this context, this means
considering the complex inter-relationships in the environment)
AUSTRALIA'S GREEN PLAN (Ecologically Sustainable Development, Commonwealth of
Australia, 1992)
An ecologically sustainable society will need to abide by certain principles.
Ecological sustainability is an iterative process more than an objective and as such the
principles we have outlined here are only a first step towards guaranteeing Australia's
future. The guiding principles are:
* Inter-generational equity: The present generation should ensure that the next
generation is left an environment that is at least as healthy, diverse and productive
as the one we enjoy. Owing to the massive and irreversible rate of loss of species
and habitats at present, we have an additional responsibility to give the highest
priority to conserving the world's natural environment and species.
* Conservation of biodiversity and ecological integrity: Conservation of biodiversity
and the protection of ecological integrity should be a fundamental constraint on all
economic activity. The non-evolutionary loss of species and genetic diversity
needs to be halted and the future of evolutionary processes secured.
* Constant natural capital and 'sustainable income1: Natural capital (eg. biological
diversity, healthy environments, freshwater supplies, productive soils) must be
maintained or enhanced from one generation to the next. Only that income which
can be sustained indefinitely, taking account of the biodiversity conservation
principle, should be taken.
* Anticipatory and precautionary policy approach: Policy decisions should err on the
side of caution, placing the burden of proof on technological and industrial
developments to demonstrate that they are ecologically sustainable.
* Social equity: Social equity must be a key principle to be applied in developing
economic and social policies as part of an ecologically sustainable society.
* Limits on natural resource use: The scale and throughput of material resources
will need to be limited by the capacity of the enviro iment to both supply renewable
resources and to assimilate wastes.
* Qualitative development: Increases in the qualitative dimension of human welfare
and not quantitative growth in resource throughput is a key objective.
* Pricing environmental values and natural resources: Prices for natural resources
should be set to recover the full social and environmental costs of their use and
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extraction. Many environmental values cannot be priced in monetary terms and
hence pricing policies will form part of a broader framework of decision making.
* Global perspective: A global perspective is needed to ensure that Australia does
not simply move its environmental problems elsewhere.
* Efficiency: Efficiency of resource use must become a major objective in economic
policy.
* Resilience: Economic policy needs to focus on developing a resilience to external
economic or ecological shocks. A resource-driven economy is unlikely to be
resilient.
* External balance: Australia's economy needs to be brought into balance. External
imbalance creates pressure to deplete natural capital and could undermine the
prospect for an ecologically sustainable economy.
* Community participation: Strong community participation will be a vital pre-
requisite for affecting a smooth transition to an ecologically sustainable society.
NETHERLANDS' NATIONAL ENVIRONMENTAL POLICY PLAN (Summary of Dutch
National Environmental Policy Plan, 1990)
The Netherlands adopted three principal plan elements that are described as
building upon the premises of environmental policy adopted over the last twenty years.
Taken together, these elements and premises constitute a more specific philosophy of
policy guidance. The first three items in the following list are the three main elements and
the items that follow are the premises considered already to have been operational:
* promote integrated life-cycle management and close substance cycles in the chain
of raw materials (production process, product, waste, associated emissions);
* energy conservation and increasing efficiency and utilization of renewable energy
resources;
* quality improvement of products, production processes, raw materials, and waste
in order to prolong the use of substances in the economic cycle;
* the "stand still" principle: environmental quality may not deteriorate;
* the polluter pays;
* pollution prevention;
* application of best practicable means of pollution control;
* two-track policy: source-oriented measures on the basis of effect-oriented quality
standards;
* internalization: integration of environmental aspects into activities in other policy
fields.
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THE GREENING OF AMERICA'S TAXES: POLLUTION CHARGES AND
ENVIRONMENTAL PROTECTION (Stavins and Whitehead, The Progressive Policy Institute,
February 1992)
Market-based policies start with the assumption that the best way to protect the
environment is to make it in the daily self-interest of individuals and firms to do so. The
key to greater environmental protection, then, is not more centralized rulemaking, but
decentralization - by changing the financial incentives that face millions of firms and
individuals in their private decisions about what to consume, how to produce, and where
to dispose of their wastes. As a result, market-based policies offer many important
advantages:
* they can enable environmental protection to be pursued at less cost of compliance
to private industry, and thereby at less cos1: to consumers
* they can give firms a constant incentive to find new and better technologies for
combatting pollution rather than locking one kind of pollution control technology
into place
* they can help move environmental protection laws and regulations out of the
exclusive domain of experts -- scientists, economists, lawyers, and lobbyists and
open up the process to the public
* they help decentralize power from public bureaucrats to private firms and
individuals by building incentives for pollution control in to the cost structure, and
as a result, in to daily decisions and long-term strategies
* they make the incremental costs of environmental protection more visible, and thus
focus public debate on the tradeoffs between protection and other economic goals,
rather than simply on the evils of pollution
* because some market-based approaches such as pollution charges raise substantial
revenues, they can enable government to reduce "distortionary" taxes ones that
reduce market efficiency by taxing desirable activities, such as investment and
labor -- and replace them with levies that discourage socially undesirable behavior,
such as pollution and degradation of natural resources
"REQUIRED GLOBAL CHANGES: CLOSE LINKAGES BETWEEN ENVIRONMENT
AND DEVELOPMENT" (Maurice Strong, in Change: Threat or Opportunity, ed. Uner Kirdar,
United Nations, 1992)
Transition to sustainability is the only means of ensuring the revitalization of the
development process, which is the key to the future of all developing countries.
Population is a critical element in the environment-development equation. The
relationship between population dynamics and ecosystems is decisive in achieving
sustainable development. Each country must determine the relationship between, on the
one hand, the growth and distribution of its population, its environment and resource base
and, on the other hand, the level and quality of life its development policies and
programmes are designed to produce for its people.
Sustainable development cannot be imposed by external pressures, it must be rooted
in the culture, the values, the interests and the priorities of the people concerned. While
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the transition to sustainability will require a supportive international economic
environment, it must not provide a basis for the external imposition of new conditions or
constraints on development. Developing countries cannot be denied their right to grow,
nor to choose their own pathways to growth.
At the same time, the transition of developing countries to sustainability cannot be
expected without the support of the international community.
Sustainable development involves a process of deep and profound change in the
political, social, economic, institutional and technological order, including the redefinition
of relations between developing and more developed countries. Governments must take
the lead and establish the basic policy framework incentives and infrastructures required
for sustainability. However, the primary actors are people, acting through the many non-
governmental organizations and citizen groups through which societies function.
ENABLING THE FUTURE: LINKING SCIENCE AND TECHNOLOGY TO SOCIETAL
GOALS (Carnegie Commission, September 1992)
Goals are projected ends. To achieve them requires assembling and sustaining a
manageable consensus on future objectives. The goal-setting process depends on focusing,
sequencing, and committing resources to a vision of where we want to be some years in
the future. We have defined long-term goals as objectives to be achieved over a period
of 10-50 or more years, and near-term goals as objectives that can be achieved in less than
10 years. Priorities, on the other hand, refer to near-term resources allocations and policy
objectives. Budget priorities attempt to order objectives within a given framework of
externalities. Thus, establishing goals and assigning priorities are distinct but parallel
processes. Annual or biennial budget priorities should be set in the context of relevant
near-term and long-term goals.
By linking goals more closely with societal needs, necessary trade-offs between
different federal, national, international, and other science and technology goals for
example, between short-term economic gain and long-term environmental damage can
be made more carefully and systematically.
Examples of major societal goals to which science and technology contribute:
* Quality of life, health, human development, and knowledge
education and diffusion of knowledge
personal and public health and safety
personal development and self-realization
exploration and expansion of knowledge
high standard of living
creation and maintenance of civic culture
cultural pluralism and community harmony
population stabilization
* A resilient, sustainable, and competitive economy
economic growth
full employment and workforce training
international competitiveness
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modernized communications and transportation
international cooperation and action
* Environmental quality and sustainable use of natural resources
worldwide sustainable development
resource exploration, extraction, conservation, and recycling
energy production and efficiency ir use
environmental quality and protection
provisions for public recreation
maintenance and enhancement of productivity of the biosphere
maintenance of urban infrastructure
energy security and strategic materials
* Personal, national, and international security
personal security and social justice
national and international security
individual freedom
worldwide human rights
KEYNOTE ADDRESS BY VICE-PRESIDENT AL GORE TO THE COMMISSION ON
SUSTAINABLE DEVELOPMENT (United Nations, June 14, 1993)
Two principles must guide us as we set about the pursuit of sustainable
development. First, the principle of national -responsibility. After all, the role of the
Commission on Sustainable Development is primarily catalytic. It can focus attention on
issues of common interest. It can serve as a forurn for raising ideas and plans. It can help
resolve issues that arise as nations proceed in their sustainable development agendas. It
can monitor progress. It can help shift the multilateral financial institutions and bilateral
assistance efforts towards a sustainable development agenda.... But it can do none of these
things unless each country makes a strong commitment to change... But just as each nation
must assume national responsibility, so must we all act together.
If sustainable development is to become a reality, the second principle we must
follow is that of partnership. There are still those who think the wealthy countries on this
planet have a monopoly on technology and insight. That's nonsense. We can all learn
from each other. That's why this Commission must encourage partnership among
countries - especially between North and South.
Over the last 20 years we have made some progress in creating the basis for a
global partnership. UNCED was a landmark in unifying "environment" and
"development" in the term "sustainable development." Now this insight must be given life
within the policies of every government. Trade, commerce, agriculture .. all interests
need to be part of the effort, and that's why this Commission as well must help create
partnerships within countries.
Finally, if this Commission is to succeed it must help create partnerships between
government and non-governmental organizations.
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DECLARATION ON COOPERATION FOR SUSTAINED GLOBAL EXPANSION (adopted
at the conclusion of the fortieth meeting of the Interim Committee of the Board of Governors of
the IMF, April 30, 1993)
There are a number of positive developments which, if sustained in a coordinated
and cooperative manner, have the potential of strengthening global economic performance
in both the near and medium term. We are consequently of the view that it is timely to
join forces in a global cooperative effort to bolster confidence and strengthen prospects for
a durable, noninflationary world expansion.
PROJECT 88 - ROUND II (Senators Wirth and Heinz, Washington, D.C., May 1991)
Conventional command-and-control regulatory mechanisms can be usefully
supplemented by incentive-based approaches to environmental protection and natural
resource management. Five general categories of policy instruments are promising:
pollution charges, tradeable permit systems, deposit-refund systems, removing market
barriers, and eliminating government subsidies. The choice among alternative policy
instruments will be made on the basis of broader criteria of what constitutes good public
policy.
Throughout the study, we ask whether the policy mechanisms being investigated
will result in real improvements over existing or alternative policies. In particular, we
keep in mind the following criteria for improved environmental and resource policy:
* Will the policy achieve our environmental goals?
* Will the policy approach be cost-effective? That is, will it achieve environmental
goals at least cost to society at large?
* Will the strategy provide government agencies and private decision makers with
needed information?
* Will monitoring and enforcement costs be reasonable?
* Will the policy be flexible in the face of changes in tastes, technology, or resource
use?
* Will the policy give industry incentives to develop new environment-saving
technologies, or will it encourage firms to retain existing inefficient plants?
* Will the effects of the policy be equitably distributed, and will any inequities be
resolvable through government action?
* Will the purpose and nature of the policy be broadly understandable to the general
public?
* Will the policy be truly feasible, in terms of both enactment by the Congress and
implementation by the appropriate departments or agencies?
SUSTAINABLE LIVING IN THE ARCTIC (Walter J. Hickel, Governor of Alaska, A paper
prepared for the 5th World Wilderness Congress, Tromso, Norway September 25, 1993)
Ten lessons learned:
1. It is a collective world: As the indigenous peoples learned long ago, in a cold,
harsh environment, you have to care about others. You waste nothing. You share to
survive. You care for the total. Every hunter's prize is a gift, not just to that hunter, but
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to his family and village. Pollution knows no borders. All rivers eventually run into a
common sea. All living things breathe the common air. Sustainable living requires
collective concern.
2. Change is a natural law. Welcome it: Those who are afraid of change will
attempt to hold people down, and they will fail. When civilizations are not allowed to
grow, the harvest is revolution. Progress might change the environment, but it need not
harm the environment. The opportunity and the challenge lie in guiding that process.
3. Government must not be the enemy. Government must be the friend:
Government must regulate, to ensure that our lands and people are not exploited. But
government must also advocate. Without government saying "yes," there will be no
sustainable economic foundation.
4. People are the most precious things on earth: We are learning that the best
social program is a job. Work means more than a paycheck. It gives you a sense of
meaning; that you, as an individual, are needed. Without that fundamental, life is not
worth living,
5. There is no wealth without production: Sustainable living in the Arctic does not
mean making computer chips. Our challenge is to address sustainable living in a resource
economy. People need nature's resources. To live on earth, someone has to harvest
God's gifts cut a tree, catch a fish, dig a hole. As the world population expands, most
people who live in the temperate, tropic and sub-tropic climates will eventually insist that
development activities take place somewhere else and "not in my backyard." Therefore,
the resources of the world of the future will come from the Arctic, the Antarctic, the
oceans and space. In the case of the Arctic, instead of fearing to use resources, we have
the opportunity to use them wisely. To begin with, we must inventory our lands before
they are set aside for a single purpose. We must measure the full range of values
important to our peoples - economic opportunities, space for communities, the need to
subsist off the land, and the intangibles, such as the value of a wilderness or a sunset.
When it comes to economic values, we must start with energy resources. Where there is
a shortage of energy, there is basic poverty.
6. The cost is to care: Cleaning up pollution is an imperative. The best time to pay
for the cost of making a product pollution free is when the product is made. Weighing and
balancing the risks and rewards, we must set attainable standards based on science and
subscribed to by the world community. A collective world demands enlightened policy
from all industries, in all countries. There must be a level playing field.
7. When no one owns something, no one cares: The lesson is to harvest living
resources on the basis of sustained yield.
8. We must care for the total environment - people, people's needs, and nature:
Sometimes in our drive for economic progress or our commitment to protect nature, we
forget about people and their needs. Through trust and working together, we can care for
both the wildlife and the people who depend on them.
9. The Arctic is not as difficult as it is different: The greatest challenge of those
who live in the Arctic is to cope with decisions made in the South that don't work in the
North. Our greatest environmental problems in the Arctic are solid waste disposal, fuel
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storage and high-cost energy. Land fills don't work on permanently frozen ground.
Incineration, which may be a problem in urban communities, may be the answer for Arctic
rural needs.
10. The greatest frontier is within ourselves: We can work together to improve the
living standards of our peoples. If we are wise, we will preserve our values of old and
welcome the new. And, on that foundation, we will build a way of life that is truly
sustainable.
SUSTAINABLE DEVELOPMENT: FROM CONCEPT AND THEORY TOWARDS
OPERATIONAL PRINCIPLES (Herman E. Daly, Population and Development Review,
Hoover Institution Conference, 1989)
The major conceptual issue we must resolve in thinking about economic
development and the environment in the next decade is to integrate the one-way throughput
as the basic starting point of economic analysis. Next is to distinguish clearly the problem
of the optimal allocation of the throughput from that of its optimal scale. Our attention
will then naturally become focused on how to limit the scale to an optimal, or at least
sustainable level. Then we can begin to investigate operational principles of sustainability
such as those summarized below:
1. The main principle is to limit the human scale to a level which, if not optimal, is
at least within carrying capacity and therefore sustainable. Once carrying capacity
has been reached the simultaneous choice of a population level and an average
"standard of living" becomes necessary. Sustainable development must deal with
sufficiency as well as efficiency, and cannot avoid limiting scale. An optimal scale
would be one at which the long run marginal costs of expansion are equal to the
long run marginal benefits of expansion.
2. Technological progress for sustainable development should be efficiency-increasing
rather than throughput-increasing. Limiting the scale of resource throughput would
induce this technological shift.
3. Renewable resources, in both their source and sink functions, should be exploited
on a profit-maximizing sustained yield basis and in general not driven to extinction,
since they will become ever more important as nonrenewables run out.
Specifically this means that: (a) harvesting rates should not exceed regeneration
rates; and (b) waste emissions should not exceed the renewable assimilative
capacity of the environment.
4. Nonrenewable resources should be exploited, but at a rate equal to the creation of
renewable substitutes. Nonrenewable investments should be paired with renewable
investments.
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CHANGING COURSE (Stephan Schmidheiny with the Business Council for Sustainable
Development (BCSD), 1992)
From a business point of view, the concept which best sums up the business
approach to sustainable development is the term"eco-efficiency", coined by the BCSD.
The Council sought a link between the two ideals of business and environmental
excellence. It found that link in the concept of efficiency, which connects business, the
environment, and the increasing human needs of this generation and of the larger
generations to come. Efficiency keeps companies competitive, it adds most value with the
least use of natural resources; and it is crucial in the fight against mass poverty in the
world.
The BCSD went further and developed the notion of "eco-efficient" to describe
those corporations that produce ever more useful goods and services while continuously
reducing resource consumption and pollution. The Council agreed that tomorrow's
winners will be those who make the most and the fastest progress in improving their eco-
efficiency. Moreover, by living up to its responsibilities, business will be able to shape
a reasonable and appropriate path towards sustainable development. Integrating the
principles of sustainable development into corporate operations, and making enterprises
eco-efficient, is a multi-faceted process. Chief Executive Officers must recognize that
there can be no long-term economic growth unless it is environmentally sustainable.
Environmental considerations must be fully integrated into production processes, affecting
the choice of raw materials, operating procedures, technology, and human resources.
Pollution prevention means that environmental concerns become, like profitability, a cross-
functional issue that everyone promotes. And corporate environmental responsibility no
longer ends at the factory gate. It extends from cradle to grave in a management process
called product stewardship.
At the top of an agenda for sustainable development would be a set of "arguing and
operating principles" upon which all participants (business, governments and citizens)
could agree. The first of these principles might be to adopt the "precautionary principle,"
which says that a lack of scientific certainty should not be used as an excuse for postponing
measures that prevent major, irreversible environmental degradation. A second principle
might be not to insist on having a certain knowledge of where society will be many years
ahead. In other words, it is obvious that the price of fossil fuels must increase so that they
are used more efficiently, so as to encourage the search for "new and renewable" energy
sources, and so that these sources will become competitive more quickly. Rather than fail
to begin because we cannot agree on how much gasoline will cost in the year 2020, let us
commit ourselves to a process of raising those prices. We can always adjust and refine.
A third principle might be to seek out, wherever possible, "no-regret" policies. There are
steps such as increased energy efficiency or the development of drought resistant crops
- which society will not regret even if global warming does not prove to be as threatening
as it now seems.
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STATE LEVEL SUSTAINABLE DEVELOPMENT (Center for Policy Alternatives, September
1993)
Sustainable development is not a single policy or plan that is incorporated into one
department or function. It is a framework for decision-making to be used across all sectors
and at all levels. It is not a strategy that can be incorporated into ten easy steps. It is a
vision a set of principles for policies, relations, and behaviors that take time and
require institutional changes. These principles include the need to:
* Integrate the environment and the economy in all levels of decision-making.
Utilize economic appraisals that fully value the cost of goods and services
(including environmental and social impacts).
* Revise how growth is measured and valued to make it equitable and long-term, and
to reflect quality of life elements.
* Incorporate economic incentives to encourage the conservation of resources, to
reflect the total cost of goods, and to shift the burden of taxes and fees from the
public to the user.
* Reorient technology to better manage risks and to efficiently use materials and
energy.
* Conserve and enhance the natural resource base (air, water, soils, biological
diversity).
* Enhance interdisciplinary science and education to improve understanding of and
to make information available on natural system sand their interrelationships.
* Adjust the use of natural resources and the ability of environmental and economic
systems to reflect carrying capacity.
* Ensure population stabilization through access to education, health care, and family
planning services.
* Improve governance through coordinated efforts that: link agencies, departments,
and central government with local government; incorporate project appraisal
techniques that include environmental and social costs and benefits; and involve
citizens in decision-making.
* Promote values and ethics that reflect sustainable development the
interdependence of the environment and the economy, the importance of fairness
and equity for long-term prosperity, and the need for cooperation and community.
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SECTION 3:
GLOSSARY OF TERMS
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Benefit-Cost Analysis
Benefit-cost analysis is a tool to inform decisionmaking. The mechanical elements of
benefit-cost analysis are decision rules to determine whether a project or projects should
he undertaken, and if so at what scale of activity. The formal rules for benefit-cost
analysis use as inputs estimates of the benefits and costs of the projects. All benefit-cost
analyses hinge on one Fundamental Rule: In any choice situation, select the alternative that
produces the greatest estimated net benefit. Recognizing that some social and biophysical
impacts cannot be easily quantified in monetary terms, multicriteria analysis offers a
complementary approach to benefit-cost analysis. In principle, the procedure followed in
a benefit-cost analysis consists of five steps:
1. The project or projects to be analyzed are identified
2. All the impacts, both favorable and unfavorable, present and future, on all of society
are determined
3. Values, usually in dollars, are assigned to these impacts. Favorable impacts will be
registered as benefits, unfavorable ones as costs.
4. The net benefit (total benefit minus total cost) is calculated to ensure that the net present
value (NPV) is positive.
5. The choice is made. The project with the highest (and positive) NPV would be the
preferred one provided also that the scale of the alternatives is roughly the same. In
addition to NPV, the internal rate of return (IRR) is also used as a criterion. Another
frequently used criterion is the benefit cost ratio (BCR).
Benefit-Cost Ratio (BCR)
A criterion used to compare the costs and benefits of a project. If BCR is greater than one,
then the net present value (NPV) of the project is greater than zero and the project is
acceptable.
Biosphere
The portion of Earth and its atmosphere that can support life.
Carrying Capacity
For human beings carrying capacity cannot be considered in terms of population alone, but
must specify some average level of per capita consumption ("standard of living"); some
degree of inequality in the distribution of individual consumption levels around that
average, and some given level or range of technology. Taking these considerations into
account, the concept of carrying capacity then asks the question: With present and
foreseeable technologies, how many people at an acceptable standard of living can a given
area support indefinitely?
Case Studies/Demonstration Projects
These projects have two purposes: (1) to test sustainable development policy hypotheses,
and (2) to reveal sustainable and NON-sustainable policy hypotheses embedded in
corporate policy, federal policy, and state and local government policies. The case studies
and demonstration projects will provide "bottom up" input to Policy Recommendations.
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Challenge Statement
The PCSD's challenge statement describes where we are now as a nation, and where
current trends are taking us.
Chlorofluorocarbons (CFCs)
A family of inert, nontoxic, and easily liquified chemicals used in refrigeration, air
conditioning, packaging, insulation, or as solvents and aerosol propellants. Because CFCs
are not destroyed in the lower atmosphere they drift into the upper atmosphere where their
chlorine components destroy ozone.
Clear Cut
A forest management technique that involves harvesting all the trees in one area at one
time. Under certain soil and slope conditions it can contribute sediment to water pollution.
Closed-Loop Recycling
Reclaiming or reusing wastewater for nonpotable purposes in an enclosed process.
Conservation
Avoiding waste of, and renewing when possible, human and natural resources. The
protection, improvement, and use of natural resources according to principles that will
assure their highest economic or social benefits.
Contaminant
Any physical, chemical, biological, or radiological substance or matter that has an adverse
affect on air, water, or soil.
Contingent Valuation
When relevant market behavior is not observable, the contingent valuation method puts
direct questions to individuals to determine how much they might be willing to pay for an
environmental resource, or how much compensation they would be willing to accept if
they were deprived of the same resource. The contingent valuation method is more
effective when the respondents are familiar with the environmental good or service (e.g.,
water quality) and have adequate information on which to base their preferences. It is
likely to be far less reliable when the object of the valuation exercise is a more abstract
aspect like existence value.
Cost-Benefit Analysis (see Benefit-Cost analysis)
Cost-Effective Alternative
An alternative control or corrective method identified after analysis as being the best
available in terms of reliability, permanence, and economic considerations. Although costs
are one important consideration, when regulatory and compliance methods are being
considered, such analysis does not require EPA to choose the least expensive alternative.
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For example, when selecting a method for cleaning up a site on the Superfund National
Priorities List, the Agency balances costs with the long term effectiveness of the various
methods proposed.
Cost Recovery
A legal process by which potentially responsible parties who contributed to contamination
at a Superfund site can be required to reimburse the Trust Fund for money spent during
any cleanup actions by the Federal government
Deposit-Refund Systems
Purchasers of products that could pollute the environment pay a surcharge, which is
refunded when the purchasers return the products to an approved center for recycling or
proper disposal.
Developing Countries
The World Economic Outlook, International Monetary Fund, Washington, D.C., divides
the world into three major groups: 30 industrial countries; 130 developing countries, and
24 countries in transition. In principle, the group of developing countries includes all
countries that are not classified as industrial or as countries in transition, together with a
few dependent territories for which adequate statistics are available.
Industrial Countries
Australia
Austria
Belgium
Canada
Denmark
Finland
France
Germany
Countries in_Transilion
Albania
Armenia
Azerbaijan
Belarus
Bulgaria
Czech Republic
Estonia
Georgia
Greece
Iceland
Ireland
Italy
Japan
Luxembourg
Netherlands
New Zealand
Hungary
Kazakhstan
Kyrgyzstan
Latvia
Lithuania
Moldova
Mongolia
Poland
Norway
Portugal
Spain
Sweden
Switzerland
United Kingdom
United States
Romania
Russia
Slovak Republic
Tajikistan
Turkmenistan
Ukraine
Uzbekistan
Former Yugoslavia
Development
A process of progressive societal (therefore involving equity and political issues) and
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economic transformation, the major objective of which is the satisfaction of human needs
and aspirations, usually achieved by increasing productive potential (growth) and equality
of opportunity.
Eco-efficiency
The two main challenges for business are 1) to intensify its efforts to reduce the amount
of energy and material used per unit in production of goods and services; and 2) to reduce
pollution by developing environmentally sound products and processes, recycling systems
and reducing wasteful packaging. An eco-efficient corporation is one that produces ever
more useful goods and services while continuously reducing resource consumption and
pollution.
Ecological Impact
The effect that man-made or natural activity has on living organisms and their non-living
(abiotic) environment.
Ecology
The relationship of living things to one another and their environment, or the study of such
relationships.
Economic Efficiency
The condition that is achieved when society's resources (technological, ecological and
human) are allocated to their highest-valued uses. For society, this means that the
difference between total consumption benefits and total production costs is maximized.
A benefit-cost criterion can be used to judge whether a considered action (such as building
a particular type of power plant) improves economic efficiency relative to the status quo
or to some other investment. An optimal policy for addressing externalities is one that
balances the costs of reducing damages with the benefits and is generally not one that
would lead to zero pollution, impacts, or damages.
Economic Efficiency/Cost Effectiveness
Applying both to the setting of standards and the design of the policy instruments for
attaining them
Economic Progress/Economic Growth:
Economic progress refers to quantitative and qualitative progress, in the context of clean
and equitable improvements to socio-economic systems. Quantitative improvements are
those that meet the essential needs of the present and depend, in part, on achieving full
growth potential without compromising the abi'ity of future generations to meet their own
needs. Qualitative improvements reflect the capacity to convert physical resource use into
improved services for satisfying human wants. Given the large technological and
productive capacity of business, any progress toward sustainable development requires the
active leadership of business.
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Economic Valuation
1. direct use value is determined by the contribution an environmental asset makes to
current production or consumption;
2. indirect use value includes the benefits derived basically from functional services that
the environment provides to support current production and consumption (e.g., ecological
functions like natural filtration of polluted water or recycling of nutrients);
3. option value is basically the premium that consumers are willing to pay for an unutilized
asset, simply to avoid the risk of not having it available in the future; and
4. existence value arises from the satisfaction of merely knowing that the asset exists,
although the valuer has no intention of using it.
Ecosystem
The interacting system of a biological community and its non-living environmental
surroundings
Emission
Pollution discharged into the atmosphere from smokestacks, other vents, and surface areas
of commercial or industrial facilities; from residential chimneys; and from motor vehicle,
locomotive, or aircraft exhausts.
Emissions trading
EPA policy that allows a plant complex with several facilities to decrease pollution from
some facilities while increasing it from others, so long as total results are equal to or better
than previous limits. Facilities where this is done are treated as if they exist in a bubble
in which total emissions are averaged out. Complexes that reduce emissions substantially
may "bank" their "credits" or sell them to other industries.
Endangered Species
Animals, birds, fish, plants, or other living organisms threatened with extinction by man-
made or natural changes in their environment. Requirements for declaring a species
endangered are contained in the Endangered Species Act.
Enforcement
EPA, state, or local legal actions to obtain compliance with environmental laws, rules,
regulations, or agreements and/or obtain penalties or criminal sanctions for violations.
Enforcement procedures may vary, depending on the specific requirements of different
environmental laws and related implementing regulatory requirements.
Environment
The sum of all external conditions affecting eh life, development and survival of an
organism.
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Environmental Cost Accounting
The practice of merging and comparing environmental information with asset, resource,
income, cost, managerial and financial data. It has multiple macro-economic and micro-
economic applications in analyzing and managing the environmental merits or actions of
a product, process, plant, company, industry, or government.
Environmental Assessment
A written environmental analysis which is prepared pursuant to the National
Environmental Policy Act to determine whether a federal action would significantly affect
the environment and thus require preparation of a more detailed environmental impact
statement
Environmental Impact Statement
A document required of federal agencies by the National Environmental Policy Act for
major projects or legislative proposals significantly affecting the environment. A tool for
decision making, it describes the positive and negative effects of the undertaking and lists
alternative actions.
Environmental Management
Field that seeks to balance human demands upon the Earth's natural resource base with the
natural environment's ability to meet these demands on a sustainable basis
Externality
The economic consequences of private activities (such as energy production and use) that
accrue to society, but not explicitly accounted for in the decision making of activity
participants. Where these consequences are detrimental, they are called external costs;
where these consequences are positive, they are called external benefits.
Full Cost Accounting
A managerial cost accounting method which seeks to identify and quantify the direct
(capital, operating, and regulatory), indirect (training, audits, fines) and intangible
(contingent liability, good will) costs of a product, process or activity. Full cost
accounting uses historical data to assign all costs to an item, often for purposes of pricing.
Full Cost Pricing
An analytical extension of full cost accounting. Once full cost accounting computes
monetary values for environmental effects, full cost pricing, in theory, seeks to adjust the
price of product or service to reflect its estimated environmental costs. In other words,
full cost pricing assumes complete information on product inputs and costs and implicitly
reduces the dynamic role of the marketplace in determining prices. Today, full cost pricing
basically is an untested concept.
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Global perspective
To assure that domestic policies are developed in light of an understanding of their
probable impacts elsewhere in the world.
Goals
The PCSD's goals are milestones agreed by the Council for the nation to reach for along
the way from where we are now as a nation (Challenge Statement), to where we want to
be (Vision). These goals can be both qualitative and quantitative. The Council agreed that
both types of goals should be measurable, and easily understandable.
Greenhouse Effect
The warming of the Earth's atmosphere caused by a build-up of carbon dioxide or other
trace gases; it is believed by many scientists that this build-up allows light from the sun's
rays to heat the Earth but prevents a counterbalancing loss of heat.
Habitat
The place where a population (e.g. human, animal, plant, micro-organism) lives and its
surroundings, both living and non-living.
Impact
This term is taken from the phrase "environmental impact assessment," meaning the
physical or socioeconomic effect of some activity. Examples of physical impacts are
changes in crop yields, human health, and recreation resources. Examples of
socioeconomic impacts are changes in aesthetics, noise nuisance, and employment
conditions.
Internal Rate of Return (IRR)
The IRR is the discount rate which reduces the net present value (NPV) of a project to
zero. The project is acceptable if IRR is greater than the discount rate, which normally
implies NPV is greater than zero. Problems of interpretation occur if alternative projects
have widely differing lifetimes, so that the discount rate plays a critical role.
Internalizing an Externality
To create social conditions where the damages (or benefits) from production and
consumption are taken into account by those who produce these effects. These social
conditions can be created by government regulation, a tort system, bargaining between
private parties, or other policy and institutional arrangements. Benefits and damages can
exist even when all externalities have been internalized.
Limits to Use of Natural Resources
Recognition of the fact that at any given time the condition of natural resources will be a
factor limiting development and growth, and may drive the development of society's
policies and processes.
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Life Cycle Analysis
A system-oriented approach which estimates the environmental effects (emissions,
discharges, and waste generation) and energy arid resource usage associated with a
product, process or operation throughout its chain of commerce (e.g., from raw materials
acquisition through final disposal, or transformation into other products). Life cycle
analysis is often used to compare the inventories of environmental effects and resource
usage of alternative products. Life cycle analysis, however, is not cost accounting; it is
an analytic tool that could be improved by the development of more sophisticated
environmental cost accounting techniques and norms.
Life Cycle Assessment
An extension of life cycle analysis. EPA, the Society of Environmental Toxicology and
Chemistry (SETAC) and the Chemical Manufacturers Association define life cycle
assessment as a holistic, three stage methodology: (i) inventory; (ii) impact, and (iii)
improvement.
Life Cycle Cost Analysis
This analysis adds a monetary component to life cycle analysis. It assigns a cost to each
impact quantified in the life cycle analysis, and sums these costs to estimate the net
environmental cost of a product or process. In its simplest form, life cycle cost analysis
is done by assigning the direct costs of controlling and handling environmental releases;
energy and resource use costs are direct production costs and thus are reflected in product
prices. Theoretically, life cycle analysis might be extended to include indirect and external
estimates of the societal and environmental costs associated with developing, reclaiming,
and replacing natural resources. At this time, such research is limited due to numerous
data and analytical constraints.
Media
Specific environments air, water, soil -- which are the subject of regulatory concern and
activities.
Monitoring
Periodic or continuous surveillance or testing to determine the level of compliance with
statutory requirements and/or pollutant levels in various media or in humans, animals, and
other living things.
Multicriteria Analysis
Recognizing that some social and biophysical impacts cannot be easily quantified in
monetary terms, multicriteria analysis offers a complementary approach to benefit-cost
analysis. Multi-criteria analysis allows for consideration of social and other forms of
equity in decision making. The decisionmaking framework is divided into three groups:
one that requires quantitative data, a second that uses only qualitative data, and a third that
handles both simultaneously. Finally, multicriteria analysis does not require the use of
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prices, although they might be used to arrive at a score. The analysis uses weighting
involving relative priorities of different groups as opposed to pricing.
National Environmental Accounting
A modified form of national income accounting which seeks to integrate environmental
effects with standard macro economic indicators such as gross domestic product (the total
monetary value of all goods and services produced within a country during a year).
Because many environmental effects cannot be measured in monetary terms, significant
research and professional debate remain before governments determine if and how national
income accounts can be adjusted to reflect environmental impacts.
Natural Resource and Environmental Accounting
1. measure responses to environmental degradation and protection that are already
imperfectly measured in the national income accounts - e.g. pollution abatement
expenditures.
2. account explicitly for the depletion of natural resources; estimates of depletion are
applied to conventionally measured income to derive a measure of net income.
3. physical accounting method used by Norway and the effort to integrate environmental
and resource use with economic activity being developed by the UNSO both attempt to
improve the information available for environmental management.
Net Present Value (NPV)
The most basic criterion for accepting a project compares costs and benefits to ensure that
the net present value (NPV) of benefits is positive. Both benefits and costs are defined as
the difference between what would occur with and without the project being implemented.
Non-point Source
Pollution sources which are diffuse and do not have a single point of origin or are not
introduced into a receiving stream from a specific outlet. The pollutants are generally
carried off the land by stormwater runoff. The commonly used categories for nonpoint
sources are: agriculture, forestry, urban, mining, construction, dams and channels, and
land disposal, and saltwater intrusion.
No Regrets Approach
A cautious approach that specifies the minimal course of action dictated by current
knowledge. In the case of global warming, this approach advocates that even the most
favorable informational developments regarding the risks of global warming will not
undermine the desirability of taking these minimal actions. In other words, a "no regrets"
approach is to adjust current prices to reflect all non-global warming damages associated
with the emission of greenhouse gases.
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Option Value
Option value is essentially the premium that consumers are willing to pay to avoid the risk
of not having something available in the future. One technical definition of option value
is the difference between the ex-ante and ex-post welfare associated with the use of an
environmental asset. The sign of option value depends upon the presence of supply and/or
demand uncertainty, and on whether the consumer is risk averse or risk loving.
Ozone Depletion
Destruction of the stratospheric ozone layer which shields the Earth from ultraviolet
radiation harmful to biological life. This destruction of ozone is caused by the breakdown
of certain chlorine- and/or bromine-containing compounds (chlorofluorocarbons or halons)
which break down when they reach the stratosphere and catalytically destroy ozone
molecules,
Pareto-Criterion
A move north and/or east from society's present position represents an improvement in
social welfare and therefore should be preferred to the present state. It is a dynamic
concept.
Pareto-Optimal
In this state, prices reflect the true marginal social costs, scarce resources are efficiently
allocated and, for a given income distribution, no one person can be made better off
without making someone else worse off. A Pareto-optimum is any point on the utility
possibility frontier, without reference to where the society is at present; it is a static
concept.
Point Source
A stationery location or fixed facility from which pollutants are discharged or emitted.
Also, any single identifiable source of pollution, e.g. a pipe, ditch, ship, ore pit, factory
smokestack.
Policy Recommendations
PCSD policy recommendations are recommendations for changes in the practices, conduct,
or structure of institutions designed to achieve the goals. Each PCSD task force is
expected to propose specific policies and some of those are likely to be "top down" and
some of those are likely to be empirical conclusions drawn from lessons learned from the
case studies and demonstration projects.
Pollution Fees
Payments by polluters based on the quantity of pollutants emitted.
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Pollution Permit Trading
The transfer of govern mentally-sanctioned pollution permits for in-kind or financial
compensation.
Pollution Prevention
Under Section 6602(b) of the Pollution Prevention Act of 1990, Congress established a
national policy that:
* pollution should be prevented or reduced at the source whenever feasible;
* pollution that cannot be prevented should be recycled in an environmentally safe
manner whenever feasible;
* pollution that cannot be prevented or recycled should be treated in an
environmentally safe manner whenever feasible; and
* disposal or other release into the environment should be employed only as a last
resort and should be conducted in an environmentally safe manner
Pollution Taxes
Also known as green taxes or environmental taxes, which can be broadly defined as
charges on pollution generated, are implemented as either emission charges or product
charges. Emission charges are levied on the discharge of pollutants into the environment,
and product charges are levied on products that are harmful to the environment when
produced, used, or disposed of.
Precautionary or Prevention Principle
When in doubt, choose the least damaging or depleting alternative available. Explicitly
recognizes the existence of uncertainty (environmental and social) and seeks to avoid
irreversible damages via the imposition of a safety margin into policy; it also seeks to
prevent waste generation at the source, as well as retaining some end-of-pipe measures;
economic incentives qualify well in the light of this principle, even if their performance
in this respect has yet to be established firmly. This principle is reflected in the Rio
Declaration on Environment and Development: "In order to protect the environment, the
precautionary approach shall be widely applied by states according to their capabilities...
lack of full scientific certainty shall not be used as a reason for postponing cost-effective
measures to prevent environmental degradation."
President's Council on Sustainable Development (PCSD)
A 25-member Council comprised of industry leaders, cabinet secretaries and other
government leaders, executive directors of non-government groups including
environmental groups and labor unions. The Council was established by President Clinton
on 25 April 1993 with a two-year sunset clause to develop bold policies for integrating
economic and environmental policy. The policy recommendations will form the core of
a report to the President in October 1995.
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Principles
PCSD principles explain the parameters that can be used to guide the nation's conduct as
it pursues its Vision and Goals. For example, "sustainable development is best attained
in a society in which free institutions develop." Principles can be defined as codes of
conduct.
Qualitative Development, Not Quantitative Growth
Suggests that the desired outcome is an improvement in the quality of human life, achieved
through economic, social, and environmental development that is sustainable and
accommodates the realities of the need to manage consumption, population, resource use,
and the array of economic and environmental amenities in ways that are sustainable.
Quasi-Option Value
Quasi-option value is the value of preserving options for future use in the expectation that
knowledge will grow over time. If a development takes place that causes irreversible
environmental damage, the opportunity to expand knowledge through scientific study of
flora and fauna is lost. Uncertainty about the benefits of preservation to be derived
through future knowledge expansion (independent of development) leads to a positive
quasi-option value. This suggests that the development should be postponed until
increased knowledge facilitates a more informed decision. If information growth is
contingent upon the development taking place, which is unlikely in an environmental
context, then quasi-option value is positive when the uncertainty regards the benefits of
preservation, and negative when the uncertainty is about the benefits of the development.
Replacement Cost Estimation
If an environmental resource that has been impaired is likely to be replaced in the future
by another asset that provides equivalent services, then the costs of replacement may be
used as a proxy for the environmental damage. This is an ex-ante measure. It may be
argued that the benefits from the environmental resource should be at least as valuable as
the replacement expenses
Risk
Represents the likelihood of occurrence of an undesirable event like an oil spill. In the
case of uncertainty, the future outcome is basically unknown. Therefore, the risk of an
event may be estimated by its probability of occurrence, whereas no such quantification
is possible for uncertainty since the future is undefined. The risk probability and severity
of damage could be used to determine an expected value of potential costs, which then
would be used in the benefit-cost analysis.
Risk Assessment
The qualitative and quantitative evaluation performed in an effort to define the risk posed
to human health and/or the environment by the presence or potential presence and/or use
of specific pollutants.
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Risk Communication
The exchange of information about health or environmental risks between risk assessors,
risk managers, the general public, news media, interest groups, etc.
Shadow Pricing
The shadow price of a given scarce economic resource represents the change in value of
the objective function (such as aggregate consumption), caused by a marginal change in
the availability of that resource. Two basic types of shadow prices exist: (1) efficiency-
oriented and (2) socially-oriented. Efficiency shadow prices try to establish the actual
economic values of inputs and outputs, while socially oriented shadow prices take account
of the fact that the income distribution between different societal groups or regions may
be distorted in terms of overall national objectives.
Shadow Projects
The use of shadow projects reflects an institutional judgement on the value of replaced
environmental assets. A shadow project is usually designed specifically to offset the
environmental damage caused by another project. The cost of a shadow project is a
measure of the value of environmental assets that are thereby restored. The original
project and shadow project together form a sustainable package which helps to maintain
undiminished, some vital stock of environmental resources. For example, if the original
project was a dam which inundated some forest land, then the shadow project might
involve the replanting of an equivalent area of forest elsewhere.
Social Costing
Includes all social, environmental, and other costs in, for example, energy prices, to
provide consumers and producers with the appropriate information to decide about fuel
mix, new investments, and research and development. In addition to the environmental
damages of fossil fuel use, possible cost components include national security costs
associated with ensuring uninterrupted oil imports and inefficiencies resulting from failure
of electric utilities to use marginal cost pricing.
Subsidies and Tax Concessions
Provide financial payments to polluters and tax advantages based on changes in previous
pollution emissions or in return for future pollution control actions.
Surrogate Markets
Often, relevant market data is not available in directly usable form to value environmental
resources. In such cases, analysis of indirect market data permits the valuation to be
carried out implicitly. A variety of such surrogate market-based methods have been
developed. They include:
1. travel cost: this method seeks to determine the demand for a recreational site as a
function of variables like consumer income, price, and various socio-economic
characteristics. The price is usually the sum of observed cost elements.
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2. property value: to value an environmental variable like air or water quality, the method
seeks to determine that component of the property value attributable to the relevant
environmental variable. Thus, the marginal willingness to pay for improved local
environmental quality of air or water is reflected in the increased price of housing in
cleaner neighborhoods.
3. wage differences: the wage differential method attempts to relate changes in an
economic price variable such as the wage rate to environmental conditions. The
underlying assumption is that there is some component of the wage that is determined by
the environmental pollution or hazard associated with the job or work site.
4. proxy marketed goods: using this method the market price of the substitute may be used
as a proxy for the value of the environmental resource.
Sustainable Development
Sustainable development meets the needs of the present without compromising the ability
of future generations to meet their own needs. Choosing to be sustainable in businesses,
schools, government institutions, and in our individual lives demands a national
commitment to the nation's economic prosperity, ecological integrity, and social equity.
Total Cost Assessment
A financial evaluation tool for analyzing the life cycle costs and savings benefits of
pollution prevention or design project. Total cost assessment was devised for
environmental applications. This approach: (i) uses full cost accounting to assign direct
and indirect environmental costs to a pollution prevention project or investment; (ii)
estimates the short and long-term direct, indirect or hidden, liability, and less tangible
costs associated with the investment; (iii) evaluates project costs and savings over an
appropriate time horizon, such as 10-15 years, and (iv) employs standard financial
indicators (e.g., internal rate of return, net present value) to measure the long-term
profitability of a project.
Use of Technological Opportunities
New developments in science and technology may and should overcome environmental
shortcomings in ways that will promote sustainability; i.e., substitution to offset depletion
of non-renewable resources, exploitation of new energy sources or energy-saving methods,
etc.
Urban Runoff
Stormwater from city streets and adjacent domestic or commercial properties that may
carry pollutants of various kinds into the sewer systems and/or receiving waters.
Vision
The PCSD's vision reads: "Our vision is of a life-sustaining earth. We are committed to
the achievement of a dignified, peaceful, and equitable existence. We believe a sustainable
United States will have an economy that equitably provides opportunities for satisfying
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livelihoods and a safe, healthy, high quality of life for current and future generations. Our
nation will protect its environment, its natural resource base, and the functions and
viability of natural systems on which all life depends."
Waste
Unwanted materials left over from a manufacturing process. Also, refuse from places of
human or animal habitation.
Wetlands
An area that is regularly saturated by surface or ground water and subsequently is
characterized by a prevalence of vegetation that is adapted from life in saturated soil
conditions. Examples include: swamps, bogs, fens, marshes, and estuaries.
Willingness To Pay
Total willingness to pay, or total value of the services provided by the environmental
resource, consists of two main components: (1) total cost; and (2) consumer surplus or net
benefit (that is, the net value over and above actual expenses).
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