The Quality of Growth: ch 4 1

SUSTAINING NATURAL CAPITALThe Quality of Growth: chapter 4

Maria José Pacheco (Costa Rica)Marco Colombo (Italia)

The Quality of Growth: ch 4 2

Natural Capital, a DefinitionThe term natural capital encompasses: the sink functions, that is, air and

water as receiving media for human-generated pollution

source functions, that is, production based on forests, fisheries, and mineral ores.

The Quality of Growth: ch 4 3

Countries throughout the world have overexploited their forests, fisheries, and mineral wealth and polluted their water and air to accelerate short term economic growth Why natural capital tends to be

abused and overexploited? What measures can be taken to

correct the negative spiral of environmental decline?

The Core Problem

The Quality of Growth: ch 4 4

Key Problem Economies that derive much of their

income from natural resources cannot sustain growth by substituting physical capital accumulation for deteriorating natural capital

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Environmental hotspots

1. Air pollution2. Waterborne diseases and water

pollution3. Overexploitation and degradation

of natural resources

1) AIR POLLUTIONActual or estimated concentration (ug/m3) of particulates (PM10) in urban areas. PM10 consists of fine particulate matter smaller than 10 microgrammes in size and is the primary cause of mortality

and morbidity from air pollution. Each city with population of 100,000 or more is identified separately.

Air pollution:kills more than 2.7 million people every

year

reduces economy output because of the loss of productive workdays

2) WATER POLLUTIONEstimated DALYs per 1000 people resulting from mortality and morbidity associated with diarrhoeal

diseases. DALY (Disability Adjusted Life Years) is a standard measure of health impact.

Water Pollution:

the poor are hurt the most,

especially children and agricultural

workers

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3) Overexploitation and degradation of natural resources

Soil degradation is a problem everywhere (high costs)

Desertification Increases in the intensity and

frequency of floods and droughts

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Significant Benefits of Environmental Action The present discounted cost of providing

everyone in China with access to clean water within 10 years is US$40 billion, and the present value of benefits is US$80 billion to US$100 billion (World Bank, 1997)

With payoffs so large, why do environmental degradation and destruction continue?

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The main reason is that private returns on investment in environmental protection are significantly smaller than private costs (Dasgupta, 1994)

Policy distorsions reflecting undervaluation of the environment contribute to pollution and degradation (Dasgupta, 1994)

i.e. Energy subsidies to keep consumer prices low contribute to overconsumption and excessive pollution

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Removing subsidies Imposing environmental taxes

Possible Solution

policy reforms can alleviate distortions and allow prices to reach their optimal

levelbut...

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The Grow-Now-and-Clean-Up-Later

Mind Set Affects developing countries Examples of industrial countries

While air and water pollution levels appear to be reversible, their impacts on human well-being often are not

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Growth

Natural Capital

Welfare

The Growth – Natural Capital – WelfareNexus

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A relationship between pollution and per capita income?

Per capita income

Environmental quality

12,000US$

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The governement and the environment

Many countries have integrated environmental concerns and growth policies

Examples: Costa Rica: Rich biodiversity but high

deforestation in the 80´s Creation of a system of Forest Protection: Policies for the creation of a Market for

some environmental benefits = Succes on capturing carbon sequestration and watershed protection

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China : Pollution Levy system Any firm whose effluent discharge exceeds a

legal standard must pay a levy (‡ tax) Result: With 10% of growth per year Decline in pollution per unit of output

Indonesia: Problems to monitor and enforce compliance to prevent pollution Development of the PROPER (Program for pollution control, evaluation and rating) = Receives pollution data, analyses and rates environmental performance then publishes the results

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Europe: The Blue Flag campaign = program coordinated by the Foundation for Environmental Education in Europe Aim: Costal environment appreciation A beach or marina receives a Blue Flag if it meets a set of criteria set up by the Foundation( environmental quality, management of safety and environmental education and information)

Denmark, Greece and Spain

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For greatest impact, the goverment should intervene selectively

The State RoleStreamline subsidies and implement environmental taxes Diminish perverse subsidies Promote Green and Pollution taxes

Move from central control to Partnerships Ex: CAMPFIRE in Zimbabwe: creation of alliances betweenprovincial governments and private sectors and local inhabitants in managing wildlife for profit and biodiversity conservation

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Clarify Property rights, resource ownership and environmental liabilities Ex: Forests in Japan Fisheries in Turkey Irrigation water in South India Pastures in Suiss Alps, Himalayas and Andes

Improve governance and reduce corruption Prevent misuse of public resources for private gain by the political elite HIGH PRIORITY MEASURE

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Global Environmental issues must be confronted

Ex: Fossil fuel combustion (gases)+

Deforestation+

Farm Activities+

Coal mining+

Leakages from natural gaz =

Greenhouse Effect and Global Climate Change

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Natural tension between growth and environmentally healthy practices Need of financial and technical assistance from the International Community Need of cooperation between rich and poor countries

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Adress your concerns to:

The Global Environment Facility Organization that helps to solve environmental problems through collaboration between industrial and developping countries

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Conclusion In slow and fast growth countries: Several indicators of the quality of Natural

Capital tend to worsen In faster growing economies: More ressources available to invest on improvement of Natural Capital

”Grow-now-and-clean-up-later” approach

Growth with Sustainability of Natural capital

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The role of the State is crucial in environmental managementBe selective and efficient in intervention

Global Environmental problems are huge but they offer the opportunity to adress nation problems with international cooperation

Development of transfer mecanisms for

resources to pay global externalities