ASA Sector Advisory Committee Terms of Reference V1 21 ...
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Sustainability Consumption and production that meets the needs of the present without compromising the ability of future generations to meet their needs •This idea can be applied to just about every type of activity •The questions that is often asked is whether or not an activity can continue with an unlimited time horizon Apply this question to fishery issues, energy use, pollution, etc… o
Sustainability criteria The definition of sustainability depends critically on the degree of substitutability that is deemed acceptable for an activity to be considered sustainable The basic assumption is that wellbeing is nondeclining As a proxy economists use consumption and production To take that proxy one step further – assume nondeclining capital o The substitutability hinges on how man made capital substitutes for natural resources In class activity – writing assignment #10 To cover the breadth of sustainability I will enlist the help of the class 1.break into groups of 4 or 5 2.define the terms weak sustainability and strong sustainability 3.discuss activities you engage in that are sustainable and ones that are not 4.each person in the group should come up with a unique example of something that is weakly sustainable, there should be at least one example for each person in the group (you may not use common recycling as one of your examples) 5.do the same for examples of strong sustainability (again, you may not use common recycling as one of your examples) 6.discuss whether or not the market encourages people to engage in the sustainable activity examples you suggest 7.write all of your names on a piece of paper with a list of the weak and strong sustainable activities and be prepared to discuss them As an example: I ride my bike to work several days a week and am looking to purchase a vehicle that gets better gas mileage than my current vehicle. Which is weak and which is strong? To what degree does the market encourage these activities? Weak sustainability– physical and natural capital are substitutes Try to maintain total capital stock Decreases in natural capital over time will not be problematic It is ok to decrease natural capital – substitutes will arise o Assume it will be ok to continue consuming at the current rate Physical capital will increase to generate future generations welfare o
Strong sustainability –must maintain the level of natural capital Natural and physical capital are NOT substitutesDecreases in natural capital will cause problemso Should sacrifice current consumption to insure the welfare of future generations Current rates of consumption may cause irreversible damage and a loss of o welfare in the long run This does NOT stipulate that the sustainability of specific elements of natural capital – the aggregate level must be the same i.e. fossil fuels can be used if they are replaced by a renewable resource o The difficulty is that there is a significant amount of uncertainty over what damage current consumption and production will cause Are we acting unsustainably? There have been many forecasts of eminent doom from over population Thomas Malthus claimed the collapse of civilization o InAn Essay on the Principle of Population(1798, rev. ed. 1803), he contended that poverty and distress are unavoidable, since population increases by geometrical ratio and the means of subsistence by arithmetical ratio.Paul Ehrlich,The Population Bomb– population growth is limiting the o earth’s ability to sustain life If we are acting unsustainably, how severe will the impacts be? What will be the impact of global warming or depletion of the ozone? o Should we sacrifice since there is a chance we are jeopardizing future generations? Maybe the question iswhatshould we be willing to sacrifice Fossil fuels, species, environmental quality – what is the substitutability o
Sustainability and efficiency Sustainability requires a specification of equity to arrive at an efficient allocation Lets define sustainability as welfare equity over time Note that sustainability does not imply efficiency or vise versa Economic efficiency requires that marginal benefit be equal in all periods Take a two period model – present and future Graph current and future consumption of a fixed amount of resources o Assume that people in each period have the same preferences o MB are equal when an equal amount is received in each period o Note that to carry this to more periods less is consumed in each period o Run out of the resource at the end of time But this does not account for the rate of time preferences Must discount future benefits to get dynamic efficiency o This implies it is efficient to consume more now than in the future o The discount rate is the equity decision!! If want to treat resources differently than must use different discount rates Any nonzero discount rate puts equity and efficiency at odds This is the basis why people argue over the discount rate o Makes sense within a generation, but not across generations o
Recycling Recycling takes many forms Informal recycling – many communities have informal recycling – Lopez Island Value Village, Goodwill, baby clothes exchange, dumpster divers… o “Market recycling” – ebay, garage sales, etc… Commercial recycling – curb side residential or business Only certain materials are driven by the market – varies over time o Cardboard and aluminum are viable in the private market Others vary dramatically Avoided cost of landfills is an important component •Who knows where Seattle’s garbage goes? In Washington recycling is driven by the Waste Not Washington Act 1989 o Policy mandated recycling to reduce solid waste to landfills The key is that it does not end up or stay in the landfill Is recycling efficient? From an economic standpoint, the MB of recycling must out weigh the MC What is critical is what the MB and MC include and how they are calculated Market prices provide inadequate incentives for most types of recycling Prices for recycled goods do not include external benefits o Resources preserved, pollution avoided, energy use saved (if recycling does not take too much energy) Cost of garbage does not include external costs o Only the cost of transport – not shadow value of preserved land Potential environmental damage Imperfect information also leads people to throw more away and recycle less
Articles on sustainability Three articles that get at different issues and dimensions of sustainability “Environmental Protection and Economic WellBeing” by Stavins What role should the government play? This article serves a bit as a review of what we have seen My hope is that this article was easy to understand It champions the use of economics so objectives can be reached more efficiently Table 1 indicates a large degree of inefficiency o Note that EPA regulations are environmental o Efficiency is not the primary goal – environmental quality is o But why not work toward both to make best use of funding Though marketbased approaches are not easy, at least paying attention to the basic principles can provide guidelines to improve policy
“The Future of Sustainable Development” by Anderson and Morgenstern Discussion of the U.N. Johannesburg Conference on sustainable development Points to the difficulty of accomplishing real changes in achieving development Countries have their own agendas o Makes it difficult to accomplish unified progress o These types of conferences communicate information But are not likely to lead to actual implemented policy o Even on basic needs like clean water and sanitation o Which are seen as basic needs and environmental improvements Implies that real changes are not driven by consensus groups Takes “focused group” effort o “Clean Technology Change in DevelopingCountry Industry Clusters” by Blackman and Kildegaard Examine adoption of environmentally friendly technologies in less developed countries (LDC) Though clean technologies have existed for years, not yet used in LDC o Two problems: Lack of willingness or ability of the government to regulate and enforce o Not want to stifle the local economy Insufficient power to overcome powerful interest groups Lack of information on clean technologies to firms o Imperfect information Concern about cost and operation of new technologies To examine this the authors build a model, gather data, and estimate results Why do economists build models? o To test hypothesis about relationships between variables Insure correct use of statistical methods Found several things Most important determinants of adoption were: o Owner’s knowledge of the technology – i.e. reduce imperfect info Human capital of work force – education Big problem with nonadopters is lack of knowledge of technologies that o have existed for decades Sustainability touches all forms of resource use in all locations of the world Each resource and each location has its own unique issues to consider Incorporating marketbased mechanisms may improve the efficiency of policy However, economics is NOT the core issue – it is only a method o Solving the issues is the core issue o
