Simon Dietz

Handbook of Sustainable Development

Contents:Preface1. IntroductionGiles Atkinson, Simon Dietz and Eric NeumayerPART I: FUNDAMENTALS OF SUSTAINABLE DEVELOPMENT2. Ethics and Sustainable Development: An Adaptive Approach to Environmental ChoiceBryan G. Norton3. The Capital Approach to SustainabilityGiovanni Ruta and Kirk Hamilton4. Sustainable Development in Ecological EconomicsJeroen C.J.M. van den Bergh5. Ecological and Social ResilienceW. Neil Adger6. Benefit-Cost Analysis and a Safe Minimum Standard of ConservationAlan RandallPART II: INTERGENERATIONAL EQUITY7. Valuing the Far-off Future: Discounting and its AlternativesCameron Hepburn8. Population and SustainabilityGeoffrey McNicoll9. Technological Lock-in and the Role of Innovation Timothy J. FoxonPART III: INTRAGENERATIONAL EQUITY AND THE SOCIAL DIMENSION10. Distribution, Sustainability and Environmental PolicyGeoffrey Heal and Bengt Kristrom11. Environmental Justice and SustainabilityJulian Agyeman12. Vulnerability, Poverty and Sustaining Well-being W. Neil Adger and Alexandra WinkelsPART IV: GROWTH, CONSUMPTION AND NATURAL WEALTH 13. The Resource Curse and Sustainable DevelopmentRichard M. Auty14. Structural Change, Poverty and Natural Resource DegradationRamon Lopez15. Economic Growth and the EnvironmentMatthew A. Cole16. Sustainable ConsumptionTim JacksonPART V: PROGRESS IN MEASURING SUSTAINABLE DEVELOPMENT 17. Environmental and Resource AccountingGlenn-Marie Lange18. Genuine Saving as an Indicator of SustainabilityKirk Hamilton and Katharine Bolt19. Measuring Sustainable Economic WelfareClive Hamilton20. Environmental Space, Material Flow Analysis and Ecological FootprintingIan MoffattPART VI: SUSTAINABLE DEVELOPMENT AT DIFFERENT SCALES21. Sustainable Cities and Local SustainabilityYvonne Rydin22. Sustainable AgricultureClement A. Tisdell23. Corporate Sustainability: Accountability or Impossible Dream?Rob Gray and Jan BebbingtonPART VII: THE INTERNATIONAL DIMENSION 24. International Environmental Cooperation: The Role of Political FeasibilityCamilla Bretteville Froyn25. Trade and Sustainable DevelopmentKevin P. Gallagher26. The International Politics of Sustainable DevelopmentJohn Vogler27. Financing for Sustainable DevelopmentDavid PearceIndex

Economic Growth, Biodiversity Loss and Conservation Effort

This paper investigates the relationship between economic growth, biodiversity loss and efforts to conserve biodiversity using a combination of panel and cross section data. If economic growth is a cause of biodiversity loss through habitat transformation and other means, then we would expect an inverse relationship. But if higher levels of income are associated with increasing real demand for biodiversity conservation, then investment to protect remaining diversity should grow and the rate of biodiversity loss should slow with growth. Initially, economic growth and biodiversity loss are examined within the framework of the environmental Kuznets hypothesis. Biodiversity is represented by predicted species richness, generated for tropical terrestrial biodiversity using a species-area relationship. The environmental Kuznets hypothesis is investigated with reference to comparison of fixed and random effects models to allow the relationship to vary for each country. It is concluded that an environmental Kuznets curve between income and rates of loss of habitat and species does not exist in this case. The role of conservation effort in addressing environmental problems is examined through state protection of land and the regulation of trade in endangered species, two important means of biodiversity conservation. This analysis shows that the extent of government environmental policy increases with economic development. We argue that, although the data are problematic, the implications of these models is that conservation effort can only ever result in a partial deceleration of biodiversity decline partly because protected areas serve multiple functions and are not necessarily designated to protect biodiversity. Nevertheless institutional and policy response components of the income biodiversity relationship are important but are not well captured through cross-country regression analysis.

Endogenous Growth, Convexity of Damage and Climate Risk: How Nordhaus' Framework Supports Deep Cuts in Carbon Emissions

‘To slow or not to slow’ (Nordhaus, 1991) was the first economic appraisal of greenhouse gas emissions abatement and founded a large literature on a topic of worldwide importance. We offer our assessment of the original article and trace its legacy, in particular Nordhauss later series of ‘DICE’ models. From this work, many have drawn the conclusion that an efficient global emissions abatement policy comprises modest and modestly increasing controls. We use DICE itself to provide an initial illustration that, if the analysis is extended to take more strongly into account three essential elements of the climate problem – the endogeneity of growth, the convexity of damage and climate risk – optimal policy comprises strong controls.

Why Economic Analysis Supports Strong Action on Climate Change: A Response to the Stern Review's Critics

Economic research that opposes the strategy of strong and urgent reductions in greenhouse gas emissions often makes the observation, misleadingly, that while scientists, environmentalists, politicians, and others would favor strong action, economists would not. Drawing on the Stern Review on the Economics of Climate Change, this paper argues that strong and urgent action is in fact good economics. Much of the previous economic literature on climate change has failed to grasp the necessary scale and timing of action because it has failed to simultaneously assign the necessary importance to issues of risk and ethics. The case for strong and urgent action set out in the Review is based, first, on the severe risks that the science now identifies and, second, on the ethics of the responsibility of current generations for future generations. It is these two issues—risk and ethics—that are crucial.

Siblings, Not Triplets: Social Preferences for Risk, Inequality and Time in Discounting Climate Change

Arguments about the appropriate discount rate often start by assuming a Utilitarian social welfare function with isoelastic utility, in which the consumption discount rate is a function of the (constant) elasticity of marginal utility along with the (much discussed) utility discount rate. In this model, the elasticity of marginal utility simultaneously reflects preferences for intertemporal substitution, aversion to risk, and aversion to (spatial) inequality. While these three concepts are necessarily identical in the standard model, this need not be so: well-known models already enable risk to be separated from intertemporal substitution. Separating the three concepts might have important implications for the appropriate discount rate, and hence also for long-term policy. This paper investigates these issues in the context of climate-change economics, by surveying the attitudes of over 3000 people to risk, income inequality over space and income inequality over time. The results suggest that individuals do not see the three concepts as identical, and indeed that preferences over risk, inequality and time are only weakly correlated. As such, relying on empirical evidence of risk or inequality preferences may not necessarily be an appropriate guide to specifying the elasticity of intertemporal substitution.

Genuine Savings: A Critical Analysis of its Policy-Guiding Value

Genuine savings (GS) is an established measure of weak sustainability (WS). It can be shown, with the help of a dynamic optimisation model, that an economy with persistently negative GS cannot be regarded as weakly sustainable. The main conclusion drawn from the empirical estimates of GS presented in this paper is that many resource intensive, developing economies appear to be weakly unsustainable, whereas developed countries are not. The paper praises the GS concept in terms of the positive contribution it has made to the measurement of WS and to the concept of sustainable development more generally. It then analyses, in some depth, the various criticisms of GS. These include the unrealistic assumption of an inter-temporally efficient economy, the dubious treatment of exogenous shocks and population growth, the inappropriate method for computing natural capital depreciation resulting from resource extraction, and the inadequate accounting for environmental pollution. We conclude that, despite various substantial problems, GS represents the best attempt at measuring WS so far with considerable scope for future development and improvement.

Vulnerability to Weather Disasters: The Choice of Coping Strategies in Rural Uganda

When a natural disaster hits, the affected households try to cope with its impacts. A variety of coping strategies, from reducing current consumption to disposing of productive assets, may be employed. The latter strategies are especially worrisome because they may reduce the capacity of the household to generate income in the future, possibly leading to chronic poverty. We used the results of a household survey in rural Uganda to ask, first, what coping strategies would tend to be employed in the event of a weather disaster, second, given that multiple strategies can be chosen, in what combinations would they tend to be employed, and, third, given that asset-liquidation strategies can be particularly harmful for the future income prospects of households, what determines their uptake? Our survey is one of the largest of its kind, containing over 3000 observations garnered by local workers using smartphone technology. We found that in this rural sample, by far, the most frequently reported choice would be to sell livestock. This is rather striking because asset-based theories would predict more reliance on strategies like eating and spending less today, which avoid disposal of productive assets. It may well be that livestock is held as a form of liquid savings to, among other things, help bounce back from a weather disaster. Although, we did find that other strategies that might undermine future prospects were avoided, notably selling land or the home and disrupting the childrens education. Our econometric analysis revealed a fairly rich set of determinants of different subsets of coping strategies. Perhaps most notably, households with a more educated head are much less likely to choose coping strategies involving taking their own children out of education.

Some constructive criticisms of the index of sustainable economic welfare

The Index of Sustainable Economic Welfare (ISEW) was first calculated for the United States by Daly and Cobb (1989). It draws upon an earlier tradition of attempts to build a comprehensive indicator of economic welfare, beginning with Nordhaus and Tobin (1972). Since then it has been applied to a handful of other countries, including several in Western Europe as well as Australia, Chile and Thailand (see Table 9.1). As Table 9.1 shows, some practitioners have chosen to change its name. It has appeared as the Genuine Progress Indicator (GPI), the Sustainable Net Benefit Index (SNBI) and most recently as the Measure of Domestic Progress (MDP).1 It would be fair to say that these linguistic turns reflect the degree of confidence different practitioners have placed in the ISEW’s ability to measure welfare, sustainability and ‘genuine’ progress. Different practitioners have also made incremental but significant changes to the methodology for calculating some of the index’s component parts. In general, no two studies are quite the same. We shall have much more to say on this point below. Fundamentally, what the original proponents of the ISEW were trying to do was create a combined indicator of welfare and sustainability.2 They understood welfare to be the satisfaction of human preferences, whereby the emphasis was placed on a comprehensive notion of preferences including much more than just income and consumer products. What they understood by sustainability is not as easy to explain. Almost certainly they supported the notion of strong sustainability, according to which at least a portion of a nation’s natural capital resources (including sinks such as the atmosphere) must be preserved for all time. However, it is possible to show that by adding and subtracting different forms of capital in calculating the ISEW (see below), it is technically an expression of the notion of weak sustainability, according to which the task is only to preserve the

Adaptation to climate change and economic growth in developing countries

Developing countries are vulnerable to the adverse effects of climate change, yet there is disagreement about what they should do to protect themselves from anticipated damages. In particular, it is unclear what the optimal balance is between investments in traditional productive capital (which increases output but is vulnerable to climate change), and investments in adaptive capital (which is unproductive in the absence of climate change but ‘climate-proofs’ vulnerable capital). We develop a model of investment in adaptive and productive capital stocks, and show that while it is unlikely that the optimal strategy involves no adaptation, the scale and composition of optimal investments depends on empirical context. Application of our model to sub-Saharan Africa suggests, however, that in most contingencies it will be optimal to grow the adaptive sector more rapidly than the vulnerable sector over the coming decades, although it never exceeds 1 per cent of the economy. Our sensitivity analysis goes well beyond the existing literature in evaluating the robustness of this finding.

The Equity-Efficiency Trade-off in Environmental Policy: Evidence from Stated Preferences

The design of environmental policy raises several equity issues, in particular the distribution of benefits and costs. At the same time, it has often been argued that there is a trade-off in environmental policy between equity and efficiency, which brings these issues firmly to the attention of environmental economics. In this paper we use a simple choice experiment to elicit individual preferences over equity-efficiency trade-offs in the context of two environmental problems, local air pollution and global climate change. We find that equity matters to people as much as efficiency does in the design and delivery of environmental policy.