Werner Hediger

Reconciling “weak” and “strong” sustainability

A conceptual and analytical approach is presented to reconcile weak and strong sustainability. It involves a reconsideration of the conception of total capital from an ecological‐economic system perspective. In particular, natural capital is classified into non‐renewable resources, renewable resources that are harvested, and those that are not used in production. Strong sustainability is defined in terms of constant environmental quality. Weak sustainability is characterised by non‐decreasing value of aggregate income and environmental quality, and formalised in terms of a “preference‐based social value function”. Ecosystem resilience and basic human needs are introduced as minimum sustainability requirements, and a “sustainability‐based social value function” is proposed, which is sensitive to potentially irreversible changes at the boundaries of the restricted opportunity space. It implies higher values associated to the trade‐offs between income and the environment than the preference‐based function, and the fact that sustainable development is only feasible if both minimum criteria are fulfilled.

Sustainable development and social welfare

Abstract Sustainable development is a normative concept which involves trade-offs among social, ecological and economic objectives, and is required to sustain the integrity of the overall system. This is usefully formalized in terms of a social welfare function which is based on an aggregate of individual preferences and, as a prerequisite of intergenerational equity and overall system integrity, on a set of sustainability constraints. A ‘sustainability-based social value function’ is proposed to integrate these issues, and to go beyond traditional conceptions of sustainability that are either based on a value principle of maintaining some aggregate of capital (‘weak sustainability’), or stationary-state criteria of maintaining social, ecological and economic assets constant over time (‘strong sustainability’). Along with individual preferences and macroeconomic objectives, the proposed welfare function integrates principles of basic human needs (‘critical economic capital’), integrity of the ecosystem (‘critical ecological capital’) and the socio-cultural system (‘critical social capital’). This implies restrictions of the social opportunity space within which sustainable development can proceed and the new value function is defined.

The Application of Robust Regression to a Production Function Comparison - The Example of Swiss Corn

The adequate representation of crop response functions is crucial for agri-environmental modeling and analysis. So far, the evaluation of such functions focused on the comparison of different functional forms. The perspective is expanded in this article by considering an alternative regression method. This is motivated by the fact that exceptional crop yield observations (outliers) can cause misleading results if least squares regression is applied. We show that such outliers are adequately treated if robust regression is used instead. The example of simulated Swiss corn yields shows that the use of robust regression narrows the range of optimal input levels across different functional forms and reduces potential costs of misspecification.

Multifunctional Agriculture and the Preservation of Environmental Benefits

SummaryWe investigate environmental aspects of agriculture from a welfare economic perspective and show that efficiency prices of agricultural and forest land include important amenity and non-use values that exhibit the character of undepletable externalities. To achieve a social optimum these must be internalised, while taking equity concerns into account. We propose compensation of farmers and forest managers according to the marginal external benefit of their land use and a combination of charges and subsidies to improve rural water quality. This is consistent with efficiency requirements and would not cause additional market distortions. Moreover, it would leave the property rights on the land with the farmers and assign the right on clean air and water to the consumers.

Sustainable farm income in the presence of soil erosion: an agricultural Hartwick rule

Soil erosion is a physical and economic problem of natural capital degradation. Even along an intertemporally efficient trajectory, one can have in a loss of soil fertility and a continuous decline of agricultural net revenue. Moreover, soil erosion is a major source of surface water pollution in rural areas. Erosion control is thus a challenge for sustainable resource management and internalizing external effects. To sustain the level of farm income, an ‘agricultural Hartwick rule’ is proposed which addresses both on-farm and off-farm effects of soil erosion. First, it requires the investment of the soil rents into alternative capital. Second, additional measures are required to comply with an ambient quality target. A charge-subsidy scheme proves the most adequate from a perspective of cost-effectiveness and sustainability, if effluent charge revenues are earmarked to subsidize cropland retirement at the watershed scale. In combination with the investment of soil rents this enables to maintain the level of farm income constant over time while respecting the ambient quality target. Altogether, this fulfills the requirements of efficiency and sustainability. # 2003 Elsevier Science B.V. All rights reserved.

Multifunctionality and Sustainability of Agriculture and Rural Areas: A Welfare Economics Perspective

Despite accord about the existence of multiple benefits of agriculture to society, there is a diversity of views when it comes to actual policy implications. This can be explained by differences in agricultural and rural economic structures, different positions in agricultural trade and different stages of societal and socio-economic development. In addition, it can be attributed to differences in epistemological foundations in libertarian and utilitarian moral philosophy. Differences in the interpretation of the roles and functions of agriculture in society between OECD, WTO and FAO also reflect the fact that these organizations have different objectives and value positions. Common to all three is recognition of the fact that a sustainable development of agriculture must reflect the ethical principle of integrating multiple societal objectives and system requirements. From a welfare economics perspective, this results in a more comprehensive approach than the traditional Paretean one, which is exclusively based on individual value judgements. In the central part of the paper, we elaborate a welfare economic approach that is based on a differentiated concept of economic, natural and social capital and that integrates a set of minimum system requirements of sustainability into a ‘sustainability-based social value function’. In the concluding section, we argue that the welfare economics perspective presented in this paper allows us to integrate the concepts of multifunctionality and sustainability. The integration of the two concepts in turn implies a paradigm shift from sectoral policy and agricultural support to a more integrated approach of territorial development. In line with that we stipulate that the elimination of market failures is necessary but not sufficient, and that an adequate compensation of the non-market benefits of a multifunctional agriculture and promotion of efficient resource allocation is a prerequisite for sustainable development.

Ecological Economics Of Sustainable Development

Although sustainability became a watchword in recent years, the idea is by no means new. It has a long tradition in various domains ranging from a basic forestry principle, to economic growth and nature conservation objectives, and the present challenge of sustainable development. The latter does not only involve an extremely important transformation of the ecologically based concept of physical sustainability to the context of social and economic development. It implies the necessity for a holistic approach to integrate some basic principles of sustainability that have been developed in economics as well as in ecology. Since none of these traditional concepts is sufficient for sustainable development, which means conservation and change is balanced through an adaptive process, new approaches are required that extend the scope of analysis towards an ecological-economic synthesis. Such an integrated approach must particularly overcome the gap between the schools of weak and strong sustainability, and integrate principles from bio-economics and the economics of environmental conservation, along with comprehensive concepts of needs and wants, social equity, and ecosystem integrity. These are suitably represented in a socio-economic value principle, and usefully formalized in an intertemporal allocation framework with social and ecological sustainability constraints that allow the benchmarking of feasible and viable sustainable development paths.

Sustainable development with stock pollution

Optimal pollution control is an important challenge for sustainable development with three distinct cases. First, the situation where natures assimilative capacity is completely destroyed involves normative problems that require further research. Second, environmental restoration with initial pollution above the steady-state stock requires an economy to initially allocate a relatively high share of its resources to cleaning-up activities. In return, this generally results in an intertemporally efficient development path that is both environmentally and economically sustainable. Third, optimal trajectories in situations with initial stocks of pollution below the long-term optimum generally imply an increase in pollution and a decline of optimal consumption. In this case, the investment of the environmental rents accruing from natures assimilative capacity into man-made capital is required in analogy to the famous Hartwick rule to maintain a constant flow of instantaneous welfare. This would facilitate growth in consumption sufficient to compensate for the rising disutility of pollution.

The Future of Swiss Hydropower - A Review on Drivers and Uncertainties

Swiss Hydropower (HP) is currently facing a wide range of challenges that have initiated a debate about future prospects and its role within the envisioned energy transition. Building on this debate, this paper provides an overview of the status and prospects of Swiss HP by identifying and evaluating the different drivers and uncertainties that Swiss HP faces. Based on a review and the perceptions held by some of the main Swiss HP stakeholders the two main topics that need to be addressed are the market driven impacts and the political, legal and social aspects. While the market dynamics cannot directly be influenced by Swiss companies or authorities, the regulatory framework can and needs to be adjusted. However, this requires a comprehensive stakeholder process and is at least a medium-term process.