1. The Environment and Development
Chapter 10
The Environment and Development

2. Economics and the Environment
Environmental issues affect, and are affected by, economic development
Poverty and ignorance may lead to non-sustainable use of environmental resources
Global Warming
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3. Environment and Development: The Basic Issues
Sustainable development and environmental accounting
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4. Environment and Development: The Basic Issues
Sustainable net national product is:
Where
NNI* is sustainable national income
GNI is Gross national income
Dm is the depreciation of manufactured
capital assets
Dn is the depreciation of environmental
capital
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5. Environment and Development: The Basic Issues
Alternatively, sustainable net national product is:
Where
NNI*, GNI, Dm, and Dn are as before
R is expenditure needed to restore
environmental capital
A is expenditure required to avert
destruction of environmental capital
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6. Environment and Development: The Basic Issues
Sustainable development and environmental accounting
Population, resources, and the environment
Poverty and the environment
Growth versus the environment
Rural development and the environment
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7. Environment and Development: The Basic Issues
Urban development and the environment
The global environment and economy
Nature and pace of Greenhouse Gas-Induced Climate change
Natural Resource-Based Livelihoods as a pathway out of poverty: Promise and Limitations
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8. The Scope of Environmental Degradation: An Overview
Environmental problems have consequences both for health and productivity
Loss of agricultural productivity
Prevalence of unsanitary conditions created by lack of clean water and sanitation
Dependence on biomass fuels and pollution
Airborne pollutants
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9. Rural Development and the Environment: A Tale of Two Villages
Representative African village
Desertification
Low opportunity cost of women’s time encourages waste
Representative South American village
Soil erosion
deforestation
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10. Global Warming and Climate Change
IPCC report of April 2007 paints a dire picture for developing economies
Impact of global warming likely hardest on the poorest
Resultant conflicts over natural resources
Adverse health impacts
Strategies
Taxes on carbons
Caps on greenhouse gases
Not exclusively caused by developed countries
Rapid industrial growth in Asia
Deforestation
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11. Traditional Economic Models of the Environment
Privately owned resources
Inefficiencies result from imperfections in property rights
Perfect property rights are characterized by
Universality
Exclusivity or Excludability
Transferability
Enforceability
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12. Figure 10.1 Static Efficiency in Resource Allocation
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13. Figure 10.2 Optimal Resource Allocation over Time
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14. Traditional Economic Models of the Environment
Common property resources
Inefficiencies arise because resource is not privately owned
Traditional models do not concern themselves with equity and income distribution
Family farmers can benefit from extended tenancy or ownership
Who should buy publicly owned land
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15. Figure 10.3 Common Property Resources and Misallocation
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16. Traditional Economic Models of the Environment
Public goods and bads: regional environmental degradation and the free-rider problem
Internalization of externalities is not easy
Free rider problems
Limitations of the public goods framework
Pricing mechanism
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17. Figure 10.4 Public Goods, Private Goods, and the Free-Rider Problem
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18. Urban Development and the Environment
The ecology of urban slums
Health threatening pollutants
Unsanitary environmental conditions
Serious impact on poor
Industrialization and urban air pollution
Environmental Kuznets curve
Pollution tax
Absorptive capacity of the environment
Severity of industrial pollution- impact on health
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19. Figure 10.5 Pollution Externalities: Private versus Social Costs and the Role of Taxation
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20. Figure 10.6 Increasing Pollution Externalities with Economic Growth
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21. Urban Development and the Environment
Problems of congestion, Clean water and Sanitation
High health and economic costs associated
Drag on development
Impact on poor
Private wells have led to land subsidence and flooding
Impact on export earnings
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22. The Need for Policy Reform
The recognition that action to reduce environmental hazards has been insufficient is now widespread
However, budgets are limited
Better pricing policies would improve matters
Inclusion of women in the design of environmental policy is important
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23. The Local and Global Costs of Rain Forest Destruction
Many scientists are alarmed by recent evidence regarding greenhouse gases
Economists also are concerned with the costs of global climate change
Rainforest preservation as a global public good- a restorative mechanism for the environment
Sustainable management of rain forests
Reduction of trade barriers to promote developing country exports
Provide funds, debt relief (not aid) to help enhance biodiversity
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24. Policy Options in Developing and Developed Countries
What LDCs can do
Proper resource pricing
Community involvement
Clearer property rights and resource ownership
Improved economic alternatives for the poor
Improved economic status of women
Industrial emissions abatement policies
Proactive stance toward adapting to climate change
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25. Policy Options in Developing and Developed Countries (cont’d)
How developed countries can help LDCs
Trade policies: barriers, subsidies
Debt relief and debt for nature swaps
Development assistance
What developed countries can do for the environment
Emissions controls
R&D
Import restrictions on unsustainable production
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26. Case Study: Philippines
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27. Concepts for Review Absorptive capacity Biomass fuels
Clean technologies
Common property resource
Consumer surplus
Debt-for-nature swap
Deforestation
Desertification
Environmental accounting
Environmental capital
Externality
Free-rider problem
Global warming
Greenhouse gases
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28. Concepts for Review (cont’d)
Internalization
Marginal cost
Marginal net benefit
Ozone depletion
Pollution tax
Present value
Private costs
Producer surplus
Property rights
Public bad
Public good
Scarcity rent
Social costs
Soil erosion
Sustainable development
Sustainable national income
Total net benefit
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