1. Tema 3. The sustaintability of growth 1.Economic and environmental sustainability 2.The IPAT identity 3.The Environmental Kuznets Curve

2. Two questions consumption held constant indefinitely i.Can be consumption held constant indefinitely, if the population is constant in size, given that non-renewable resources are a necessary input to production? allocate efficiently ii.How to allocate efficiently the environmental resources in case of market failures? 1.Economic and environmental sustainability 2.The IPAT identity 3.The Environmental Kuznets Curve

3. The Hartwick rule o Constant consumption in a model economy can be achieved if the total value of the economy’s stock of reproducible capital together with its stock of non-renewable resources is held constant over time by investing the rent. o The amount of investment in reproducible capital that is needed to exactly offset declining stocks of non-renewable resources. 1.Economic and environmental sustainability 2.The IPAT identity 3.The Environmental Kuznets Curve

4. The optimum pollution level o Economic Equilibrium: (P) o BMg=CMg privado o Environmental Equilibrium: (P*) - - OL*. Lesser resources consumption and higher prices o BMg = CMg total (privado + ambiental) 1.Economic and environmental sustainability 2.The IPAT identity 3.The Environmental Kuznets Curve

5. “visions” on sustainability o Neoclassical economics o Neoclassical economics focus on the level of consumption Weak sustainability o Hartwick rule: total of natural and human-made capital together remains constant over time “Weak sustainability” o Correcting market failures: Internalising externalities o Ecologists o Ecologists think about sustainability in terms of the extent to which the prevailing structure and properties of the ecosystem can be maintained  Resilience o Ecological economics Strong sustainability o Ecological economics accept that resilience is important for sustainability, and they argue that following the Hartwick rule and correcting market failure will not suffice to achieve sustainability. “Strong sustainability” o natural and human-made capital are complements rather than substitutes. o critical natural capital, which acknowledges substitutability close to zero for some parts of capital and assumes higher substitutability for others 1.Economic and environmental sustainability 2.The IPAT identity 3.The Environmental Kuznets Curve

6. The “unlimited-growth” limits 1.Economic and environmental sustainability 2.The IPAT identity 3.The Environmental Kuznets Curve *durable(K m ), human(K h ) and natural (K n )

7. The “unlimited-growth” limits 1.Economic and environmental sustainability 2.The IPAT identity 3.The Environmental Kuznets Curve *durable(K m ), human(K h ) and natural (K n )

8. The IPAT Identity? 1.Economic and environmental sustainability 2.The IPAT identity 3.The Environmental Kuznets Curve o IPAT is a tautology -- it states what must be true. It is, nonetheless, very useful. o It reflects the “trade-off” between growth and environment. o An increasing demand (P or A), raises the pollution at least… o … something happen with technology (T) o It points us to the proximate determinants of the environmental impacts of economic activity. o It does not tell us about the fundamental, or underlying, determinants.

9. The IPAT Identity? 1.Economic and environmental sustainability 2.The IPAT identity 3.The Environmental Kuznets Curve Arto y Dietznbacher (2014): Drivers of the growth in global GHG emissions (gigatonnes of CO2eq)

10. The IPAT Identity? 1.Economic and environmental sustainability 2.The IPAT identity 3.The Environmental Kuznets Curve o IPAT is a tautology -- it states what must be true. It is, nonetheless, very useful. o It points us to the proximate determinants of the environmental impacts of economic activity. o It does not tell us about the fundamental, or underlying, determinants.

11. Modelling growth and the environment o IPAT doesn’t give information about the determinants of P, A, T. o Cobb-Douglas production function  Substitution o Leontieff production function  Not substitution 1.Economic and environmental sustainability 2.The IPAT identity 3.The Environmental Kuznets Curve

12. The Scenarios Analysis o A scenario is an internally consistent story about one way in which the future could unfold. It is not a prediction or a forecast. ScenarioProyections 2050PITImpact PeopleGDP/pcTonnes/$Tonnes Co2 A Baseline 6.000.000.000 7.0000,00055 23.100.000.000 BLow Fertility 7.866.000.000 7.0000,00055 30.284.100.00031% CMedium Fertility 9.322.000.000 7.0000,00055 35.889.700.00055% DHigh Fertility 10.934.000.000 7.0000,00055 42.095.900.00082% EGrowth 1% 6.000.000.000 11.5120,00055 37.989.600.00064% FGrowth 2,5% 6.000.000.000 24.0600,00055 79.398.000.000244% GGrowth 3% 6.000.000.000 49.7470,00055 164.165.100.000611% Best Worst o the commodity composition of GDP can be regarded as the ‘technology’ by means of which needs and desires are satisfied in a particular economy… and it could be calculated the coal embodied. 1.Economic and environmental sustainability 2.The IPAT identity 3.The Environmental Kuznets Curve

13. Scenarios Example: Carbon footprint of nuclear energy Zafrilla, J. E., cadarso, M. A., Monsalve, F., & Rúa, C. (2014). 1.Economic and environmental sustainability 2.The IPAT identity 3.The Environmental Kuznets Curve

14. Kuznets Curve 1.Economic and environmental sustainability 2.The IPAT identity 3.The Environmental Kuznets Curve

15. Kuznets Curve 1.Economic and environmental sustainability 2.The IPAT identity 3.The Environmental Kuznets Curve I = Resources/waste per cápita y = Income per cápita t = Time Z = other variables variables o Remarks: o GDP composition: Services vd industry o Leakages effects.- Globalization and value chains o Technological progress o Society preferences o Green Legislation: energy, consumption, recycling

16. Kuznets Curve 1.Economic and environmental sustainability 2.The IPAT identity 3.The Environmental Kuznets Curve Confirman la curva de Kuznets: Pico: 8.266 € per cápita 1857 y 1986 relación positiva. 1987-2007 relación inversa. Estimación de la curva:

17. Libros: Jackson, T. (2009): Prosperity without growth? The transition to a sustainable economy, Sustanible Development Commission. Labandeira, X., Carmelo, J. L., Vázquez, M. X. (2006): Economía Ambiental, Pearson Educación. (Capítulo 2). Artículos: Arto, I. y Dietzenbacher, E. (2014): “Drivers of the Growth in Globlal Greenhouse Gas Emissions”, Environmental, Science and Technology, 48 (10), 5388-5394. Esteve, V. and Tamarit, C. (2012): “Threshold cointegration and nonlinear adjustment between CO 2 income: The Environmental Kuznets Curve in Spain, 1857-2007”, Energy Economics 34, 2148- 2156. References