1. Sustainable Development, Energy and Environment Lecture 05 Paulo Ferrão Full Professor Tiago Domingos Assistant Professor Rui Mota Researcher IN+, Centre for Innovation, Technology and Policy Research Environment and Energy Scientific Area Department of Mechanical Engineering Doctoral Program and Advanced Degree in Sustainable Energy Systems Doctoral Program in Climate Change and Sustainable Development Policies Doctoral Program in Mechanical Engineering Doctoral Program in Environmental Engineering

2. “Empty World” Costanza, R., J. Cumberland, H. Daly, R. Goodland, R. Norgaard (1997). An Introduction to Ecological Economics. St. Lucie Press, Boca Raton, FL, USA.

3. “Full World” Costanza, R., J. Cumberland, H. Daly, R. Goodland, R. Norgaard (1997). An Introduction to Ecological Economics. St. Lucie Press, Boca Raton, FL, USA.

4. Main Issues in Sustainable Development Scale –Ecology; –Environmental dimension of sustainability Distribution –Ethics and Sociology; –Social dimension of sustainability (Allocative) Efficiency –Economics; –Economic dimension of sustainability Constraints –Thermodynamics –Institutions –Knowledge

5. Value and Indicators Economic –Valuation techniques –National Accounting and Macroeconomic Variables –Genuine Savings –Green Net National Product Social –Human Development Index –Index of Sustainable Economic Welfare –Gini coefficient Biophysical –Ecological Footprint –Human Appropriation of Net Primary Production Multi-criteria analysis

6. Sustainable Development in Space and Time Theories of growth and sustainable development –Solow growth model –Ayres’s theory of growth (the role of energy) –Growth accounting –Weak vs. strong sustainability The network dimension: direct vs. indirect effects –Life Cycle Assessment –Input-Output (IO) Analysis and Environmentally Extended IO Energy, environment and economic growth

7. Sustainable Development and Energy Energy in Portugal and the World Energy efficiency –New paradigms: from supply to demand –The rebound effect –Behavioural aspects

8. An Integrative Case Study Towards sustainable cities, an urban metabolism perspective

9. “Development that meets the needs of the present without compromising the ability of future generations to meet their own need.” –Intra- and inter-generational equity –Anthropocentric Sustainability of what? –non-declining aggregate output or consumption, –non-declining utility, –non-declining aggregate resources (productive base), –non-increasing pollution, … Weak vs. Strong Sustainability –Limits to substitution, –Is the combined value of all assets remain constant, that is, it is possible to substitute one form of capital for another, so natural capital can be depleted or the environment degraded as long as there are compensating investments in other types of capital? –Critical levels of natural capital. Sustainable Development

10. Sustainability vs Optimality A Sustainable Economic path at time t is one that obeys where is the maximum sustainable utility, defined as A Present Value Optimal path is one that results from the maximization of Present Value (PV): Future utility is being discounted with a constant discount rate Hicks (1946) : Individual’s income “maximum amount of money which the individual can spend this week, and still expect to be able to spend the same amount in real terms in each ensuing week".

11. Dasgupta-Heal Model Capital resource economy with no technological progress: Production can be used to consume or invest: Extraction of a non-renewable resource used in production Optimal Path: Hotelling’s rule Ramsey’s rule Optimal and sustainable? subject to

12. Discount Rate Justification and Components The same monetary flow at different instants does not have the same value (time preference) –CONSUMPTION: Uncertainty Being alive in the future (individual vs. society) Preferences in the future Value of the benefit or the cost –CONSUMPTION: Impatience –PRODUCTION: Capital productivity (opportunity cost of capital) Under certain conditions, the discount rate is equal to the real market interest rate consumption discount rate per capita consumption growth rate elasticity of the marginal utility of consumption utility discount rate Turner et al. (1994), pp. 102-106. pure time preference rate variation in survival probability