DEVELOPMENT

& THE ENVIRONMENT

GERALD M. MEIER, JAMES E. RAUCH

Presented by Group B6-B

 Relationship Between
Development And The
Section 1

Environment
Development Environment
There is a two way relationship between
Development and Environment

1. Environmental quality is itself part of

the improvement in welfare.

2. Environmental damage can

undermine future productivity

Ecosystem that are destroyed in the

name of raising incomes today can
jeopardize the prospects for earning
income tomorrow.
 The Impact Of Economic Growth On Environment

This report also explores the impact for both good and bad of economic growth on
environment. From a policy point of view there are strong “win-win” opportunities
that remain unexploited.

For example, Poverty reduction: not only is attacking poverty a moral imperative, but it is also
essential for environmental stewardship. Moreover, policies that are justified on economic
grounds alone can deliver substantial environmental benefits.

But the policies are not enough to ensure environmental quality, strong public institutions
and policies for environmental protection are also essential

Goverment must maintain a central role for environmental protection

 First, developing countries need to have access to less polluting technologies to
learn from the successes and failures of industrial countries’ environmental
policies

Second, some of the benefits from environmental policies in developing

Role Of Industrial Countries In countries - the protection of tropical forest and biodiversity, for example -
accrue to rich countries which ought therefore to bear an equivalent part o
Helping To Improve The the cost
Environments Of Developing
Third, some of the potential problems facing developing countries-global
Countries warming and ozone depletion, in particular-stem from high con-
sumption levels in rich countries; thus, the burden of finding and
implementing solutions should be on the rich countries.

Fourth, the strong and growing evidence of the links between poverty
reduction and environmental goals makes a compelling case for greater
support for programs to reduce poverty and population growth.

Fifth, the capacity of developing countries to enjoy sustained income

growth will depend on industrial countries' economic policies;
improved access to trade and capital markets, policies to increase
savings and lower world interest rates, and policies that promote
robust, environmentally responsible growth in industrial countries, will
all help.
 Potential Consequences for
Health and Productivity Of
Different Forms Of
Environmental Mismanagement
 Clean Water And
Sanitation
1 biilion people in developing countries do not have access to
clean water and 1.7 billion people lack acess to sanitation

900 million cases of diarrheal diseases every year

Deaths of more that 3 million children per year

The economic costs of inadequate provision are also high. Many women in Africa
spend more than two hours a day fetching water. In Jakarta an amount equivalent to 1
percent of the city's gross domestic product (GDP) is spent each year on boiling water,
and in Bangkok, Mexico City, and Jakarta excessive pumping of groundwater has led to
subsidence, structural damage, and flooding.
 Clean air is air with no harmful pollutants and is
good to breathe

Emissions from industry, transport, and domestic

energy consumption impose serious costs on
health and productivity.

CLEAN AIR Three specific problems

1. SUSPENDED PARTICULATE MATTER

2. INDOOR AIR POLLUTION

3. OTHER FORMS OF POLLUTION

 In 2nd half of the 1980s, about 1.3 billion people lived in urban
areas that did not meet the standards set by WHO, they faced
many serious respiratory diseases and cancers.

Studies say that if emissions were reduced as per the standards

set by WHO the estimated 300,000 to 700,000 lives could be

1. SUSPENDED PARTICULATE saved a year.

MATTER High levels of lead mainly from vehicle emissions have been
identified as the greatest danger in a no. of cities.

Estimates of BANGKOK suggest that the average child has lost 4

or more IQ points by the age of 7 due to elevated exposure to
lead, in adults the consequences include risks of higher blood
pressure and higher risks of strokes, attacks, and death.

In MEXICO CITY, lead exposure may contribute to as much as

20% of the incidence of hypertension.
1. SUSPENDED PARTICULATE
MATTER
 For 100s of millions of the world’s poorer citizens,
smoke and fumes from indoor use of biomass fuel
pose a much greater risk than any outdoor pollution.
2. INDOOR AIR POLLUTION
Women and children suffer most from this form of
pollution.

Its effects on health are equivalent to those of

smoking several packs of cigarettes a day.
 An estimated 1 billion people live in
cities that exceed WHO standards for sulfur
dioxide. Sulfur dioxide (SO2) is a gaseous air
pollutant composed of sulfur and oxygen.
Sulfur dioxide is severely irritating to the
3. OTHER FORMS OF POLLUTION eyes, mucous membranes, skin, and
respiratory tract.

Nitrogen oxides and volatile organic

compounds are a problem in a smaller but
growing no of rapidly industrializing and
heavily motorized cities.
 The loss of productive potential in rural areas is a more
widespread and important problem.

Soil degradation in particular is the cause of stagnating or

declining yields in parts of many countries, especially on fragile
lands.

Erosion is the most viable symptom of degradation.

SOIL, WATER AND AGRICULTURAL Data suggests that in some countries the losses in productive
potential attributed to soil depletion may amount to 0.5 to 1.5

PRODUCTIVITY
percent of GDP annually.

Erosion can also cause damage to economic infrastructure such as

dams, and down streams.

Even when erosion is insignificant, soils may suffer from nutrient,

physical, and biological depletion.

Water logging and salinization are serious problems in some

irrigated areas.

Agricultural intensification

Europe & North America, parts of Punjab , Java and parts of China.
 NATURAL HABITATS
&
LOSS OF BIODIVERSITY

AREA DEFORESTED :

Latin America & the Caribbean > Sub-Saharan Africa > Asia

RATE OF DEFORESTATION :

Asia > Latin America & the Caribbean > Sub-Saharan Africa

EFFECTS :

African women have to walk farther for fuelwood

Indigenous forest dwellers -Amazon succumbed to diseases
5,000 villagers in Philippines were recently killed by flooding
 GREENHOUSE WARMING

TEMPERATURE PROJECTIONS CONSEQUENCES AND RISKS ADAPTATION STRATEGIES

IPCC projects a potential rise in Low-lying nations face risks, and Economic adaptation plays a vital

average world temperatures by 3° ecosystems, especially forests, may role; depends on both policy

Celsius by the end of the next struggle to adapt to shifts in climatic adoption and the effectiveness of

century zones. economies in adjusting to rising

temperatures.

08 TITLE OF THE REPORT | DATE OF THE REPORT

Economic Growth and Sustainable Futures WORLD OUTPUT

$ 69 TN
2030

TRANSLATING IT INTO ENVIRONMENTAL IMPACT

10 MN
SICK

SOUND POLICIES & STRONG INSTITUTIONS

Economic Activity becomes favourable
 POLICIES
FOR DEVELOPMENT
AND ENVIRONMENT
 POLICIES THAT SEEK TO HARNESS POLICIES FORMULATED TO TACKLE
THE POSITIVE LINKS BETWEEN THE SPECIFIC ENVIRONMENT
ENVIRONMENT AND DEVELOPMENT PROBLEMS

08
 BUILDING ON POSITIVE
LINKS
URGENT NEED TO IMPLEMENT POLICIES THAT SATISFY
DUAL GOALS

POLICIES THAT ENCOURAGE EFFICIENCY --> LESSER

CONSUMPTION OF RAW MATERIAL --> MORE SPACE
AVAILABLE FOR INNOVATION

Income inequality and threatened species (Threatened As shown in Fig. there is a positive linkage between the
species are the number of species (bird, fish, mammal, number of threatened species and the Gini index. In other
plant) classified by the International Union for Conservation words, the number of threatened species increases in
Nature (IUCN) as endangered, vulnerable, rare, countries where income is not equally distributed.
indeterminate, out of danger, or insufficiently known

(World Bank, 2021)

 REMOVING DISTORTION
e.g.
some government policies can be harmful to the cost incurred by developing
environment countries is lets say $230
e.g. subsidies on energy resources bn a year which is more
than 4 times total world
removal of such subsidies lead to large gain in
volume of official
efficiency and fiscal balance as well as decrease in
development assistance
local pollution and carbon emission as much as 10%
the bulk of this cost is
distortionary measures lead to serious Environmental incurred by former USSR
problems
and Eastern Europe which
e.g. irrigation subsidy in latin America accounts to
results in more than 1/2 of
almost 19-83% of costs
the pollution due to subsidy
CLARIFYING PROPERTY
RIGHTS
there is a common phenomena that
OPEN ACCESS to common resources
--> overusing and explotation

usually, a common mistake in the

process of correcting the problems
associated with open access of
resources Is that the government
resortes to NATIONALISATION of
resources in name of conservation

this reflects the FAILURE OF POLICY

MAKERS to distinguish between
traditional common property systems
and open access systems
POLICIES TO CHANGE BEHAVIOUR

Based on Incentives
(“Market Based” Policies)

Based on Quantitative Restrictions

(“command-and-control” policies)
Based on Incentives
(Market-based instruments)

Encourage those polluters with the lowest costs of control to take the most remedial action

Impose less of a burden on the economy

A survey of six studies of air pollution control in the United States found that least-cost policies
could reduce the costs of control by 45-95 percent in comparison with the actual policies
implemented

Economic incentives - fuel and vehicle taxes, congestion charges, and surcharges on potentially
damaging inputs such as pesticides and plastics

More specific charges - carbon taxes, tradable permits for air pollution, deposit-refund schemes
for bottles and batteries, hazardous waste charges and performance bonds, and surcharges on
stumpage fees to pay for replanting
Based on Quantitative Restrictions
(“Command and Control” Policies)

Quantitative command-and-control instruments, have acquired a bad name in recent years

for their high costs and for stifling innovation

But in some situations they may be the best instruments available. Where there are a few
large polluters, as was the case in the industrial city of Cubatão in: Brazil

The quickest and most effective instrument

Management of land use in frontier areas is another example of situations that may require
direct controls.
LESSONS DRAWN FROM RECENT EXPERIENCES

Standards should be realistic and enforceable

Controls must be consistent with the overall policy

framework

A combination of policies will often be required

REVIEWING
PUBLIC EXPENDITURE
KRITI PANWAR
21BA084
ARE PUBLIC INVESTMENTS DAMAGING THE ENVIRONMENT? ENVIRONMENTAL ASSESSMENT
PROCEDURES : THE WAY FORWARD
Empirically, public investments around the world, many of which were supported
by development agencies like the World Bank, have caused huge damage by
failing to take the environmental considerations into account CHALLENGE 1 CHALLENGE 2
EXAMPLES OF ENVIROMENTAL DAMAGES THROUGH PUBLIC INVESTMENTS Underdeveloped Difficult to
technical skills and incorporate
Brazil’s resources to conduct assessment results
Indonesia’s Sri Lanka’s
Polonoreste such level of analyses into decision-making
transmigration Mahaweli since they are often
program scheme projects
non- quantitative

ROOT PROBLEM SOLUTION 1 SOLUTION 2

Lack of focus from the environmental angle on design of projects, road
Listening to local views: Increasing
alignments, infrastructure of the buildings and provision of access to forests, etc. Sharing information transparency in
with locals in early conducting these
SOLUTION stages analyses leads to
Incorporate improvement in
Applying cost-benefit techniques to environmental concerns comments from quality and impact
Such analyses were first applied to hydroelectric projects in the United States in affected
communities into
the 1950s and 1960s, and since then have tripled estimated returns for some
project design
forestry programs and halved returns on some hydroelectric and road projects
 REMOVING IMPEDIMENTS TO ACTION

Political Pressure Weak Institutions

Absence of data Inadequate local

& knowledge participation
 COUNTERACTING POLITICAL PRESSURES
INABILITY OF GOVERNMENTS TO SELF-REGULATE
FIGHTING WITH THE POLITICALLY POWERFUL

State bodies have conflicting social and economic

Stopping environmental damage often involves asking rights away
objectives, which allow them to use resources less
from the politically powerful: Industrialists, farmers, loggers, and
efficiently, and also because of the inherent contradictions
fishermen fiercely defend their rights to pollute or to exploit sources.
of being both gamekeeper and poacher.
Example: In the United States publicly owned municipal
wastewater treatment plants are the most persistent EXAMPLES
violators of effluent discharge standards
Modification of carbon Delay in introduction of
taxes in Europe to assist transferable fishing rights in
ACTING ON WRONG PRIORITIES
energy-intensive industries Chile due to pressure from
powerful fishing interests
International pressures may favor issues of interest to
donor's rather than to developing countries.
Governments may be pressed to address problems such It is often the poor and the weak who are hurt when the environment
as air pollution that affect everybody, including the rich, is degraded, and who stand to gain most from sound policies.
rather than problems such as fecal coliforms in rivers They may be less potent politically than the polluters.
from which the rich can insulate themselves.
 IMPROVING INFORMATION
AWARENESS DATA COLLECTION
International initiatives are urgently needed Countries can reap large returns from
to overcome a grave lack of knowledge in investments in basic environmental data on
some areas, including soil depletion exposure to emissions and unsanitary conditions,
(especially in Africa), land productivity in soil and water depletion, land capability, and
and around tropical forests, etc. loss of forests and natural habitat

TECHNOLOGY COST BENEFIT ANALYSIS

Independent commissions have proved a useful way Understanding the causes and effects of environmental
for governments to draw on technical expertise: damage and the costs and benefits of action
A growing number of developing countries, Eg: U.S. Environmental Protection Agency estimated
including Hungary, Nigeria, and Thailand, are finding that, as a measure for avoiding deaths, placing controls
that ad hoc commissions can bring professional on unvented indoor heaters was 1,000 times more cost-
objectivity to highly charged issues. effective than tightening hazardous wastes standards.
 INVOLVING
LOCAL PEOPLE
VRINDA GUPTA
21BA091
WHY INVOLVING LOCAL PEOPLE DEVELOPMENT PROJECTS, THAT HAVE NOT DRAWN
MIGHT BE A GOOD IDEA? FROM LOCAL INSIGHTS, HAVE OFTEN FAILED.

REASON 1 REASON 2 Haiti’s top-down Bali’s large

reforestation irrigation
Choices between Governments and program project
economic benefits & aid agencies are
environmental costs not equipped to
involve subjective gauge how local WHAT DO WE CONCLUDE?
judgements & local people value their
knowledge environment
Involving local people is not always easy.
REASON 3 1 It can be expensive, paralyse decision making, channel public
investments into NIMBY activism & reinforce local power structures.
Scope for high economic and environmental
returns in implementing programs: Local governments can play a significant role.
2 There is a need to devolve tasks selectively and increase
Afforestation Soil Management responsibilities for local governments.

Park Protection Water Management Need for training and clear messaging
3 Public agencies must be trained in participatory approaches.
Flood Control Sanitation & Drainage Senior management must iterate the importance of participation.
THE ENVIRONMENTAL WHAT EXPLAINS THE UPSWING (A TO B)?

KUZNETS CURVE
Greater output per head (a natural outcome of an increase in per capita
income, starting from very low levels) generates more emissions.

B
WHAT EXPLAINS THE DOWNSWING (B TO C)?

A C THE CONVENTIONAL EXPLANATION THE PESSIMISTIC EXPLANATION

1
Richer consumers demand higher 1
Richer countries produce more
environmental quality. services than manufactures.

2 Richer governments enforce 2 Richer countries specialise in

The picture indicates that air
environmental regulations better. “cleaner” industries.
pollution first increases, and then
decreases with per capita income. 3
Technologically advanced products 3
Demand for the output of “dirty”
control emissions industries is met by imports.
This inverse-U shaped curve is
reminiscent of Kuznets conjecture At the global level, economic growth of countries with per capita Y above the “turning
for income inequality. point” does not improve environmental quality, but instead redistributes degradation to
poorer countries (by directly / indirectly outsourcing “dirty” industries)
 SUSTAINABLE
DEVELOPMENT

Sustainable development essentially involves a

development vector which consists of increases in
real income per capita, improvements in health ,
access to resources, a fairer distribution of income,
increases in basic freedoms.
 STRONG SUSTAINABILITY VS WEAK SUSTAINABILITY

THE FORMER IMPLIES dD/dt be positive for each and every

time period an dthe latter implies dD/dt has got a positive
trend altogether.

A broader definition for sustainable development is that it is defined as the general

requirement that a vector of development characyteristics be non decreasing over time,
where the elements included in the vector are open to ethical debate and where the
relevant time horizon for practical decision making is similarly indeterminate outside of
agreement on intergenerational objectives.
 A KEY NECESSARY CONDITION OF SUSTAINABLE DEVELOPMENT
IS CONSTANCY OF NATURAL CAPITAL STOCK .

CONDITIONS FOR SUSTAINABLE

DVELOPMENT
Sustainable development is a development strategy that manages
all assets , natural resources and human resources , as well as
financial and physical assets , for increasing long term wealth an
well being. It as a goal rejects policies and practices that support
current living standards by depleting the productive base ,
including natural resources , and that leaves future generation
with poorer prospects and greater risks .
EXISTING & OPTIMAL CAPITAL STOCK
RISHA SAINI
21BA023
 NATURAL CAPITAL
There are two ways of looking at natural capital-
Existing stock: What's currently available on Earth THE ULTIMATE CBA
Desired stock: What amount of resources we USE VALUE-: NON-USE VALUE-:
ideally want to maintain for future generations. Provisioning Existence Value
Regulating Bequest Value
Cultural Instrinsic Value
SO WHICH IS MORE IMPORTANT?

Neo-Classical economists TOTAL ECONOMIC VALUE= USE VALUE + NON USE VALUE
believe that the ideal amount
of natural resources that should Foregone development value refers to the
exist for sustainability, is more potential economic benefits lost by
important than the "existing
preserving natural resources instead of
stock" which is the amount of
using them for development.
resources currently available.
 KEY INSIGHTS FROM THE GRAPH ON RIGHT
The benefit curve
GRAPH TIME ! As Kn Increases captures the benefits to
Economic analysis
would identify KN as
there are users and non-users of the optimal stock of
increased costs the environment
nat-ural environments

LEFT OF KN* AT KN* RIGHT OF KN*

MB > MC MB =MC MB < MC
Increase KN* Stay Here Decrease KN*

Sustainability might require less resource use than "optimal,"

focusing on long-term benefits not just short-term economic gains.

ARE THE OBSERVATIONS CONSISTENT WITH THE MODEL

OBSERVATION 1 OBSERVATION2 OBSERVATION 3

WHAT’S WHAT? For some Sahelian For some countries with The "optimum" point should
countries they are already degraded consider the multiple
Kn Natural Capital Stock significantly below the resources calculating an benefits of nature, not just
B Benefit from increasing it optimum, in that "optimal" level might be their immediate economic
desertification and irrelevant because further
C Cost of increasing it deforestation actually depletion offers no gain value. Forests, for example,
K n* threaten livelihoods provide life support function
Optimal value of natural stock
 BUT WHATS ECONOMIC ANALYSIS WITHOUT LIMITATIONS?
THE KINKED BENEFIT
Lack of (Quantifiability)
CURVE
Capturing the true value of nature's life support functions in cost-
1 benefit analysis is challenging. These functions, like geochemical
cycles, might not be easily quantifiable.

Risk aversion is the basic instinct

2 Due to limited understanding of natural systems and the potential
irreversibility of resource loss, a risk-averse approach favors
conserving existing resources.

Lack of substitutes People value what they already possess more

Even if immediate economic gains seem possible from further than potential gains (psychological
3 resource depletion, the risks of ecosystem collapse and unknown phenomenon explained by prospect theory).
substitutes make conservation essential.
This leads to a discrepancy between
willingness to pay for a gain and willingness to
Willingness to pay and accept accept compensation for a loss.
4 Economic theory suggests a crucial difference between WTP and
WTA. People generally value what they have more than what they This discrepancy can be depicted as a "kink" in
don't, leading to WTA exceeding WTP for the same asset. the valuation function for natural resources
 MEANING OF CONSTANT CAPITAL STOCK

Renewable
CONSTANT PHYSICAL CAPITAL STOCK Exhaustive
Natural

This is appealing for renewable resources, but clearly has little relevance to exhaustible resources since any
positive rate of use reduces the stock.

CONSTANT ECONOMIC VALUE OF THE STOCK Declining Physical Stock | Rising Real Price

This allows for a declining physical stock with a rising real price over time, maintaining a constant economic
value. The problem here is that the price variable needs to be interpreted with considerable care |to
TITLE OF THE REPORT reflect
DATE OF THE REPORT

all the economic values deriving from multifunctional resources.

 MEANING OF CONSTANT CAPITAL STOCK

High Price
CONSTANT PRICE OF THE STOCK Measuring scarcity
Low Price

Idea is that scarcity can often be effectively measured in terms of the price of a natural resource, higher
prices reflecting scarcity, and lower prices reflecting abundance. Appeals to exhaustive resources.

CONSTANT TOTAL VALUE OF ALL CAPITAL STOCK Man made + Natural

Inheritance of equal capital stock
Compensating for depleted resources

A broader version of the constant value rule would require that the total value of all capital stocks be held
constant, man-made and natural. TITLE OF THE REPORT | DATE OF THE REPORT
 Development and the Environment

Relationship between development and the environment

Requirement of policies backed by strong institutions

Different effects on rich and poor, and on different countries?

Loss of natural habitat and biodiversity, global warming

CONCLUSION
Economic growth and environment - policies and institutions

Sustainable Development

Definition

Existing and optimal capital stock

Meaning of constant capital stock

Weak sustainability and strong sustainability

Genuine Savings and Green National Accounting

B6-B

Vrinda Gupta Malvika Pruthi ALeena Sara Liju

21BA091 21BA045 21BA009

MEET YOUR
PRESENTERS Nishita Singh
21BA013
Nandita Pruthi
21BA097
Kriti Panwar
21BA084
Risha Saini
21BA023

Simran Sangeeth Pramod Souratya Ghosh

21BA017 21BA098