Sustainable Development and Climate Change

Abstract

Because the climate change crisis can only be resolved in conjunction with other crucial sustainable development concerns, this chapter delves deeply into the concept of sustainable development and its broader implications. Upon defining sustainable development, this chapter outlines a number of key concepts relevant to the climate change crisis. Beginning with a concrete representation of the economic process, it is shown that the desirable or optimal scale of the economy is considerably smaller than the economy’s maximum sustainable scale. For two reasons, this revelation has important consequences for how humankind should deal with the climate change crisis. Firstly, governments must not only ensure that national economies operate within their ecological limits (of which a 450 ppm stabilisation target is one of them), they must take the necessary action to ensure their economies grow no larger than their optimal scale. Upon reaching the optimal scale, increases in economic welfare are still possible, but are dependent upon the production of better goods, not more goods; improvements in the distribution of income and wealth; natural capital maintenance; and increases in the efficiency of natural resource use. Secondly, empirical evidence suggests that the economies of nearly all high-GDP countries have exceeded their optimal scale. Furthermore, many have exceeded their maximum sustainable scale, as has the global economy as a whole. Disconcertingly, a number of low-GDP countries also appear to be suffering from ‘uneconomic growth’. This indicates that the climate change crisis needs to be tackled on the understanding that high-GDP nations must immediately begin the transition to a qualitatively-improving steady-state economy and that any growth undertaken in the meantime by needy low-GDP nations must be as equitable and efficient as possible. Whilst a lower rate of global growth will make it easier to meet greenhouse gas emissions targets, it poses institutional and policy issues rarely considered in the climate change literature.

Notes

• 1. The WCED (1987, p. 43) defined sustainable development as “…. development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

• 2. In the natural world, information exists as genetic information coded in the DNA molecule. In the anthropocentric world, information exists as knowledge encoded in various institutions and organisations, and on physical objects, such as books and computer disks.

• 3. A holon is a term made popular by Arthur Koestler. See Capra (1982), p. 303.

• 4. Human-made capital constitutes the intermediate means depicted in Fig. 1.11.

• 5. The throughput is equivalent to the ultimate means depicted in Fig. 1.11.

• 6. Fisher (1906) described psychic income as the subjective satisfaction that emerges in the stream of human consciousness from consumption and other benefit-yielding endeavours.

• 7. There are two things worthy of note here. Firstly, uncancelled costs are often undervalued because many natural capital values escape market valuation. Secondly, uncancelled costs should reflect the higher of two distinct classes of opportunity costs. The first is the cost of transforming a unit of low-entropy resources into a physical good in terms of the next best alternative good forgone. For example, if a unit of resource X is used to produce good A, it cannot be used to produce good B. The second class of opportunity cost involves the reduced capacity of natural capital to provide a flow of resources required to produce future goods. For example, if the extraction of a unit of resource X reduces the capacity of natural capital to provide a unit of X over time, which it will if X is a non-renewable resource or if a renewable resource is unsustainably harvested, a unit of X will be unavailable to produce goods of any type in the future. It is the larger of the two classes of opportunity costs that constitutes the true uncancelled costs of economic activity.

• 8. The technical efficiency of production (E) can be written as the ratio of energy-matter embodied in physical goods (Q) to the energy-matter embodied in the low-entropy resources used to produce them (R). That is, E = Q/R. While the value of E can be increased via technological progress, the first and second laws of thermodynamics dictate that E must be less than a value of one.

• 9. The concept of a ‘line in the sand’ is very similar to Ciriacy-Wantrup’s (1952) notion of a ‘safe minimum standard’. See, also, Crowards (1998).

• 10. It is invariably argued that a growth rate of 2–3 per cent of real GDP is required just to prevent the unemployment rate from rising.

• 11. Some of the ways to sever the GDP-employment nexus are outlined in Lawn (2009).

• 12. Why does the principle of increasing marginal costs apply to the entire economy? Firstly, it is customary for nations to extract the more readily available resources first and be left with the more complicated task of extracting lower quality resources later. Secondly, the cost of the undesirable ecological feedbacks associated with each incremental disruption of natural capital increases as the economy expands relative to a finite natural environment.

• 13. Having said this, there is a limit on the capacity for income redistribution to increase Ratio 1 because, at some point, excessive redistribution is likely to adversely dilute the incentive structure built into a market-based economy.

• 14. Importantly, the new optimal scale need not necessarily be physically larger as a consequence of the UB curve shifting upwards. The size of the optimal scale will depend upon the nature of the UB and UC curves—in particular, the extent to which the shape of the UB curve alters following its upwards shift.

• 15. There are a number of critics of the ecological footprint (e.g., see Ecological Economics (2000), volume 32(3); and Fiala (2008)). A major weakness of the ecological footprint is the use of land area as a numeraire for sustainability. There is no doubt that if a nation was compelled to generate its entire resource flow in the form of renewable resources, land area and fertility would constitute critical limiting factors. However, there are other factors that also impinge on a nation’s renewable resources, such as water availability (Patterson 2006). Because factors other than land area can restrict the generation of renewable resources, ecological footprint studies almost certainly overestimate a nation’s biocapacity (and underestimate ecological deficits). As such, the ecological footprint can be regarded as a conservative indicator, which is all the more concerning given the ecological footprint estimates revealed in Table 2.1. It is worth pointing out that, following the work of Lenzen and Murray (2001), a number of improvements have been made to ecological footprint estimates to better account for additional limiting factors.

• 16. 1.3 Earths = 2.7 hectares ÷ 2.1 hectares. A value of 1.3 is only possible because: (i) non-renewable resources constitute a major portion of all resource use at present, and (ii) resource limits can be exceeded in the short-run by liquidating natural capital stocks.

• 17. The GPI was originally labelled an Index of Sustainable Economic Welfare (Daly and Cobb 1989). To view the items typically used to calculate the GPI, see Lawn (2007).

• 18. These figures are based on international dollars (Int$). An international dollar is a fictitious monetary unit which equilibrates the purchasing power that a nation’s currency has over its own GDP with that of the US dollar over America’s GDP. Two people living in different countries earning the same international dollar-valued income would be able to purchase an equivalent basket of goods and services.

• 19. Although the per capita GPI of some wealthy countries has recovered slightly since the early-1990s, in virtually every case it has failed to reach its earlier peak value.

• 20. It is also unnecessary because, if the central government is the monopoly owner and issuer of the nation’s currency, it can always purchase the difference between exports and imports and provide the same goods to its citizens rather than have them enjoyed by foreigners. Better still, the government can redirect the resources involved to provide more schools, hospitals, and other critical infrastructure with public goods characteristics. In doing this, the nation’s real output would not change, but the goods consumed or used would increase, thereby raising the per capita economic welfare of the nation (Lawn 2011).