Environmental Accounting and Sustainable Development

Environment and Development: The Basic Issues

The livelihood depends on agriculture, animal husbandry, hunting, fishing, forestry, and foraging. The interaction between poverty and environmental degradation can lead to a self-perpetuating process. Result of ignorance or destroy or exhaust the resources.

National Level

Environmental costs are not considered in the calculations of GNI. Damage to soil, water supplies, and forests resulting from unsustainable methods of production can greatly reduce long-term national productivity but have a positive impact on current GNI figures.

Global Level

Growing consumption needs of people in developing and the developed world may have global implications as well:

• Destruction of rainforests
• Climate change

Climate models predict sub-Saharan Africa and South Asia to be affected by greenhouse gases.

Sustainability

Generally refers to meeting the needs of the present generation without compromising the needs of future generations.

Sustainable Development Path

Refers to the stock of overall capital assets remaining constant or rising over time, implicitly related to future generations.

Importance of environmental accounting:

1. The incorporation of environmental benefits and costs into the quantitative analysis of economic activities
2. Types of capital:
   • Manufacturing capital: machines, factories, roads, etc.
   • Human Capital: knowledge, experience, skills
   • Environmental Capital: forests, soil quality, rangeland, water, etc.

Sustainable net national income (NNI): an environmental accounting measure of the total annual income that can be consumed without diminishing the overall capital assets of a nation (including environmental capital).

NNI = GNI – D(m) – D(n)

D(m) is depreciation of manufactured capital assets. D(n) is depreciation of environmental capital.

A better measure is: NNI* = GNI – D(m) -D(n) – R – A

R is expenditure required to restore environmental capital (forests, fisheries, etc.)

A is expenditure required to avert destruction of environmental capital (air pollution, water and soil quality, etc.)

Population, Resources, and the Environment

If increases in GNI and food production are slower than population growth, per capita levels of production and food self-sufficiency will fall. Ironically, the resulting persistence of poverty would likely perpetuate high fertility rates as the poor are dependent upon large families for survival.

Poverty and the Environment

They most often live on degraded lands that are less expensive because the rich avoid them. People in poverty have less political clout to reduce pollution where they live. Living on the less productive polluted land gives the poor fewer opportunities to work their way out of poverty. For environmental policies to succeed, they must first address issues of landlessness, poverty, and lack of access to institutional resources such as insecure land tenure rights, lack of credit and inputs, and absence of information.

Growth vs. the Environment

Environmental Kuznets Curve: As income rises, societies will have both the means and willingness to pay for environmental protection. This is particularly a problem with global public goods.

Rural Development and the Environment

It is estimated that food production in developing countries will have to increase by at least 50% in the next three decades. Additionally, since women are frequently the caretakers of rural resources such as forests and water supplies, there needs to be a particular focus on targeting women’s economic status to reduce their dependence on unsustainable methods of production.

Urban Development and the Environment

Rapid population increases accompanied by heavy rural-urban migration are leading to unprecedented rates of urban population growth.

The Global Environment and Economy

Corruption and poaching negate the ecological benefit.

Rural Development and the Environment: A Tale of Two Villages

Saharan Africa and the Amazon

Global Warming and Climate Change: Scope

IPPC found 4 zones:

• Sub-Saharan Africa because of drying
• Asian mega deltas because of flooding
• Small islands due to multiple sensitivities
• Arctic

Policy Adaptations

Inventorying and tracking ecological resources of the poor; addressing environmental deprivations including susceptibility to ecological stresses in poverty assessments and programs; implementing early warning systems to anticipate environmental emergencies and to prevent disasters; restoring and expanding natural ecosystem barriers to extreme events such as flooding and water shortages; constructing infrastructure to serve the poor while accounting for likely climate change; establishing microinsurance schemes for farmers; ensuring better voice and empowerment of the poor and their organizations.

1. Mitigation: development of ‘carbon markets’
2. Adaptation: UNDP defines climate change adaptation as “the process by which strategies to moderate, cope with and take advantage of the consequences of climatic events are enhanced, developed, and implemented”. “Planned” autonomous”

Economic Models of Environmental Issues

Property rights

Universality: all resources are privately owned. Exclusivity or “excludability”: it must be possible to prevent others from benefiting from a privately owned resource. Transferability: the owner of a resource may sell the resource when desired. Enforceability: the intended market distribution of the benefits from resources must be enforceable.

Public Goods and Bads: Regional environmental degradation and the free-rider problem. Externalities: when one person's consumption or production behavior affects that of another without any compensation. Public goods: anything that provides a benefit to everyone and the availability of which is in no way diminished by its simultaneous enjoyment by others (clean air or national defense). Public bad: any product or condition that decreases the well-being of others in a nonexhaustive manner (air pollution, water pollution). Urban Development and the Environment: air pollution, congestion, sanity, and water.