CHAPTER TWO
CONCEPT OF SUSTAINABILITY
2.1. The Origins of Sustainability Problem
We inhabit a world in which the human population has risen dramatically over the past century
and may almost double during the next. The material demands being made by the average
individual have been increasing rapidly, though many human beings now alive are desperately
poor. Since the 1950s, 1960s economic growth has been generally seen as the solution to the
problem of poverty.
Without economic growth, poverty alleviation involves redistribution from the better-off to the
poor, which encounters resistance from the better-off. In any case, there may be so many poor in
relation to the size of the better off group that the redistributive solution to the problem of
poverty is simply impossible. the cake is not big enough to provide for all, however thinly the
slices are cut. Economic growth increases the size of the cake. With enough of it, it may be
possible to give everybody at least a decent slice, without having to reduce the size of the larger
slices.
However, the world’s resource base is limited, and contains a complex, and interrelated, set of
ecosystems that are currently exhibiting signs of fragility. It is increasingly questioned whether
the global economic system can continue to grow without undermining the natural systems
which are its ultimate foundation.
This set of issues we call ‘the sustainability problem’ – how to alleviate poverty in ways that do
not affect the natural environment such that future economic prospects suffer. Sustainability is
the attribute of an ideal economic system in which economic development derives from a
balance between purely economic factors and considerations for environmental preservation and
social fairness. Sustainability policies are aimed at integrating the overlooked environmental and
social aspects into decision-making, thereby changing the economy of countries and regions.
The concept has its roots in the 1960s. In this period, there was widespread social unrest and
protests in many countries, with people voicing their concerns about environmental and social
issues such as pollution, chemical contamination of the environment due to the use of
agricultural pesticides like dichloro-diphenyl-trichloroethane (DDT), deforestation, as well as
social, racial and gender inequality. The protests reflected a growing dissatisfaction with the
persistent and obsessive focus of economic policies on monetary and financial aspects while
disregarding ecological pressures and social problems.
2.2. Economic-Environment Interdependence
The Organization for Economic Corporation and Development (OECD) defines natural capital as
“natural assets in their role of providing natural resource inputs and environmental services for
economic production”. This ranges from clean air and water, to the soils we use to grow crops
and the minerals and ores we extract from the earth.
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Economic activity takes place within, and is part of, the system which is the earth and its
atmosphere. This system we call ‘the natural environment’, or more briefly ‘the environment’.
This system itself has an environment, which is the rest of the universe.
The ecosystems services framework provided by the Millennium Ecosystem Assessment (2005)
suggests that the assets and services provided by the natural environment can be aggregated into
four broad categories:
• Provisioning services – products obtained from ecosystems, including fresh water, food,
fiber, genetic resources, biochemical, natural medicines and pharmaceuticals.
• Regulating services – benefits obtained from the regulation of natural processes,
including air quality, climate, water/flood, erosion, water purification, disease and pest
control, pollination, buffering pollution.
• Cultural services – non-material benefits people obtain from ecosystems through
spiritual enrichment, cognitive development, reflection, recreation and aesthetic
enjoyment.
• Supporting services – services that are necessary for the production of all other
ecosystem services, including soil formation, photosynthesis, primary production,
nutrient cycling and water cycling.
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Natural capital contributes to economic output through two main channels:
• Directly as an input to the process of economic activity; and
• Indirectly through its effect on the productivity of the other factors of production.
Growth is also generated by industries where the output is a clean and healthy natural
environment; for example, natural asset management and services that mitigate the
environmental impacts of economic activity.
Natural capital as a direct input to wealth creation
The natural environment provides the raw materials for economic production of goods and
services (provisioning services):
o Non-renewable resources are those with a finite endowment, which can be depleted over
time. Non-renewable resources like fossil fuels, minerals, metals, and basic aggregates
are extracted from the natural environment to produce energy, machinery, consumer
products, the built environment, and much else.
o Renewable resources are those which are capable of being replenished through natural
processes or their own reproduction. However, these resources can be exhausted if they
are consumed at a rate faster than the rate of replenishment. Renewable resource, such as
forests and fisheries, contribute directly to economic activity.
Natural capital as an indirect input to wealth creation
Arguably more important than these direct effects are the indirect inputs from the natural
environment into economic processes. The indirect inputs provided by ecosystems facilitate the
processes of production and act as a sink for the adverse environmental effects of economic
activity. They include:
o Global life support functions – Natural areas provide global life support functions,
including climate regulation and regulation of the chemical composition of the
atmosphere and oceans. While natural areas play a role in the maintenance of life-
essential services, it is difficult to evaluate and demonstrate the contribution that
particular habitat types or areas make. However, one area where the contribution of
particular habitats is being recognised and evaluated more explicitly is with regard to the
ability of forests to act as a store for carbon.
o Water regulation – Natural areas can buffer hydrological flows and dampen
environmental fluctuations, provide flood and storm protection, and prevent run-off
damage. Natural processes can also provide water quality benefits; for example, by
preventing sediment run-off into rivers.
o Pollution filtering – Natural resources play an important role in pollution control and
detoxification, including the removal of nutrients and pollutants from water, filtering of
dust from the air, and providing noise attenuation.
o Waste sink – The natural environment provides a repository for all non-recycled waste
produced by economic activity. In the absorptive capacity of the atmosphere, the oceans,
and the soil, the natural environment is able to assimilate some of that waste without
diminishing the provision of its other services.
o Soil retention and provision – The natural environment, such as many wetland habitats,
provide benefits by preventing soil loss and by storing silt.
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o Nutrient cycling – Ecological processes provide benefits through the storage, processing,
and acquisition of nutrients essential for plant growth.
o Waste decomposition – Naturally occurring micro-organisms provide benefits through
their ability to break down organic matter and speed up the process of waste
decomposition.
Environmental Kuznets Curve
The Environmental Kuznets Curve (EKC) is often used to describe the relationship between
economic growth and environmental quality. It refers to the hypothesis of an inverted U-shaped
relationship between economic output per capita and some measures of environmental quality.
The shape of the curve can be explained as follows: As GDP per capita rises, so does
environmental
degradation. However, beyond a certain point, increases in GDP per capita lead to reductions in
environmental damage.
Specifically:
• at low incomes, pollution abatement is undesirable as individuals are better off using their
limited income to meet their basic consumption needs;
• once a certain level of income is achieved, individuals begin considering the trade-off
between environmental quality and consumption, and environmental damage increases at
a lower rate; and
• after a certain point, spending on abatement dominates as individuals prefer
improvements in environmental quality over further consumption, and environmental
quality begins to improve alongside economic growth.
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Other possible explanations for the shape of the EKC include:
1. Technological progress: firms initially concentrate on expanding production as quickly
as possible, but as technology evolves production processes become cleaner and more
resource efficient.
2. Behavior Change: society is at first interested in higher levels of consumption,
regardless of the means by which it is achieved, but after a certain point greater
consideration is given to other factors affecting quality of life, including the environment;
3. Lewis’s growth model: the development pattern of any economy is characterised by the
changing patterns of economic activity. Stage 1: society concentrates resources in the
primary sector (i.e. extraction, agriculture) to satisfy necessary consumption; Stage 2:
resources are switched to the secondary sector (i.e. manufacturing) as basic needs are
satisfied and further consumption is concentrated on consumption goods; and Stage 3:
society moves from the secondary to the tertiary sector (i.e. services) characterised by
much lower levels of pollution. However, this model is less applicable in an increasingly
globalised world where the move from stage 1 to 3 may happen as the result of a shift
rather than a reduction in the levels of pollution.
Alternative views of the economic growth and environmental damage relationship
a. The limits theory considers the possibility of breaching environmental thresholds before
the economy reaches the EKC turning point. Commentators, such as Arrow et al., (1996),
suggest that the risk of small changes causing catastrophic damage means that solely
focussing on economic growth to deliver environmental outcomes could be counter-
productive. For example, in the context of biodiversity, increased spending on
maintaining species diversity will not be able to recreate extinct species. The limits
theory defines the economy-environment relationship in terms of environmental damage
hitting a threshold beyond which production is so badly affected that the economy
shrinks.
b. Another theory questions the existence of turning points, and considers the possibility
that environmental damage continues to increase as economies grow. This is similar to
the new toxics view, where emissions of existing pollutants are decreasing with further
economic growth, but the new pollutants substituting for them increase.
c. Stern (2004) discusses a further possible relationship between economic growth and the
environment in the context of international competition. International competition
initially leads to increasing environmental damage, up to the point when developed
countries start reducing their environmental impact but also outsource polluting activities
to poorer countries. The net effect is, in the best case scenario, a non-improving situation.
This model is known as ‘race to the bottom’.
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2.3. Sustainable Development
Rather than approaching environmental questions as a secondary issue after we have dealt with
the basic economic issues of production, employment, and output growth, our concept of
economics must consider the environment as fundamental to the production process. Of course,
economic production has always depended on the environment, but the scale of economic
activity makes a difference. Now that economic production produces such widespread
environmental effects, it is essential to integrate our views of economics and environment.
If we adopt a broader perspective, we must adapt the goals of economic activity to ecological
realities. Traditionally, the main goals of economic activity have been to increase welfare though
increased industrial production and rising per capita consumption. For all the reasons presented
above, these goals may pose a threat to the environmental sustainability (the continued existence
of an ecosystem in a healthy state; ecosystems may change over time but do not significantly
degrade) of our economic system. Either the goals or the methods we choose to achieve them
must be modified as population and environmental pressures increase.
The effort to balance economic and environmental goals is addressed in the theory of sustainable
development—economic development that provides for human needs without undermining
global ecosystems and depleting essential resources. Recall that the standard view of economic
growth is defined in terms of per capita GDP, meaning that total GDP must grow faster than
population. Sustainable development requires different measures. Increased output of goods and
services can certainly be part of the desired outcome, but equally important is the maintenance of
the ecological base of the economy—fertile soils, natural ecosystems, forests, fisheries, and
water systems.
Sustainable Development Versus Standard Views of Economic Growth
Every economy must use some nonrenewable resources, but sustainable development implies
conservation or recycling of these resources and greater reliance on renewables. On the
consumption side, an important distinction is drawn between wants and needs. In contrast to the
standard economic paradigm, in which “dollar votes” command the marketplace and determine
which goods are to be produced, sustainable development implies putting a priority on supplying
basic needs before luxury goods.
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Also in contrast to standard economic growth theory, sustainability implies some limits to the
macroeconomic scale. Rather than projecting rates of growth indefinitely into the future, a
maximum level can be postulated based on the carrying capacity of the area (and ultimately of
the planet). This in turn implies a maximum level of population above which carrying capacity—
the level of population and consumption that can be sustained by the available natural resource
base—will be exceeded and living standards must fall.
Population and Sustainable Development
This introduction of population as a key variable in determining the limits to economic growth
has implications for both developing and currently industrialized countries. For developing
countries with rapid population growth rates, it means that limiting population growth is a
critical element in successful development. For industrialized countries, the role of population is
different. In much of Europe and in Japan, population has stabilized, and for some countries
concern has shifted to an emerging pattern of population decline.
This means that population policy must be an essential element of sustainable development.
Population policy must include elements of education, social policy, economic policy, and health
care, including availability of contraception, and often runs into conflict with established
religious and social mores. Still, this difficult area, generally little considered in standard
economic development models, is crucial for sustainability.
Agriculture and Sustainable Development
When we consider agriculture production systems, the general principle of relying as much as
possible on renewable resources runs counter to much of standard agricultural “modernization.”
Modern food production is based on input-intensive agriculture, meaning that it depends heavily
on additional fertilizer, pesticides, water for irrigation, and mechanization. All of these in turn
depend on fossil-fuel energy. Traditional agriculture, based on solar energy, animal power, and
human labor, has generally produced lower yields than modern agriculture.
The concept of sustainable agriculture combines elements of traditional and modern techniques.
It emphasizes maximum use of renewable resources such as crop waste and animal manure, as
well as crop rotation, intercropping of different plant types, agroforestry, efficient irrigation,
minimum-till techniques, and integrated pest management.
Energy and Sustainable Development
A similar issue arises as to whether renewable energy sources (including solar energy) have the
capacity to supplant dependence on fossil fuel. The challenge is a daunting one, because
renewables now supply less than 10 percent of energy in industrialized countries. The picture is
different in developing countries, where a large portion of current energy supply comes from
biomass (wood, plant, and animal waste). Efficient use of biomass and maintenance of forest
resources can thus play an important role in energy policy. Technological advances in solar,
wind,
and biomass energy systems have brought the prices of these renewable sources down, and their
potential for future expansion is significant in both developed and developing countries.
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Huge, often unrecognized, potential lies in conservation and improved efficiency— by some
estimates the developed world could reduce its energy use by at least 30 percent through these
techniques with little or no effect on living standards. The traditional emphasis on energy supply
augmentation (such as building new power plants) could thus give way to a focus on demand-
side management (increasing efficiency and reducing energy consumption).
Because industrialized countries now account for three-quarters of global energy use (though
only one-quarter of global population), increased energy consumption in developing countries
could be offset by reductions in developed country energy use. Such reductions could come from
increased efficiency rather than requiring reduced living standards. Negotiations over global
climate policy suggest that such a tradeoff may be essential to reduce overall human impacts on
world climate.
Sustainable Management for Natural Resources
Sustainable natural resource management implies a combination of economic and ecological
perspectives. The economic theory of natural resource management shows how many
management systems for resources such as forests and fisheries can lead to depletion or even
extinction of the resource. Proper incentives and institutions can promote sustainable
management. Current management systems for many of the world’s fisheries and forests,
however, are far from sustainable.
In the area of industrial pollution management, the standard economic approach is to analyze the
costs and benefits of various forms of pollution control to determine an economically optimal
policy. This approach has its merits, but it is insufficient for sustainability. The best pollution
control policy can be overwhelmed by growth in pollution-generating activities, especially those
that produce cumulative pollutants.
Attention has therefore begun to focus on the new concept of industrial ecology as a more
comprehensive approach to pollution control. Using the analogy of a natural ecosystem’s
capacity to recycle its own wastes, this approach attempts to analyze industrial systems as a
whole to identify ways in which to minimize or avoid the generation of pollutants and
maximizing the recycling of resources.
2.4. Sustainability Criteria’s
2.4.1. Weak and Strong Sustainability
The fundamental debate regarding sustainable development is whether we choose to adopt a
strong or a weak conception of sustainability. Weak sustainability postulates the full
substitutability of natural capital whereas the strong conception demonstrates that this
substitutability should be severely seriously limited due to the existence of critical elements that
natural capital provides for human existence and well-being. The following science digest
provides an overview of scientific findings to support informed debate among decision-makers
regarding the need to adopt a strong sustainability position for the discussion and implementation
of the post-2015 sustainable development policies.
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As developed in the literature, the weak versus strong sustainability debate makes extensive use
of the notion of ‘natural capital’, which we now explain. Production potential at any point in time
depends on the stock of productive assets available for use. This stock can be classified into
human labour and all other productive resources. Now let us define the term ‘capital’ in a very
broad sense, to include any economically useful stock, other than raw labour power. In this broad
sense capital consists of:
Natural capital: any naturally provided stock, such as aquifers and water systems, fertile land,
crude oil and gas, forests, fisheries and other stocks of biomass, genetic material, and the earth’s
atmosphere itself. The services that the natural environment provides to the economy, talking of
‘natural capital’ is a way of referring to the collectivity of the environmental assets from which
all such services flow.
Physical capital: plant, equipment, buildings and other infrastructure, accumulated by devoting
part of current production to capital investment.
Human capital: stocks of learned skills embodied in particular individuals, which enhances the
productive potential of those people.
Intellectual capital: disembodied skills and knowledge. This comprises the stock of useful
knowledge, which we might otherwise call the state of technology. These skills are disembodied
in that they do not reside in particular individuals, but are part of the culture of a society. They
reside in books and other cultural constructs, and are transmitted and developed through time by
social learning processes.
Weak sustainability assumes that natural capital and manufactured capital are essentially
substitutable and considers that there are no essential differences between the kinds of well-being
they generate (Ekins et al., 2003; Neumayer, 2003; Neumayer, 2012). The only thing that matters
is the total value of the aggregate stock of capital, which should be at least maintained or ideally
increased for the sake of future generations (Solow, 1993). In such a perspective: “it does not
matter whether the current generation uses up nonrenewable resources or dumps CO2 in the
atmosphere as long as enough machineries, roads and ports are built in compensation”
(Neumayer, 2003, p1). Such a position leads to maximizing monetary compensations for
environmental degradations. In addition, from a weak sustainability perspective, technological
progress is assumed to continually generate technical solutions to the environmental problems
caused by the increased production of goods and services (Ekins et al., 2003).
Authors writing on strong sustainability demonstrate that natural capital cannot be viewed as a
mere stock of resources. Rather natural capital is a set of complex systems consisting of evolving
biotic and abiotic elements that interact in ways that determine the ecosystem’s capacity to
provide human society directly and/or indirectly with a wide array of functions and services
(Noël and O’Connor, 1998; Ekins et al., 2003; De Groot et al., 2003; Brand, 2009). The
proponents of strong sustainability invoke several reasons to demonstrate the non-substitutability
of natural capital.
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2.5. Sustainability and Efficiency
There is a strong argument for treating natural capital as a significant factor of production in its
own right, alongside produced capital, human capital and social capital, and to fully take account
of it in production and consumption decisions.
Under traditional assumptions of wealth creation, there are assumed to be no limits to the
availability of capital in the long run – it can either be replenished or substituted for by produced
goods and services – and the objective of economic growth is consistent and aligned with the
efficient use of resources. However, there are a number of attributes that differentiate natural
capital from other types of capital.
a. Environmental assets may have critical thresholds - Changes to some renewable
environmental assets beyond unknown thresholds may cause non-linear and irreversible
changes to occur. These thresholds mark the boundary between alternate stable states. If
these critical thresholds are breached, the asset may no longer be able to continue
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providing services or may no longer be adequately replenished, leading to eventual
depletion of the asset.
Ecosystems are often subject to these thresholds, including ‘source limits’ such as fish
stocks and top soil (where breaching this threshold will lead to a change or collapse in the
ecosystem) and ‘sink’ limits, such as limits to the degree that water and soil can absorb
chemical outputs from production, and where breaching this limit can cause temporary or
permanent disruption to ecological functioning. However, there is a great deal of
scientific uncertainty around if and where critical thresholds might exist. In the absence
of robust evidence, the precautionary principle would suggest preventing degradation or
depletion well before these thresholds are reached.
b. Environmental assets may have finite limits - Stocks of non-renewable environmental
assets are limited not just in the short run, as traditionally assumed for capital assets, but
also in the long run. For example, non-renewable assets such as metals and minerals are
limited in the long-run and continued depletion will eventually lead to no virgin reserves
remaining. However, identifying where and when these limits exist remains a challenge;
for example, identifying which assets are non-renewable and face limits, and over what
timescale.
c. Changes to environmental assets are potentially irreversible - Depletion and degradation
of natural assets can often be irreversible, at least within timescales of interest to human
civilisation. For example, whereas a degraded road can be repaired or worn-out
machinery replaced, it is not as simple to replant an ancient woodland ecosystem, and not
possible to recreate an extinct species. In many cases, these natural assets are not
substitutable to the same degree as produced or human capital.
d. Changes to environmental assets have impacts that extend over many generations - The
present generation’s actions will have an impact on the welfare and endowment of future
generations. For example, damage to environmental capital not only affects people today,
but its impact extends over several generations. Decisions regarding the use of
environmental assets need to be evaluated over a similar time scale.
Capital formation – whether produced, human, social or natural is an essential element of
economic growth. Declining levels of some natural assets can be consistent with sustainable
growth, but only if adequate investments are made in other types of capital. Using the proceeds
from the depletion of environmental assets to improve human capital (skill levels), invest in
physical capital (such as infrastructure), or even invest in other elements of natural capital (for
example, through offsetting biodiversity losses in one location by creating new habitats
elsewhere) can be consistent with sustainable long-term growth.
However, to the extent that the services provided by natural assets have critical thresholds, or
cannot be substituted for by other goods and services, maintaining a minimum stock of these
assets must be considered.
Economic efficiency requires that inputs to production are used up to the point where the cost of
using an additional unit is equal to its contribution to economic output. In the case of
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environmental inputs, the cost of an additional unit consumed is measured in terms of the
benefits foregone by society when the resource is consumed. Sustainable economic growth,
therefore, requires valuing environmental resources correctly and factoring them into production
and consumption decisions. Underestimating or not adequately valuing these benefits leads to
their overuse.
As resources become scarcer for example, depletion of mineral reserves there is typically a price
response, with prices rising as they become scarcer. This provides an incentive to use the
resource more efficiently in production, increase recycling and re-use of the resource, and
develop substitutes for it in the production process. This does not just prevent the overuse of
environmental resources, but also produces efficiency benefits for the economy as a whole.
However, for many elements of natural capital, markets do not exist, meaning this price response
and the corresponding incentives for efficiency will not occur, and in instances when natural
assets exhibit unknown critical thresholds, other forms of intervention could be considered.
Given the many scientific and economic challenges associated with valuing natural assets and
identifying critical thresholds, it may often be preferable to take a more precautionary approach
and set environmental targets instead, typically a little short of where the true critical threshold is
thought to exist.
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