SUSTAINING NATURAL CAPITAL The Quality of Growth: chapter 4

1. SUSTAINING NATURAL CAPITALThe Quality of Growth: chapter 4 Maria José Pacheco (Costa Rica) Marco Colombo (Italia) The Quality of Growth: ch 4

2. Natural Capital, a DefinitionThe term natural capital encompasses: • the sink functions, that is, air and water as receiving media for human-generated pollution • source functions, that is, production based on forests, fisheries, and mineral ores. The Quality of Growth: ch 4

3. The Core Problem Countries throughout the world have overexploited their forests, fisheries, and mineral wealth and polluted their water and air to accelerate short term economic growth • Why natural capital tends to be abused and overexploited? • What measures can be taken to correct the negative spiral of environmental decline? The Quality of Growth: ch 4

4. Key Problem • Economies that derive much of their income from natural resources cannot sustain growth by substituting physical capital accumulation for deteriorating natural capital The Quality of Growth: ch 4

5. Environmental hotspots • Air pollution • Waterborne diseases and water pollution • Overexploitation and degradation of natural resources The Quality of Growth: ch 4

6. 1) AIR POLLUTIONActual or estimated concentration (ug/m3) of particulates (PM10) in urban areas. PM10 consists of fine particulate matter smaller than 10 microgrammes in size and is the primary cause of mortality and morbidity from air pollution. Each city with population of 100,000 or more is identified separately.

7. Air pollution:kills more than 2.7 million people every yearreduces economy output because of the loss of productive workdays

8. 2) WATER POLLUTIONEstimated DALYs per 1000 people resulting from mortality and morbidity associated with diarrhoeal diseases. DALY (Disability Adjusted Life Years) is a standard measure of health impact.

9. Water Pollution:the poor are hurt the most,especially children and agricultural workers

10. 3) Overexploitation and degradation of natural resources • Soil degradation is a problem everywhere (high costs) • Desertification • Increases in the intensity and frequency of floods and droughts The Quality of Growth: ch 4

11. Significant Benefits of Environmental Action • The present discounted cost of providing everyone in China with access to clean water within 10 years is US$40 billion, and the present value of benefits is US$80 billion to US$100 billion (World Bank, 1997) • With payoffs so large, why do environmental degradation and destruction continue? The Quality of Growth: ch 4

12. The main reason is that private returns on investment in environmental protection are significantly smaller than private costs (Dasgupta, 1994) • Policy distorsions reflecting undervaluation of the environment contribute to pollution and degradation (Dasgupta, 1994) i.e. Energy subsidies to keep consumer prices low contribute to overconsumption and excessive pollution The Quality of Growth: ch 4

13. Possible Solution • Removing subsidies • Imposing environmental taxes policy reforms can alleviate distortions and allow prices to reach their optimal level but... The Quality of Growth: ch 4

14. The Grow-Now-and-Clean-Up-LaterMind Set • Affects developing countries • Examples of industrial countries While air and water pollution levels appear to be reversible, their impacts on human well-being often are not The Quality of Growth: ch 4

15. The Growth – Natural Capital – WelfareNexus Natural Capital Growth Welfare The Quality of Growth: ch 4

16. A relationship between pollution and per capita income? Environmental quality 12,000US$ Per capita income The Quality of Growth: ch 4

17. The governement and the environment • Many countries have integrated environmental concerns and growth policies • Examples: • Costa Rica: Rich biodiversity but high deforestation in the 80´s • Creation of a system of Forest Protection: • Policies for the creation of a Market for some environmental benefits = Succes on capturing carbon sequestration and watershed protection The Quality of Growth: ch 4

18. China : Pollution Levy system Any firm whose effluent discharge exceeds a legal standard must pay a levy (‡ tax) Result: With 10% of growth per year Decline in pollution per unit of output Indonesia: Problems to monitor and enforce compliance to prevent pollution Development of the PROPER (Program for pollution control, evaluation and rating) = Receives pollution data, analyses and rates environmental performance then publishes the results The Quality of Growth: ch 4

19. Europe:The Blue Flag campaign = program coordinated by the Foundation for Environmental Education in Europe Aim: Costal environment appreciation A beach or marina receives a Blue Flag if it meets a set of criteria set up by the Foundation ( environmental quality, management of safety and environmental education and information) Denmark, Greece and Spain The Quality of Growth: ch 4

20. The State Role For greatest impact, the goverment should intervene selectively • Streamline subsidies and implement environmental taxes • Diminish perverse subsidies • Promote Green and Pollution taxes • Move from central control to Partnerships • Ex: CAMPFIRE in Zimbabwe: creation of alliances between • provincial governments and private sectors and local inhabitants in • managing wildlife for profit and biodiversity conservation The Quality of Growth: ch 4

21. Clarify Property rights, resource ownership and environmental liabilities • Ex: Forests in Japan • Fisheries in Turkey • Irrigation water in South India • Pastures in Suiss Alps, Himalayas and Andes • Improve governance and reduce corruption • Prevent misuse of public resources for private gain by • the political elite • HIGH PRIORITY MEASURE The Quality of Growth: ch 4

22. Global Environmental issues must be confronted Ex: Fossil fuel combustion (gases) + Deforestation + Farm Activities + Coal mining + Leakages from natural gaz = Greenhouse Effect and Global Climate Change The Quality of Growth: ch 4

23. Natural tension between growth and environmentally healthy practices Need of financial and technical assistance from the International Community Need of cooperation between rich and poor countries The Quality of Growth: ch 4

24. Adress your concerns to: The Global Environment Facility Organization that helps to solve environmental problems through collaboration between industrial and developping countries The Quality of Growth: ch 4

25. Conclusion • In slow and fast growth countries: • Several indicators of the quality of Natural Capital tend to worsen • In faster growing economies: • More ressources available to invest on • improvement of Natural Capital • ”Grow-now-and-clean-up-later” approach • Growth with Sustainability of Natural capital The Quality of Growth: ch 4

26. The role of the State is crucial in environmental management • Be selective and efficient in intervention • Global Environmental problems are huge but they offer the opportunity to adress nation problems with international cooperation • Development of transfer mecanisms for resources to pay global externalities The Quality of Growth: ch 4