Assignment 1 (GE) Q7

ECONOMIC
DOVELOPMENT

Amit Kumar Sihag Submitted To

1921180 Saumyajit
BA PROGRAMME Bhattacharya
1
Q7
 Q7. What is meant by sustainable development? What are the issues
involved in discounting climate change. Are market prices adequate
signals of resource scarcity?
Evaluate the opinion that for developing countries environmental
concerns should be of lower priority compared to growth objectives.

Sustainable development:
 ‘Development which meets the needs of the present without
compromising the ability of future generations to meet their
own needs’.
 This most widely accepted definition of Sustainable Development
was given by the Brundtland Commission in its report Our
Common Future (1987).
 Sustainable development (SD) calls for concerted efforts towards
building an inclusive, sustainable and resilient future for people and
planet.

2
Q7
 Core Elements of Sustainable Development

 Three core elements of sustainable development are

economic growth, social inclusion and environmental protection. It
is crucial to harmonize them.
 Sustainable economic growth, achieving sustainable livelihood, living
in harmony with nature and appropriate technology are important
for sustainable development.
 1. Environmental Sustainability:
o It prevents nature from being used as an inexhaustible source of
resources and ensures its protection and rational use.
o Aspects such as environmental conservation, investment
in renewable energy, saving water, supporting sustainable
mobility, and innovation in sustainable construction and
architecture, contribute to achieving environmental sustainability
on several fronts.
 2. Social Sustainability:
o It can foster gender equality, development of people,
communities and cultures to help achieve a reasonable
and fairly-distributed quality of life, healthcare and education
across the Globe.
 Economic Sustainability:
o Focuses on equal economic growth that generates wealth for
all, without harming the environment.
o Investment and equal distribution of economic resources.
o Eradicating poverty in all its forms and dimensions.

3
Q7
Global issues Related to Sustainable Development:

 Inequitable growth of national economies (North-South Divide)

 Loss of Biodiversity: Despite mounting efforts over the past 20
years, the loss of the world’s biodiversity continues.
 Climate Change: As a global problem, climate change requires a
global solution. Within climate change, particular attention needs to
be paid to the unique challenges facing developing countries.
 Tackling climate change and fostering sustainable development are
two mutually reinforcing issues.
 Intellectual Property Rights (IPRs): There is a need for welfare for all
rich and poor to have affordable access to the results of innovation
that can lead to sustainable development.

4
Q7
DISCOUNTING CLIMATE CHANGE
Discounting is the process of
converting a value received in a future
time period (e.g., 1, 10, or even 100
years from now) to an equivalent value
received immediately.
Discounting is particularly significant for
understanding the present value of
mitigating climate change. This is
because climate change has long-
lasting effects: the warming effects of
greenhouse gas (GHG) emissions
released today remain for hundreds of
years or more.
Discounting allows policymakers to
measure the present value of the long-
term benefits that come from reducing
these greenhouse gas emissions.
While the benefits of decreasing
emissions are spread over hundreds of
years, the costs typically occur in the
short run. This means that the costs will
be minimally affected by discounting,
while the benefits—, which are spread
across many years in the future—may
be significantly affected by discounting.
This disparity between the timing of the
costs and benefits means that
discounting can greatly impact the
benefit-cost analysis of any policy or
investment that affects GHG emissions.
Q7
FOR EXAMPLE
Building a renewable wind farm
requires capital investments (short-term
costs). Once built, this wind farm will
reduce emissions over the course of its
lifetime and the benefits will extend even
further into the future, since avoided
warming effects last for hundreds of years
(long-term benefits). The present value of
the benefits from this wind farm will vary
depending on which discount rate is used,
while the present value of the cost will not
be significantly affected by the discount
rate.
The example above only considers
benefits occurring 200 years from now.
But, in reality, reducing emissions today
has impacts that occur gradually over
time, not just in 200 years but next year,
the year after, and so on. Each ton of
greenhouse gas emitted into the
atmosphere has some impact each year
into the future. The costs of these annual
impacts are discounted (converted to the
present value) and added up, and the
resulting sum is called the social cost of
carbon (SCC). Since these costs are
discounted over time, the discount rate is
a significant determinant of the SCC.
5
 RESOURCE SCARCITY
RESOURCE scarcity occurs when demand for a natural
resources is greater than available supply –leading to a
decline in the stock of available resources. This can lead to
unsustainable growth and rise in inequality as price rise
making the resource less affordable for those who are least
well off.
For an individual wishing to acquire a resource commodity,
Market price is a valid indicator of exchange value. A resource
become scarce if its exchange value increases or the sacrifices
required to obtain it increase. It is this meaning if scarcity that
we term exchange scarcity.
Market price ∝ Resource scarcity
(extent of market equilibrium)
DEBATE
“For developing countries environmental concerns should be of
lower priority compared to growth objectives”.

Context:
All economies in the world exist within the global ecosystem.
Destruction of our ecosystem means destruction of our
economies in both developed and developing countries.
Rapid growth of population, income per capita and use of fossil
fuels over the past half century have led to major threats to
climate stability and to ecosystems in both developed and
developing countries.

6
Q7
 FAVOUR
The basis of view that Developing countries should focus on
economic growth giving lower priority to environment
conservation is the idea that environmental quality comes only
after basic needs such as food and housing are met. So,
countries should focus initially on economic growth even if it
comes at the expense of environmental quality.
As countries become richer, they can afford to clean up
pollution from the past and as public demand for cleaner
environment increases, governments can enact and enforce
stricter pollution control regulations. This is the Environmental
Kuznets Curve (EKC) hypothesis and is supposed to explain
why environmental quality has improved in richer countries.
The argument is simple:
“pollute first; clean up later".

7
Q7
 ARGUMENT
Nobel prize-winning economist Kenneth Arrow argues that the
“pollute first; clean up later" approach is flawed.
1. In the case of global pollutants such as carbon dioxide, there is
not enough evidence that its levels start falling after countries
become richer.
2. It is not clear how much damage we can cause to our ecological
systems before which they start undergoing irreversible changes.
Such irreversible changes can lead to changes in the earth’s life-
supporting systems, with unpredictable consequences.

3. The improvement in environmental quality after an income

threshold may have more to do with the ability of developed
nations to shift polluting industries to developing nations at low
economic cost and less to do with public demand for policies that lead to
a cleaner environment.
Thus, our policy should not be based on the “pollute-first; clean-up-later"
approach.

8
Q7
THE WAY FORWORD
 Planning of development projects and explicitly
identify trade-offs between economic benefit and
ecological impact
 Meaningful public participation in decision-making
in a variety of environmental and natural resources
management will build greater trust among various
stakeholders and reduce conflict.
 The idea of sustainable development cannot be mere
rhetoric; it must be accompanied by transparent,
participatory mechanisms that allow for meaningful
discussion of the development paths that make
growth truly sustainable.
 Subsidize/”incentivize” green technology and/or tax
pollution.

Thus Pursuing economic growth at the expense

of the environment is no longer an option as
Europe faces “unprecedented” challenges from
climate chaos, pollution, biodiversity loss and
the overconsumption of natural resources,
according to a report from Europe’s
environmental watchdog.

9
Q7