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INTRODUCTION

Towards the end of the 20th century the economic discipline began to seriously
acknowledge the central importance of environmental sustainability to the process of
economic development. It is now widely accepted that long-term economic growth
requires not just accumulation of technology, physical capital, and labour, but also
the preservation of the natural capital base.

Whereas other factors of production may be replaced and are often substitutable,
ecosystem services provided by waterways, forests, and fertile land are an essential
and largely finite resource. Once damaged, they may become unusable for long
periods, and their repair is often an expensive and protracted process. As these
natural systems are the primary source of economic inputs such as economic
development. For this reason, academics and policymakers have become
increasingly concerned with national accounting procedures that include measures
of environmental capital.
In 1987 the United Nations Report on sustainable development foresaw the
need for “a new era of economic growth, one that must be based on policies that
sustain and expand the environmental resource base” (WCED 1987). It has
taken a long time for that message to sink in. As the Commission on Growth and
Development (2008: 135)—chaired by Nobel Laureate Michael Spence and
constituted predominantly of senior developing-country economic policymakers
(including from the People’s Republic of China [PRC], India, and Indonesia)—put
it:

It is only a slight exaggeration to say that most developing countries decide to grow
first and worry about the environment later. This is a costly mistake… The poor
suffer the most from many kinds of pollution… Early attention to environmental
standards serves the interests of equity as well as growth.
Environmental damage not only undermines the sustainability of growth, putting
future welfare at risk, it also exacts a large welfare cost here and now. Low-income
groups, particularly in rural areas, disproportionately subsist on environmental
services. Poverty limits the ability of poor households to find alternatives to a
contaminated water source or harmful cooking fuels.Where the capacity to earn
income or receive education is affected, such as health problems related to
pollution and food insecurity, environmental problems reinforce poverty.
Consequently, environmental degradation is a fundamental development issue in
Asia today, as well as to 2030 and beyond.

Recognizing these risks, policymakers throughout Asia are giving increasing weight
to environmental concerns. The economic imperative for environmental protection is
now a principal policy issue. The PRC’s 12th Five Year Plan (2011–2015) places
“green growth” at the centre of the country’s development path, with ambitious
targets for renewable energy, carbon intensity, water and energy efficiency of
production, emissions of major pollutants, among others (see NDRC 2011). The
Indian government has similar goals, and views water security in particular as
fundamental to economic development (GoI 2009, ADB 2007), whilst ASEAN
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members formally recognize the necessity of environmentally sustainable growth.