Balancing Economic Growth And Environment for Economic Growth

Subject : Economics

Submitted By : Hiya Bharali

UID SF0121023

Faculty-in-charge :

NATIONAL LAW UNIVERSITY AND JUDICIAL ACADEMY, ASSAM

 1. INTRODUCTION

Overview
Literature Review
Research Questions
Scope and Objectives
Research Methodology

2. A BRIEF UNDERSTANDING OF SUSTAINABLE DEVELOPMENT

2.1 Development of the Concept of Sustainable Development

2.2 Essentials of Sustainabilty as Decided in Rio Declaration
2.3 Problems faced in Way of achieving sustainable development

3. ECONOMIC GROWTH WITHOUT HARMING THE ENVIRONMENT

3.1 Relationship between Environment and Economic Growth

3.2 Sustainable use of Environment for long term economic growth
3.3 Environmental Policy effect for sustainable growth and healthy economy

4. BALANCING ENVIRONMENT AND ECONOMIC GROWTH IN UTTARKAHND

5. CONCLUSION

6. BIBLIOGRAPHY
1. Introduction

Through its many services it offers and as a direct input into production, the environment plays
a significant role in our economy. Minerals and fossil fuels are examples of environmental
resources that directly assist in the production of goods and services. Other services are also
provided by the environment. Additionally essential to our well-being, it gives us opportunities
for recreation, enhances our health, and does much more. The prosperity and well-being of the
economy and its citizens, in both developed and developing economies, depends on economic
growth. It stimulates advances in technology and also an important factor in enabling other
drivers of wellbeing, such as improvements in health, education, and overall quality of life.
Usually, when we talk about economic growth, we mean an increase in the quantity of goods
and services that an economy produces, as measured by metrics like the Gross Domestic
Product (GDP). While the value of goods and services offered through the market is reflected
in the GDP and other comparable measures, many other goods and services that are not offered
through the market but still contribute to overall welfare are not included. Because of this, the
GDP does not accurately reflect many of the elements that influence society's well-being.
Human wellbeing is a complicated and multifaceted concept that is influenced by a variety of
variables, such as income levels (both absolute and relative), health status, level of education,
living conditions, and environmental quality.

While economic growth has produced many benefits – raising standards of living and
improving quality of life across the world – it has also resulted in the depletion of natural
resources and the degradation of ecosystems. There has been much debate over whether or not
it is possible to achieve economic growth without unsustainably degrading the environment,
and a growing realisation that economic growth at the current rate of depletion and degradation
of environmental assets cannot continue indefinitely. Despite the fact that wellbeing is a
multifaceted concept, economic growth continues to play a significant role in enabling or
driving improvements along many of these dimensions.

The Millennium Ecosystem Assessment of 2003 found that 15 out of the 24 ecosystem
services it examined were being degraded or used in an unsustainable manner, and that the use
and consumption of natural resources like minerals and metals is continuing to rise. Some
believe that the finite world is The extent to which economies can continue to grow over time
is constrained by Earth's resources. Others contend that sustainable resource use is compatible
with sustained economic growth, with the costs of inaction likely to be much higher than the
costs of immediate action.
Literature Review

A ) H. Daly, 1997, ‘Beyond growth: The economics of sustainable development’, Boston, MA:
Beacon Press. In this Book Daly as a former economist at the World Bank, Daly takes them
head on in Beyond Growth with reasoned arguments and increasingly intellectual elegance. He
begins by challenging the trendy and fluid nature of the term sustainability. “One way to render
any concept innocuous is to expand its meaning to include everything,” he writes. He then gives
his definition of sustainability: “Development without growth beyond environmental carrying
capacity, where development means qualitative improvement and growth means quantitative
increase.”

a) Tim Everett, Mallika Ishwaran, 2010, ‘Economic Growth and the Environment’, Defra
Evidence and Analysis Series.

As the UK economy emerges from the downturn, attention is shifting to how best to return it to
sustained and durable economic growth. But what does sustained and durable economic
growth mean in the context of the natural environment? The UK and the global economy face
significant environmental challenges, from averting dangerous climate change to halting
biodiversity loss and protecting our ecosystems. There has been debate over whether it is
possible to achieve economic growth whilst also tackling these challenges. This

paper does not try to answer the question of what the sustainable level of economic growth
might be, but instead examines the link between economic growth and the environment, and
the role of environmental policy in managing the provision and use of natural assets.

b) Pawan Deep Singh, Economic Growth and Sustainable Development in Himalayan State,
January 2017, RESEARCHGATE

Sustainable development is a constantly evolving concept. Thus the will to improve

everyone's quality of life, including that of future generations, by reconciling economic
growth, social development and environmental protection sustainable development becomes
very important. The present piece of work is an attempt to explore the concept of sustainable
development & highlights the importance of sustainable development in Uttarakhand and
suggests some important measures to improve sustainability. The relation between economic
growth and sustainable development is also presented in this paper.
Research Questions

a ) What is sustainable development and what are the problems faced while achieving it ?

b) How to balance economic growth and environment for sustainable development ?

Scope

This paper is limited to the study of economic growth only to that extent as it helps in the
maintenance of sustainable growth. It does not attempt to study other aspects of economic
growth and development. Furthermore, the paper attempts to study the environment and how it
should be maintained to achieve sustainable growth along with the economy. The paper also
presents a case at last to display how economic growth and environment can be balanced for
sustainable growth.

Objective

a) To study the concept of sustainable development and the problems in way of achieving it

b) To study how economy and environment can be balanced to achieve a sustainable growth

Research Methodology

This project uses the method of doctrinal research which is related to secondary sources from
libraries, archives, journals etc. A number of journals articles and research papers from online
sources were used while creating this paper. It does not take into account any primary data and
citations are used strictly to maintain the authenticity of the sources.
2. A BRIEF UNDERSTANDING OF SUSTAINABLE DEVELOPMENT

2.1 Development of the concept of sustainable development

By "sustainable development," people typically mean that the nation's economy should grow
now, but it also needs to be ensured that this growth won't jeopardise the needs of future
generations. As a result, sustainability envisions long-term growth where everyone enjoys better
quality of life. Sustainable development ideologies incorporate a series of concerns relating to
the global impact of human activities by including ecological limits, basic human needs,
distributive justice between present and future generations, economic growth, ethical, spiritual
and religious values.1 A human being is dependent on the economy, environment, and society,
which are the three main components of sustainability, for survival. The needs of these three
groups must be balanced. It should be noted that these divisions frequently overlap and are not
completely separate. The realisation and application of human rights implies that the
fundamental needs of the human being are satisfied. Access to basic necessities like food,
shelter, employment, and fair income distribution is also included. The goal of social
development is to enable the underprivileged to use more of the resources that are available to
them in order to meet their own needs and improve their own lives. Women, children, members
of indigenous cultures, those with disabilities, and all other members of populations thought to
be most susceptible to the effects of poverty are given special consideration in order to ensure
fair treatment. Economic growth increases employment opportunities and people's capacity to
earn a living for their families and themselves. Sustainable agriculture, industry, and full
inclusion in the global economy are all aspects of economic development. The full realisation of
social and economic developments depends on and reinforces one another. In June 1972, the UN
General Assembly held a conference in Stockholm on the "human environment," which
produced a set of guiding principles.  It emphasised that man has a fundamental right to a healthy
environment and that he also has a duty to preserve the environment for both current and future
generations. It also argued that protecting the earth's natural resources is necessary for both
current and future generations.
In 1983, the World Commission on Environment and Development was established to address

1
T Franks, 1996, ‘Managing sustainable development: definitions, paradigms and dimensions’, Sustainable Development, Vol 4
No
the problems relating to the ongoing depletion of natural resources and unsustainable
development. Sustainable development was defined as "development that meets the needs of the
present without compromising the ability of future generations to meet their own needs" by the
Brundtland Commission (1983). The UN Conference on "Environment and Development" (also
known as the "Earth Summit") was held in Rio de Janeiro in 1992, twenty years after the
Stockholm Declaration, and an action plan known as "Agenda 21" was adopted. The goals of
Agenda 21 included eradicating poverty, providing access to healthcare and clean water, and
safeguarding the environment. It should be noted that a number of the Millennium Development
Goals3 (see UNDP) have called for protecting the environment and lowering the proportion of
people living in extreme poverty. Therefore, in order to achieve sustainable development,
economic viable development, socially equitable development, and environmental protection
have all been emphasised at major global conferences and initiatives on environment and
development.

2.2 Essentials of sustainability as decide in Rio Declaration

The Rio Declaration on Environment and Development elaborates on the term by outlining
various sustainability tenets.(1) People have a right to live a healthy, productive life in harmony
with the natural world. (2) Current development must not jeopardise the needs of present and
future generations in terms of environment and development. (3) Nations have the sovereign
right to use their own resources for economic gain, but only within their own borders and
without endangering the environment. (4) To provide compensation for harm that activities
under their control cause to areas outside of their borders, nations must create international laws.
(5) In order to protect the environment, nations must take precautions. Scientific uncertainty
cannot be used to delay cost-effective environmental preservation actions when there is a risk of
severe or irreversible harm. . (6) Environmental protection must be a crucial component of
development in order to achieve sustainable development; it cannot be viewed separately from it.
(7) Achieving sustainable development and meeting the needs of the majority of people depend
on eliminating poverty and minimising differences in living standards across the globe. (8)
Nations must work together to preserve, safeguard, and restore the ecosystem's balance and
integrity. In light of the demands their societies place on the environment, as well as the
technology and financial resources they control, the developed countries recognise their role in
the global effort to achieve sustainable development. (9) Countries should eliminate
unsustainable production and consumption patterns and encourage the right demographic
policies.

2.3 Problems in way of achieving sustainable development

People concerned about sustainable development suggest that meeting the needs of the future

depends on how well we balance social, economic, and environmental objectives or needs
when making decisions today. Many of these objectives may seem to conflict with each other in
the short term. For example, industrial growth might conflict with preserving natural resources.
Yet, in the long term, responsible use of natural resources now will help ensure that there are
resources available for sustained industrial growth far into the future. If we don’t balance our
social, economic, and environmental objectives in the short term, we cannot expect to sustain our
development in the long term. Climate change, technological advancement, resource depletion,
pollution, the global environment, the breakdown of economic and social conditions, the fight
against poverty, and the unequal distribution of resources between rich and poor nations are just
a few of the difficulties associated with sustainability.2 There are other communities on the
planet that live alongside humans, including communities of plants and animals, and none of
these communities can exist without the others. A collaborative approach is required to deal with
these interdependent communities of people, plants, and animals so that scientists from various
fields can better understand the limitations and conditions of these communities.

3. ECONOMIC GROWTH WITHOUT HARMING THE ENVIRONMENT

3.1 Relationship between economic growth and environment

The natural environment contributes directly by providing resources and raw materials like
water, timber, and minerals that are needed as inputs for the production of goods and services, as

2
R. Raskin, M. Chadwick, T. Jackson and G. Leach, 1996, The Sustainability Transition: Beyond Conventional Development,
Stockholm: Stockholm Environment Institute Sida, 1995, Promoting Sustainable Livelihoods: a Report from the Task Force
on Poverty, Stockholm: Sida.
well as indirectly through services provided by ecosystems like carbon sequestration, water
purification, managing flood risks, and nutrient cycling. The natural environment also plays a
significant role in supporting economic activity. Therefore, natural resources are essential for
ensuring economic growth and development, both now and in the future. Environmental
protection and economic development have a complicated relationship. A number of factors are
at play, including the size and composition of the economy, particularly the proportion of
services in the GDP as opposed to manufacturing and primary industries, and technological
advancements that have the potential to both drive economic growth and lessen the
environmental effects of production and consumption decisions. A complete decoupling of the
production of goods and services from their environmental impacts is necessary to achieve
sustained economic growth because many essential natural resources and ecosystem services are
scarce or under pressure. This entails utilising natural resources in a sustainable way, whether
through increased resource efficiency or the adoption of cutting-edge manufacturing processes
and product designs. Avoiding critical threshold breaches is another way to ensure that natural
resources continue to support the desired level of economic activity.

Existing commitments to prevent dangerous climate change serve as an example of the need for
complete decoupling because they call for a decrease in greenhouse gas emissions despite a
growing global economy. The UK may be achieving absolute decoupling for many air pollutants
and carbon emissions, according to empirical evidence, but this is not true for all environmental
resources or for all developed economies. Furthermore, the evidence suggests that changes in the
location of production, with many of the goods and services now produced in other nations,
contribute to the decoupling in the UK. This demonstrates the significance of technology and
innovation in reducing environmental impacts—not just in the UK but around the world—as
well as the opportunities it creates for UK businesses and industries.

3.2 Sustainable use of environment for long term economic growth

The long-term trend in economic output over the past 200 years has been unmistakably upward,
despite temporary downturns and setbacks. It has increased employment and income levels and
continues to be a major driver of the necessary level of public and private investment in
technology and infrastructure to support the transition to a low-carbon and resource-efficient
growth path. Additionally, economic development has given developing nations the chance to
raise their game in response to environmental challenges and enhance the standard of living for
their people. The demand for imports from developed economies, investment, and aid all play a
significant part in promoting global economic growth and development.

Combining various forms of capital is necessary for economic growth in order to produce goods
and services. These include natural capital, which is most important, produced capital, such as
the raw materials we extract from the earth and the carbon sequestration services provided by
forests and soils; human capital, such as skills and knowledge; and produced capital, such as
machinery, buildings, and roads. Natural capital changes can potentially be irreversible, some
components have critical thresholds beyond which abrupt and dramatic changes may happen,
some have finite limits, and their effects last for several generations. Therefore, even though
natural capital is used to spur growth, it must be utilised sustainably and effectively to ensure
growth over the long term. This is most obvious in the context of non-renewable resources like
oil and minerals, but the rate of consumption of ecosystem services like biodiversity and carbon
sequestration as well as renewable resources like forests and fisheries must also be taken into
account relative to their rates of recharge and replenishment.

For an economy to grow, capital must be created, whether it be produced, human, social, or
natural. As long as the decision to deplete them reflects the real costs of environmental
resources, taking into account their scarcity and how substitutable they are, and only if adequate
investments are made in other types of capital, declining levels of some natural assets, such as
the use of minerals and metals in manufacturing, can be acceptable. However, interventions to
keep these thresholds from being exceeded must be taken into consideration where
environmental resources have critical limits beyond which they cannot be replaced by other
types of capital.

3.3 Environmental Policy effect for sustainable growth and healthy economy

The nature and severity of the environmental impact being addressed, the policy design chosen,
and the sectors it affects will all have an impact on the economic impact of environmental policy.
Policies that increase the effectiveness with which companies use resources like energy, water,
and materials result in sustainable growth as well as cost savings for companies. Businesses in
the UK, for instance, could save up to £6.4 billion annually by improving their resource
efficiency, which would reduce the amount of waste they produce and the amount of energy and
water they use.  In general, measures to properly value environmental resources may result in an
increase in costs soon. This must be weighed against the potential for these policies to encourage
innovation and increased resource efficiency. Environmental policy can be a powerful innovation
driver because it increases certainty about the likely future political landscape for businesses.
The extent to which the environmental impacts being reduced are reflected in market prices,
however, determines the extent to which this produces growth benefits in the short-term.

There is some evidence that there are short-term trade-offs between environmental regulation
and growth (or productivity), but these effects are typically negligible or even negligible. For
instance, macroeconomic effects of the EU Emissions Trading Scheme were found to be almost
nonexistent in economic modelling of its effects.3

In addition, smart and cost-effective policy design could be used to further reduce any short-
term trade-offs between environmental policy and economic growth. This includes:

• considering the best mix of instruments to deliver environmental objectives, from pricing
the externality, to investing in technology and infrastructure, and influencing behaviour;

• providing a clear regulatory framework for businesses and consumers to operate in, now
and in the future; and

• designing policies in ways that minimise regulatory burdens on the broader economy, both
in terms of administrative and policy costs.

The long-term cost to growth of taking action now to ensure the efficient and sustainable use of
natural resources is probably less than the costs of doing nothing. The costs of preventing
catastrophic climate change, for instance, are estimated by Stern (2006) to range from a 1% gain
to a 3.5% reduction in global GDP in 2050, whereas the costs of failing to do so are estimated to
be much higher - between 5% and 20% of global GDP. By establishing the proper incentives
now, we can change our production and consumption patterns in a way that will require less
drastic and expensive changes down the road.

3
S. Peterson, (2003), “The EU Emission Trading Scheme and its Competitiveness Effects for European Business: Results from
the CGE Model DART”, Kiel Institute for World Economics
In order to maintain a natural environment that promotes wellbeing and permits long-term
economic growth and development, it is crucial to create a consistent, coherent, and effective
environmental policy framework.

This necessitates: comprehending critical thresholds and the potential for significant changes in
the functioning of natural assets; valuing smaller changes in the provision and use of
environmental resources and services and factoring them into economic decisions; investing in
infrastructure and R&D to address market failures while ensuring that it does not compete with
private investment; and removing obstacles to behaviour change and the adoption of cost-
effective measures. Designing effective policies that deliver environmental results and aid in the
economy's pursuit of durable and sustained growth requires addressing these issues. The purpose
of environmental policy is to ensure that natural resources are used wisely, sustainably, and in
accordance with any potential critical thresholds. By doing this, we can guarantee that natural
resources will continue to benefit our wellbeing and foster and support future economic growth.

Environmental policy can also encourage the adoption of best practises and improvements in the
production process while assisting businesses in realising cost-effective resource savings. For
instance, it's been calculated that companies in the UK could save up to £6.4 billion annually by
implementing free or inexpensive measures to increase their resource efficiency.4Information
dissemination and other measures to remove obstacles from the business adoption of resource-
efficient practises and measures result in financial and environmental gains.

4
D. Eatherley and S. Slater, (2009), “Competitiveness Improvements Potentially Available from Resource
Efficiency Savings”, report for Defra.