Second Book

Economic growth vs. sustainable development

Abstract

In this chapter we analyze two fundamental aspects such as economic growth of the city
and sustainable development, which for many people are two irreconcilable concepts.
That is, the city needs to grow; consequently, it has to use as many resources as
possible with disregard to their depletion. The second aspect deals with the city that our
children’s children will inherit, and tries to preserve resources for them. Since
population is increasing more resources are needed, however it is believed that a
compromise, a trade-off, can be reached where sustainable development indeed
balances economic growth. In other words it is possible to have economic growth
respecting at the same time our environment and resources and preserving them for
generations to come.

Background
Everybody wants a city that growths, implying increased salaries, more affordable
dwellings, better schools and healthcare system, less travel time between city places,
more variety of goods and services, etc. There are hundreds of books on Economics
dealing with this subject, explaining economic concepts, proposing economic policies
and measures and in general linking the city with economics issues, and also with social
problems which are intimately linked with economics.

However, most books do not take into account two very important aspects: environment
and sustainability. That is, say that one of the activities of the city is the logging
industry, it is of course beneficial to have as many sawmills as possible, many plants
processing timber products, and a flourishing dwellings program for construction of
wooden houses. Of course the logging, saw milling, and house construction activities
progressively increase the value added to the original product starting with the timber
and then, from the precedent operation incrementing the value of the product in each
successive operation. That is, there will be a value added in the saw mill for dressing the
log, another value added in the transportation of lumber to lumber stores, another value
added to the selling price to the building contractor, and finally another value added
charged by the builder.

However two very important aspects are usually neglected: There is an environmental
cost that is not added to the product, and there is no provision to make sure that the
resource will not be depleted in the near future. Which is the environmental cost? After
logging a forest the soil rapidly losses its nutrients which are carried away by rain. If the
situation continues, that is not reforesting, the soil will be erosioned and lost for
cultivation. Besides, there are additional environmental costs such as the decrease in
rains provoked by the disappearance of the forest. There will be no animal life, and no
bio-organisms in the soil. By flying over a logged area one can appreciate the
devastation produced by this operation, however, this important cost is not included in
the product

The second effect is related with the resource itself, the trees. If there is no reforesting,
this resource will disappear and our children will inherit only a barren soil.
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This sad conclusion can be improved by mandatory reforesting, that is by planting trees.
In this way, the resource is renewed and be again available in a certain period and not
depleted forever. This scenario replicates in many other activities in a country, for
instance in agriculture, where the final price of a product does not take into account the
continuous impoverishment of the soil due to losses of nutrients, the contamination of
underground water sources (aquifers) by chemicals from fungicides, pesticides and
fertilizers. It also replicates in the mining industry where the price of a metal does not
consider the alteration of the environment caused by open cut or by underground
excavation, neither the migration of wildlife because the noise produced by the mining
equipment, or the generation of dust provoked by the mining transport equipment, and
the eventual contamination of underground water with the chemicals used in obtaining
the metal from the mineral.

We can also make a similar analysis in other industries such as the commercial fishing
where excessive catching can deplete whole species, as has already happened with the
anchovies (anchoveta) in Peru.

Solutions
The only mention of the above commented consequences makes anybody shudders, and
many people claim for measures to be taken for using our resources more wisely and to
save them for future generations, however, these activities are paramount for economic
growth. Just imagine life without wood and paper, without lumber to build houses, with
no minerals to build cars and machinery, etc. Therefore, many people can reach the
conclusion that all of this is unavoidable, and it is then one or the other, the environment
or our progress. As a matter of fact there is a school of thought that supports this idea.
In other words, the resources are there for us to use them, provided that they contribute
to a better life.

Another line of thought believes that it is imperative to keep our resources, not only for
the sake of our descendents, but also because the life of our planet. This is also
impracticable since people need food and shelter, transportation, and products made
from resources.

What is then the solution since it appears that there is a dichotomy, that is a mutually
exclusive policy? We believe that there is a middle point between these two concepts of
economic growth and sustainable development, which is using our resources in a
sustainable way.

The sustainable way

When considering renewable resources such as fishing, logging and agriculture,
humankind must learn to live with the ‘interest’ generated by these resources and not in
consuming the capital, the same way as many people live with the renewable interest of
their savings deposited in a bank on term deposits and not touching the principal or
capital. This is one extremely important way, and with it, we can help in maintaining a
renewable resource forever. This calls for the following measures:

 Replanting our forests and then logging them in a rational interval, giving them
time to grow.
 Catching yearly a certain quota of fish but allowing them to reproduce.
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 Using land in agriculture in a rational way, returning to the soil the nutrients
taken by crops, but using organic fertilizers.
 Using our water sources, but allowing them to replenish, especially when we are
extracting water from our aquifers. We need to keep our rivers and lakes clean.
Contaminants such as nitrogen and phosphorous, coming from fertilizers
provoke the proliferation of weeds, which use the necessary oxygen for fish
making them to emigrate and converting our rivers and lakes into sewers. There
are wonderful examples of how some watercourses have been environmentally
‘reborn’, such as the great River Rhine, which was so polluted that no fish could
live there. Then, a gigantic international effort cleaned the river, and prohibited
the discharges from industrial plants and sewage. The results? The Rhine has
now clear water and the fish is again living in its water.
 We have to also save one resource that is more than fundamental: oxygen. Many
cities are so polluted by industrial discharges that people have to wear masks, to
say nothing of the stained buildings, the destroying of art by corrosive agents,
and the disappearance of wildlife. We also need to apply the ‘interest policy’ in
our air, allowing trees to absorb the CO2 that our industries and cars produce,
and to convert them in oxygen. In order to help this effort we need to plant more
trees in our cities, and of course, to put a limit to automobile traffic in certain
parts of town. Cars are indeed necessary, but our efforts should be addressed to
develop not contaminant vehicles, even if their cost and operation is higher than
actual prices. This is not a matter of economics, is a matter of survival.

This way, we still can have a fishing industry, we still can use wooden products, we still
can drive cars, that is we are not calling for a halt in economic growth; we are calling
for a sustainable use of our resources and in so doing helping our environment, using
only which is renewable, keeping the capital, and saving it for our descendents.
That is we can live in a sustainable way.

The efficiency way

There is also another effective way which consists in reusing or recycling products
made out of paper, wood, metals, plastics, etc. This subject will be treated in Paper No.
4, ‘The issue of excessive consumption and the subject of domestic and industrial
refuses’.
This is the only way, other than a more efficient use of our natural resources, for
extending the life of such resources that are not renewable such as minerals.
Unfortunately, we cannot recycle our fuels once they are burnt, but we can make a
better use of them instead of being burnt. In some extent, recycling plastics made from
hydrocarbons can greatly help in saving our oil sources and land in our landfills.

How to qualify a project

Usually, a large project will involve some sort of utilization of natural resources and
some alteration of the environment. Consequently, it is nowadays mandatory the
execution of an Environmental Impact Assessment (EIA) to determine the impacts of a
project on the environment. The result of this assessment will show how much is the
environmental cost of a project, which can be then compared with the benefits that it
will bring. If the impacts cause a large damage to the environment, then measures must
be taken to reduce them.
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For instance, suppose that a central city is considering the construction of a highway
linking the city with different towns and villages of its metropolitan area. It extends
more or less in a linear succession of human settlements along seashore, and which are
located at different levels. There will be positive impacts such as the economic, social
and environmental benefits, derived from timesavings in transporting people and
merchandise within the area, and a decrease of accidents compared with the present
situation because the narrow road. There also will be the possibility of using a dedicated
sector for an interurban Light Rapid Transit (LRT), and thus substantially curtailing the
number of private cars on the road, and the decrease in emissions from cars when
patrons chose to ride the transit system.

However, there also will be negative impacts which materialize in the need of using
some agriculture land in the fringe of the cities, which are important because they
supply fresh produce to the settlements, and the economic losses that will suffer the
interurban bus companies because the LRT. We have to add the necessity of large
amounts of electricity generation for the LRT, which means more consumption of fossil
fuels unless it comes from hydroelectric power. There will be visual contamination of
the landscape since in some parts of the route it will be necessary to build elevated
tracks which will affect the sight of dwellers living in higher altitudes (to say nothing
about the sound barriers), and the decrease in value of those properties, because the
noise and the loss of an unobstructed sight, etc.

Therefore, we have here an example of a project that promises an economic growth, but
at the same time producing undesirable social, economic and environmental impacts.

What to do?

Well, first thing is to try to determine impacts from the project and to evaluate them.
To do this a series of steps must be followed.

1. Identification of alternatives
Normally a project like this presents different alternatives in its length, route,
width, etc. Each alternative has its own cost and its own effects. For instance, in
hilly country there could be an alternative for the highway to go along the valley
formed by a river, but with a longer length. Another alternative could mean the
construction of a tunnel through a hill, which has a higher cost, but providing a
shorter length. Another alternative via the river valley could mean to go through
a forest or a preserved natural area, etc.
As an example, we can choose two any alternatives, for instance:

 Alternative C: Construction of a tunnel through the hill

 Alternative D: Follows the river valley and goes through a forest

2. Determining impacts of the project.

There are different impacts that a project can produce. As a sample we have:

 The effects of impacts can be positive or negative, as mentioned above.

 Primary and secondary impacts. The first ones are those which are a direct
consequence of the project, for instance the increment of persons and
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merchandise movement, coming to the region because there will be an easier

access to the city. But this very increase in traffic also provokes an increment
in noise, which in turn affects the wildlife in a nearby forest.
 Measurable and indeterminate effects. We can easily measure the increment
in traffic, but it will be difficult or even indeterminate to appraise the
economic loss for the houses above the highway, because their value will be
affected by the project.
 Apparent effect. The highway will be built to speed up traffic. However, a
highway feeds its own growth, because when built it generates more traffic
than foreseen, and as a consequence there could be traffic jams in the future.
 Cumulative effects. That is, small impacts when added up can reach a large
value. For instance, the highway will cause the desiccation of a lagoon with
the loss of aquatic life, the fleeing of the birds because the noise, the
levelling of a hill, etc. They are small when considered independently, but
not when they are added.

These are only examples, for there are many different kind of effects from the
project, but we have mentioned a few of them to pinpoint the need for the
identification and appraisal.
A more comprehensive list of impacts include: Able to be mitigated, residual,
spatially related, temporal related, reversible, irreversible, likelihood of impact,
unexpected effects, risk effects, residual effects, population impact and
interaction between impacts.

3. Determining criteria.
Criteria are parameters used to evaluate the contribution of a project to meet the
required objective. Therefore, we need to have an objective. It could be the
minimization of the economic cost, or minimizing the environmental cost, or
maximizing connectivity, or maximizing the number of people who benefit from
the project, etc.
The selected objective is used for all alternatives; then, for each alternative, we
need to measure its contribution in reaching the chosen objective, and according
to different criteria.
We can have different type of criteria, for instance:

 Technical criteria, which are related with the technical characteristics of

each alternative
 Environmental criteria, that normally relate with thresholds or limits for
each criteria, for instance when in operation, the project should generate
levels of contaminants that should not exceed certain quantities.
 Safety criteria, that is considering risks, as for instance geological risk
(unstable soil), seismic effects, etc.
 Social criteria, which is related on how the public accepts each
alternative, people affected by the project, heritage conservation, etc.
 Economic criteria that is direct and indirect benefits, use of arable land,
etc.
 Construction criteria, involving geological faults, difficulty for access,
logistics, etc
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 Spatial criteria that is how the project affects other regions. For instance
the installation of an incinerator will probably have effects in areas far
away from its placement

Criteria should also be weighted since usually each one has greater o lesser
importance that others.

As a bottom line, we now have the listing of alternatives, the impacts of each
one, and the set of criteria by which each alternative will be appraised.

Construction of the contribution matrix or table

Now that we have all the elements we can work with them. As an example, consider
alternative C that is the alternative that contemplates the construction of a tunnel. This
alternative can be analyzed using several criteria.

From the point of view of the technical criteria, we must consider for instance how
difficult the work is, and give it a weight of 5 (we use a scale between 1 and 10, being
10 the most difficult), because is not very complicated considering its length, altitude,
logistics, etc.

From the point of view of environment, this project will have a low effect (impact), so
we assign a value of 2. For another alternative D, such as the one which goes by the
river valley but through a forest, the environmental damage is high and consequently we
assign it a value of 9.

From the point of view of safety, we assign C a high value of 8 because the rock is
unstable, while the alternative D gets a 3.

As per the social criteria, we must analyze each alternative considering its impacts in
the population. It could be that in traversing one of the metropolitan towns, the
alternative C will cut the town in two, and thus creating a problem where there was
none before, since the two parts of the town will be separated. There is a variation of
alternative C when passing the urban area, called C1, that contemplates that this portion
of the highway will be elevated, then there is not such a problem (but could be another),
but there is also a variation C2 that calls for the construction at ground level. For C1
may be we can assign a value 1 (because in does not interrupt traffic), while for C2, for
this criterion, and for this effect, the value is 10 (because traffic is interrupted and only
permitted as dedicated streets)

Considering the economics, we assign alternative C a value of 8, because it is much

more expensive that the alternative D using the river valley, albeit is also shorter. The
alternative D, for this criterion gets a 6

Considering construction criteria for C, and since it is not very difficult, we assign a 5,
the same value that we assign to D, because if it is true that tunnelling is more difficult
than opening a road by the river, it has the drawback that the D route lies in a very low
ground, subject to flooding, and then needing a lot of earth moving, filling and
embankments
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We do not consider the spatial criterion for these alternatives because they do not have
any influence spatially.

We use as example only alternatives C and D, but of course it applies to them all, and at
the end we can have a matrix with alternatives as columns and with criteria in rows. In
the intersection of a column and a row we will have the number that we assigned as in
the example above.

Thresholds
We are not done yet, because even if we put values it does not mean that those values
are acceptable. Suppose that we are analyzing noise at a distance of 40 meters from the
highway. We can estimate how much noise variation C1 will produce and how much C2
will originate, and say that we get a value of 60 db for C1 and 70 db for C2. Therefore,
from this point of view, for this criterion and for this impact, C1 is better than C2. But
wait a minute. We must see what the environmental regulations establish for an urban
highways noise. Say or instance that the maximum threshold of noise at a distance of 40
meters should be about 50 decibels. Consequently none of these two variations comply
with this restriction, and probably we have to modify them.

As a bottom line we have:

1) A project, which is the construction of an interurban highway with an

LRT, connecting the cities in the metropolitan area.
2) A listing of alternatives for that project. Some of the alternatives
have several variations or sub-alternatives.
3) An objective
4) A detail of impacts for each alternative.
5) A listing of criteria by which alternatives will be appraised
6) Values have been determined for the contribution of each project and
in accordance which each alternative and variations
7) Thresholds values for each criterion.

This is what is called Multicriteria Analysis, and there are several techniques
for finding which is the best alternative that complies simultaneously with all criteria o
restrictions. Remember that in the first paper we showed de use on one of these
techniques, when it was mentioned de utilization of the SIMUS method for urban
planning.

This is a tool for EIA because it tells us:

 Which are the expected impacts produced by each alternative, together

with their characteristics.
 It can chose an alternative considering economic benefits as well as
sustainable development. In other words it is a tool that allows as to select
the alternative not by its lesser cost, as is usually done, but the one (which
many times is not the cheapest), which also incorporates the environmental
cost.

There are several techniques to solve this problem albeit not all of them work
in the same way, apply the same techniques or consider all the factors here analyzed.
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Just for the reader to have an idea:

Techniques for Environmental Appraisal

o Geographic Information System (GIS)

o Contingent Valuation
o Cost Benefit Analysis
o Cost-Effectiveness Analysis
o Input-Output Analysis
o Life-Cycle Analysis

Techniques for Multicriteria Analysis

o Dollar Value Appraisal

o Dollar Value with Monetary Restrictions
o Environmental Damage Appraisal
o Analytical Hierarchy Process
o Mathematical Programming (SIMUS Model) (This was the technique used the
Book 1 example)
o ELECTRE Method
o Trade-Off Analysis
o CELECTRE
o NAIADE
o ROY

There is plenty of information in Internet.

Bibliography:

Munier, N. (2004) Multicriteria Environmental Assessment: A Practical

Guide, Kluwer Academic Publisher, Dordrecht, The Netherlands