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Overview and Summary
This book recognizes that sustainable development is a primary challenge of the 21st century (with poverty alleviation as the main goal), and sets out a framework called “Sustainomics” developed over the past 15 years to meet that challenge. Sustainable development is broadly defined here as “a process for improving the range of opportunities that will enable individual human beings and communities to achieve their aspirations and full potential over a sustained period of time, while maintaining the resilience of economic, social and environmental systems”.
The main message of this volume is optimistic – although the problems are serious, an effective response can be mounted, provided we begin immediately. Sustainomics seeks to show us the first steps in making the transition from the risky business-as-usual scenario to a safer and more sustainable future.
Sustainomics is “a transdisciplinary, integrative, comprehensive, balanced, heuristic and practical framework for making development more sustainable.” Unlike other traditional disciplines, it focuses exclusively on sustainable development. Thus, the main principle of the framework seeks to make ongoing and future development efforts more sustainable, as a first step towards the ultimate goal of sustainable development. Other key principles stress: (a) balanced consideration of the three dimensions of the sustainable development triangle (social, economic and environmental); (b) better integration by transcending conventional boundaries imposed by discipline, space, time, stakeholder viewpoints, and operational needs; and (c) practical application of innovative methods and tools throughout the full cycle from data gathering to policy implementation and feedback.
This volume also seeks to clearly illustrate the methodology with empirical case studies that are practical and policy-relevant over a wide range of geographic and time scales, countries, sectors, ecosystems and circumstances. Every application does not necessarily give equal weight to all elements of the triangle (i.e., social, environmental and economic). Many cover all three aspects, while others primarily address two aspects (e.g., economic and environmental), or a single aspect (e.g., economic cost-benefit analysis, social multi-stakeholder consultative process, etc.), with the remaining aspects covered less prominently. Nevertheless, the intention is to demonstrate how a broad array of sustainomics-compatible methods and tools could be applied simply and practically to a variety of problems, to make development more sustainable.
I have tried to make the book both accurate and readable. However, because of its wide coverage and length, some parts may seem complex and others too simple, depending on the academic training and disciplinary background of the reader. A fair balance is maintained between theory and applications, recalling the famous rebuke by Nobel-Laureate Wassily Leontief: “Page after page of professional economic journals are filled with mathematical formulas leading the reader from sets of more or less plausible but entirely arbitrary assumptions to precisely stated but irrelevant theoretical conclusions.” Generally, the analytical sections are rigorous but relatively free of technical jargon, while mathematical and other details are provided in annexes. The case studies have been simplified to illustrate as clearly as possible, the practicality and policy-relevance of the underlying principles involved. They are presented in decreasing order of geographic scale – from global to local applications. The extensive bibliography should be useful to those who wish to further research specific topics. It is hoped that the book will appeal to a wide audience, including students, researchers from many disciplines, teachers, policy analysts, development practitioners, decision makers and concerned laypersons.
To conclude, sustainomics is put forward as an innovative transdisciplinary framework (or transdiscipline), based on a holistic set of key principles, theories and methods. It draws on many other approaches and techniques, because no single traditional discipline can cover the vast scope and complexity of sustainable development issues. The advantages and shortcomings of sustainomics are frankly laid out, with the expectation that future contributions by other potential “sustainomists” will rapidly build on the strengths, remedy gaps and inconsistencies, and further flesh out the initial framework and applications.
Outline of the Book
Part A of the book contains four chapters covering the introduction and fundamentals. Chapter 1 provides a broad overview of the entire volume. The first section outlines the various chapters and provides a road map for the reader. Next, we set out the rationale and motivations for the book, including key sustainable development challenges (especially poverty), major global agreements on sustainable development, lessons of history and future scenarios, and vision for a practical way forward. A brief history and introduction to the fundamental elements of sustainomics are provided, followed by a review of key ideas. The chapter ends with selected information on the status of modern development.
Chapter 2 lays out the basic principles, concepts and methods of sustainomics in greater detail. A practical approach based on “making development more sustainable” or MDMS is described, as an alternative to pursuing abstract definitions of sustainable development. The sustainable development triangle, comprising the social, economic, and environmental domains is introduced, and the driving forces and concepts of sustainability underlying each viewpoint are explained. The integration and synthesis of these three viewpoints is facilitated by two complementary approaches, based on the concepts of optimality and durability. The poverty-equity-population nexus and linkages between economic efficiency and social equity are discussed. A variety of practical analytical tools are outlined, to implement the sustainomics framework – including the Action Impact Matrix (AIM), sustainable development assessment (SDA), cost-benefit analysis (CBA), multi-criteria analysis (MCA), etc. It is important to select relevant, time and location specific indicators of sustainable development. The need to harmonize development with nature, and restructure the pattern of growth is explained, especially in developing countries, where poverty alleviation will require continued increases in income and consumption.
In Chapter 3, we explore the economy-environment interface (and related social linkages). Economic cost-benefit analysis (CBA) is a key element of SDA and the project cycle. Basic concepts of CBA are set out, including decision criteria, efficiency and social shadow pricing, and measurement of costs and benefits. Practical techniques for economic valuation of environmental assets and services play a key role in incorporating externalities into traditional CBA. When such economic valuation is difficult, multi-criteria analysis (MCA) helps to make trade-offs among disparate objectives. Key issues like discounting, risk and uncertainty are discussed. The two-way links between economy-wide (macroeconomic and sectoral) policies and environment (and social) issues are outlined. The incorporation of environmental considerations into the conventional system of national accounts is explained.
Chapter 4 expands on the social and ecological inter-linkages, which play a key role in determining the use of natural resources. The Millennium Ecosystem Assessment (MA) conceptual framework and cyclic interaction between the ecological and socio-economic domains is summarized, including the main ecosystem services which sustain key components of human well being. Ecological cycles involving birth-growth-decay-death-regeneration help us understand ecosystem dynamics. Property rights regimes determine how socioeconomic forces interact with environmental resource, especially in the case of traditional societies and native peoples who are heavily dependent on ecological resources, as well as the landless poor who subsist in degraded areas. Finally, environmental and social assessments are described, as important tools which complement economic assessment (cost-benefit analysis) – all three are key elements of sustainable development assessment (SDA).
Next, we turn to applications of sustainomics at various scales: global and transnational, national and macroeconomic, sub-national sectoral and system, and project and local. Part B of the book contains two chapters (5 and 6) with case studies covering the global and transnational levels.
In Chapter 5 the sustainomics framework is applied to study the circular linkage between two global level issues – climate change and sustainable development. The role of adaptation and mitigation are analyzed, and several applications are provided. First, alternative climate change mitigation response strategies are assessed in terms of optimality and durability. Next, we examine the interplay of equity and efficiency in joint implementation (JI) and emissions trading, between Annex 1 and non-Annex 1 countries. The final case study describes how climate change might interact with sustainable development at the national level – by analyzing greenhouse gas (GHG) mitigation prospects in Sri Lanka.
Chapter 6 examines a unique trans-disciplinary, international scientific dialogue within the Intergovernmental Panel on Climate Change (IPCC), describing how climate change and sustainable development links have been analyzed by researchers. Then, the Action Impact Matrix tool is used to explore two way linkages between two international activities – the millennium development goals (MDG) and the findings of the millennium ecosystem assessment (MA). Finally, we examine the practical functioning of a transnational, multi-stakeholder, multi-level consultative process, involving the United Nations Environment Programme (UNEP) Dams and Development Programme (DDP).
Part C of the book comprises three chapters (7, 8 and 9), covering case studies of sustainomics at the countrywide and macro levels, which deal with a wide range of countries, policy issues and models.
Chapter 7 reviews past research on the sustainability of long-term economic growth, including economy-environment linkages. Some stylized facts about environmental and social impacts of growth-oriented macroeconomic policies. Unforeseen economic imperfections can interact with growth to cause environmental and social harm. An environmental-macroeconomic analysis confirms that second-best remedial measures could help to limit the damage. Environmental concerns may be introduced into the standard static IS-LM macroeconomic model. The role of green accounting and concepts like genuine savings are discussed. The Action Impact Matrix (AIM) approach plays a key role in environmental-macroeconomic analysis. A “policy-tunneling” model shows how elimination of economic imperfections permits continued growth while limiting environmental and social harm. Finally, some of these ideas are illustrated through a case study of Brazil. A combination of sectoral and macroeconomic models are used to examine the effects of growth oriented strategy pursued by the Brazilian government during the past decades, on a range of sustainable development issues like poverty, employment, urban pollution and deforestation in the Amazon region. Ideas for future research are discussed.
Chapter 8 explores two different theoretical approaches to making development more sustainable at the national macroeconomic level. The literature on the relationship between optimization and sustainability in growth models is reviewed. First, a sustainomics-compatible mathematical model examines the conditions under which development paths focusing on optimal economic growth, might also be made more sustainable. The model is numerically solved using stylized data. Second, a theoretical model looks at the circumstances that may justify the use of second best adjustments to macroeconomic policies, to compensate for pre-existing economic distortions that give rise to environmental harm. Three developing world examples (Botswana, Ghana and Morocco) show how macroeconomic polices might combine with local imperfections to harm the environment, and appropriate remedial measures are discussed.
Chapter 9 focuses on computable general equilibrium (CGE) models. First, we apply the ECOGEM model, to assess economic, environmental and social policy linkages in Chile. The model systematically and holistically analyzes different economy-wide policies and their impact on the Chilean economy. It combines different environmental and social policies so as to enhance positive cross effects or to mitigate the negative side effects of any single policy. Complex interrelations between the diverse sectors and agents of the economy are captured. Winners and losers are identified, but the results obtained are not always obvious, i.e., indirect effects are also relevant. In the second example, a static CGE model is applied to study the effects of macroeconomic policies on deforestation in Costa Rica. The results support the more conventional partial equilibrium approach that establishing property rights tends to decrease deforestation, because such rights allow forest users to capture the future benefits of reduced logging damage today. Findings concerning the effects of discount rate changes also parallel the predictions of partial equilibrium models—higher interest rates promote deforestation, and vice versa. The CGE approach also identifies indirect effects arising from intersectoral linkages, and shows the importance of pursuing sectoral reforms in the context of growth. A dynamic CGE model of Costa Rica, where the value of forest conservation, capital accumulation, and interest rate are endogenized, gives the same results as the static CGE model.
Part D of the book contains five chapters (10 to 14) describing case studies and applications of sustainomics at the sub-national and meso levels within several countries – involving energy, transport, water, ecological and agricultural systems, and resource pricing policies.
In Chapter 10, we begin with a general review of links between energy and sustainable development, including a worldwide assessment of energy sector status and issues. Next, the sustainomics approach is used to develop a comprehensive and integrated conceptual framework for energy-related decision making framework called sustainable energy development (SED), which identifies practical sustainable energy options by taking into account multiple actors, multiple criteria, multi-level decision making, and policy constraints. The methodology is applied to demonstrate how social and environmental externalities could be incorporated into traditional least-cost power system planning in Sri Lanka, using both cost-benefit analysis (CBA) and multi-criteria analysis (MCA). The study is relatively unique in its focus on assessing environmental and social concerns at the system level planning (including technology choices among hydro-, oil-, coal- and renewable energy-based generation), as opposed to the more usual practice of carrying out such analyses only at the project level. Sustainable energy policies for Sri Lanka are identified. Another case study applies SED to the South African energy sector, using multi-criteria analysis to assess the social, economic and environmental trade offs arising from policy options relating to electricity supply and household energy use. Finally, long term UK electricity expansion options are examined, to show that decentralized energy may be more sustainable than centralized generation.
Chapter 11 starts by reviewing generic sustainable transport priorities, Then, we examine how transport policy could be made more sustainable in Sri Lanka, including the analysis of fuel pricing policy, alternative fuel choices, and a range of transport projects. Two classic externalities are discussed. First, health damages from local air emissions are estimated using the benefit transfer method, and the specific health benefits of introducing unleaded gasoline are assessed. Second, the effects of traffic congestion in the city of Colombo are studied, including estimation of the cost of time wasted. Several specific infrastructure projects and other measures for reducing congestion are analyzed, and an overview is provided of sustainable transport policy options for Sri Lanka.
Chapter 12, explores how to make water resource management more sustainable. The first section describes the natural hydrological cycle and how interventions have affected it. Next, water and development linkages are examined, including a review of the global status of water resources, water shortages and rising costs, poverty issues, and sustainable livelihoods. A comprehensive framework for sustainable water resources management and policy (SWAMP) is outlined, which parallels the sustainable energy development (SED) approach of Chapter 10. The SWAMP methodology is practically applied to a typical water resources project involving groundwater for urban use in Manila, Philippines. The case study analyzes the effects of environmentally harmful externalities like aquifer depletion, saltwater intrusion along the coast, and land subsidence, and then identifies remedial policy measures. Finally, another case study demonstrates a simple, low-cost, socially acceptable, and environmentally desirable approach to purifying drinking water and reducing waterborne diseases that has yielded significant economic, social and environmental gains to poor villagers in Bangladesh.
Chapter 13 sets out case studies dealing with both natural and managed ecological systems – i.e., forests and agriculture, respectively. First, we analyze the management of megadiversity natural ecosystems in rainforests to identify generic policies that make forest management more sustainable. Next, a case study of Madagascar is presented to achieve a better understanding of the specific environmental and socioeconomic impact of national parks management policies on tropical forests. Relevant policy implications are drawn. Various techniques are used to economically value damage to forests and watersheds, timber and non-timber forest products, impacts on local inhabitants and biodiversity, and ecotourism benefits. In a second case study, we examine the potential impacts of climate change on managed ecosystems (agriculture) in Sri Lanka. A Ricardian model is used to estimate the past effects of natural variations in both temperature and precipitation. Then, several scenarios of future climate change are imposed to assess future agricultural production. The harmful impacts of rising temperatures generally dominate the beneficial effects of increased precipitation. Policy conclusions are drawn for sustainable agricultural policy in Sri Lanka.
Chapter 14 examines natural resource pricing policy issues within a national economy – the economics of both renewable and non-renewable resources are discussed. A practical and effective energy pricing policy may be developed, linked to sustainable energy development (Chapter 10). First, economic principles are used to determine efficient energy prices which will lead to economically optimal production and consumption of energy. Environmental considerations may be introduced by economically valuing relevant impacts (Chapter 3). Next, we discuss how such efficient prices may be further adjusted to include social consideration like affordable (subsidized) prices to meet the basic needs of the poor, and other general policy objectives such as regional or political consideration. The final section describes how the same generic framework may be used for pricing of other natural resources like water, and examines specific water-related issues.
Part E of the book contains two chapters (15 to 16) dealing with case studies and applications of sustainomics at the project and local levels, that cover topics like hydropower, solar energy, water supply, sustainable hazard reduction and disaster management, and urban growth.
Chapters 15 commences with the sustainable development assessment of small hydro projects in Sri Lanka, by applying multi-criteria analysis to economic, social and environmental indicators. The second case study analyzes new and renewable energy projects and national energy policy in a typical developing country. It highlights the use of different policy tools (including the interlinked shadow and market prices) to influence human behavior and ensure more sustainable energy use – based on solar photovoltaic (pv) energy for agricultural pumping. Then, rural electrification projects in Sri Lanka are analyzed with a focus on new and renewable energy technologies, and rural energy priorities are set out.
Chapter 16 explains how the natural hazards become major disasters, because of heightened vulnerability, often due to prior damage inflicted by unsustainable human activities. A practical framework is presented for mainstreaming sustainable hazard reduction and management (SHARM) into national development – involving the stages of relief, rehabilitation and reduction (planning, preparedness and prevention). The two-way linkages between hazards and sustainable development are analyzed. These ideas are illustrated by a case study that assesses the impacts of the 2004 Asian tsunami in India, Indonesia, Maldives, Sri Lanka and Thailand. A comparison of the Tsunami impacts on Sri Lanka, and Hurricane Katrina on New Orleans, raises important questions about the role of social capital in coping with disasters. The next section describes issues concerning the sustainability of long term growth in Asian cities, and policy options to address these problems – especially in the rapidly expanding mega-cities. The closing section of the chapter describes urban vulnerability to natural hazards and environmental degradation.
- ^ Leontief, W. (1982) “Academic economics”, Letter to the Editor, Science, Vol.217, p.106-7, 9 July.
This is a chapter from Making Development More Sustainable: Sustainomics Framework and Applications (e-book).
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