Prof. Mohan Munasinghe has postgraduate degrees in physics, engineering and economics, from Cambridge University (UK), the Massachusetts Institute of Technology (USA), McGill University (Canada), and Concordia University (Canada). Presently, he is Chairman, Munasinghe Institute of Development (MIND); Vice Chair, U.N. U.N. Intergovernmental Panel on Climate Change (UW).
Making Development More Sustainable: Sustainomics Framework and Applications
Edited by MIND Press
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Harmonizing development with nature
Let us examine the alternative growth paths available, and the role of sustainomics principles in choosing options. Lovelock made a pioneering contribution with his Gaia hypothesis [1]. He proposed that the totality of life on Earth might be considered an integrated web which works together to create a favorable environment for survival. As a corollary, unregulated expansion of human activity might threaten the natural balance. In this spirit, Figure 2.3(a) shows how the socioeconomic subsystem or “anthroposphere” (solid rectangle) has always been embedded within a broader biogeophysical system or “biogeosphere” (large oval). National economies are inextricably linked to, and dependent on natural resources – since everyday goods and services are in fact derived from animate and inanimate resources that originate from the larger biogeosphere. We extract oil from the ground and timber from trees, and we freely use water and air. At the same time, such activities have continued to expel polluting waste into the environment, quite liberally. The broken line in Figure 2.3(a) symbolically shows that in many cases, the scale of human activity in the anthroposphere has increased to the point where it is now impinging on the underlying biogeophysical system (Chapter 3). This is evident today, if we consider that forests are disappearing, water resources are being polluted, soils are being degraded, and even the global atmosphere is under threat. Consequently, the critical question involves how human society might contain or manage this problem of scale?
One traditional view that has caused confusion among leaders around the world is the assumption that concern for the environment is not necessarily good for economic activity. Thus, until recently the conventional wisdom held that it was not possible to have economic growth and a good environment at the same time, because they were mutually incompatible goals. However, the more modern viewpoint (embodied also in sustainomics), indicates that growth and environment are indeed complements. One key underlying assumption is that it is often possible to devise so-called ‘win-win’ policies, which lead to economic as well as environmental gains [2]. As illustrated earlier in Figure 2.3(a), the traditional approach to development would certainly lead to a situation where the economic system would impinge upon the boundaries of the ecosystem in a harmful manner. On the other hand, Figure 2.3(b) summarizes the modern approach that would allow us to have the same level of prosperity without severely damaging the environment. In this case, the oval outer curve is matched by an oval inner curve – where economic activities have been restructured in a way that is more harmonious with the ecosystem.
Changing the structure of growth
Another way of depicting the importance of changing the structure of development and growth is illustrated in Figure 2.4, which shows how environmental risk in a country (e.g., represented by greenhouse gas (GHG) emissions per capita) might vary with its level of development (e.g., measured by gross national product (GNP) per capita). One would expect carbon emissions to rise more rapidly during the early stages of development (along AB), and begin to level off only when per capita incomes are higher (along BC).
A typical developing country may be at a point such as B on the curve, and an industrialized nation at C. Ideally, industrial countries (exceeding safe limits) should increase environmental protection efforts and follow the future growth path CE. Munasinghe proposed the idea of developing countries adopting policies to “tunnel” through (along BDE), by learning from past experiences of the industrialized world – the tunnel would lie below the safe limit where environmental damage (like climate change or biodiversity loss) could become irreversible [3].
Such a tunnel also corresponds to a more economically optimal path, and resembles “turnpike” growth paths which appeared in past literature [4]. The highly peaked path ABCE could result from economic imperfections that make private decisions deviate from socially optimal ones. Corrective policies would help to reduce such divergences and permit movement through the tunnel BDE. Developing countries could thereby avoid severe environmental degradation along conventional development paths of industrial economies (ABCE). This approach is not concerned with the related issue of the existence of the so-called environmental Kuznets curve (EKC) for any single country or group of nations. Instead, “tunneling” focuses on identifying policies to delink environmental degradation and economic growth [5].
There are several ways to find such a policy “tunnel”:
1. Actively seek ‘win-win’ policies that simultaneously yield both economically and environmentally (and socially) sustainable paths.
2. Use complementary policies. Growth inducing economy-wide policies could combine with imperfections in the economy to cause environmental and social harm. Rather than halting economic growth, complementary measures may be used to remove such imperfections and thereby prevent excessive environmental and social harm. Such measures include, ex-ante environmental (and social) assessment of projects and policies, introducing remedies that eliminate imperfections (like policy distortions, market failures and institutional constraints), and strengthening capacity for environmental and social protection.
3. Consider the fine-tuning of growth inducing economy-wide policies (e.g., altering their timing and sequencing), especially where severe environmental and social damage could occur.
It would be fruitful to encourage a more proactive approach whereby the developing countries could learn from the past experiences of the industrialized world – by adopting sustainable development strategies and climate change measures which would enable them to follow development paths such as BDE, as shown in the figure [6]. Thus, the emphasis is on identifying policies that will help delink carbon emissions and growth, with the curve in Figure 2.4 serving mainly as a useful metaphor or organizing framework for policy analysis.
This representation also illustrates the complementarity of the optimal and durable approaches discussed earlier. It has been shown that the higher path ABC in the figure, could be caused by economic imperfections which make private decisions deviate from socially optimal ones [7]. Thus the adoption of corrective policies that reduce such divergences from optimality and thereby reduce GHG emissions per unit of output, would facilitate movement along the lower path ABD. Concurrently, the durability viewpoint also suggests that flattening the peak of environmental damage (at C) would be especially desirable to avoid exceeding the safe limit or threshold representing dangerous accumulations of GHGs (shaded area in the figure).