Download Strong Sustainability

Economy of Natural Resources and Environment
Prof. Manuel Coelho
Prof.ª Joana Pais
4 of January 2008
Sustainable Energy Systems
What is sustainable development?
“…sustainable development, which implies meeting the needs of
the present without compromising the ability of future
generations to meet their own needs…”
Report of the World Commission on Environment and Development,
United Nations, 1987
Sustainable Energy Systems
2
Agenda
Weak Sustainability
• Concept
• Indicators
Strong Sustainability
Case Studies
Sustainable Energy Systems
3
Growth theory with limited resources
Assumptions
Success drivers to a non-decrease
consumption
Production function
Q=Q(L,K,N)
Elasticity (ε) of substitution between
produced capital (K) and natural capital
is (N) is greater than 1
or
Natural resource (N)
essential to production
of Q
Average production of
natural capital does not
have an upper bound
ε is equal to 1 and the interest rate of the
produced capital is higher than the
valorization of the natural resource
or
ε is not constant but is there a technology
improvement
Solow’s model, 1974
Sustainable Energy Systems
4
From growth theory to weak sustainability
Hartwick rule
Given a degree of
substitutability
between produced
capital and natural
resources returns
from non renewable,
scarcity rent should
be reinvested in
produced capital.
Sustainable Energy Systems
Weak sustainability
Sustainability is equivalent to
non-decreasing or increasing
total capital stock
In a mathematical formulation:
dK d
 (K h  K n  K m )  0
dt dt
Total capital
K=Kh+Km+Kn
Kh – Human
capital
Km – Produced or
manufactured
capital
Kn – Natural
capital
5
Weak sustainability
Capital
C0
Produced
capital
Natural
capital
The pinch from
the shrinking
natural capital is
countered by the
services and
technology from
the enlarged
produced capital
stock
Time
Sustainable Energy Systems
6
Weak sustainability – an workable theory
Information about the amount to be reinvested
All the scarcity rent must be invested
Possible to evaluate the sustainability each year
What is happening to total capital? Is it declining or
increasing?
Sustainable Energy Systems
7
Weak Sustainability Indicators
Elasticity of Substitution
Technological Progress
Scarcity Rent
Environmentally-adjusted Net Product
Sustainable Energy Systems
8
Elasticity of Substitution 1/2
Sustainability
Elasticity between Kn
and Km ≥ 1
Sustainable Energy Systems
An high elasticity of
substitution value
can say, that this
resources is not very
essential and can be
easily replaceable.
9
Elasticity of Substitution 2/2
Open questions
How evaluate
δKn(t)?
How to apply to
some
resources?
Sustainable Energy Systems
Potential problems
Tendency to overestimate
or underestimate real value
Difficulty to
calculate the
real value of
the Elasticity
of Substitution
What is the elasticity of
substitution of air? And
biodiversity?
Difficulty in
the cases where
the resource is
essential to life
support
10
Technological Progress 1/2
Sustainability
Technological Progress
Rate
>
Population Growth Rate
HHS Model
Sustainable Energy Systems
11
Technological Progress 2/2
Difficulties
Indicator limitations
 Is not easy to measure the
technological progress
Indicator with a very
limited scope
 The production functions
don’t have the capacity to
incorporate, at same time, the
technological progress and
the elasticity of substitution.
The priority is given
to the elasticity of
substitution
Sustainable Energy Systems
12
Scarcity Rent 1/3
Mercantile Natural Capital
Non renewable resources, and
some renewable – forests
Sustainable Energy Systems
Non Mercantile Natural
Capital
Renewable resources - air and
environmental services
Scarcity Rent 2/3
Mercantile Natural Capital
Definition
A Rarity rent (final
use cost) is the
difference
between the
shadow price of
the natural resource
(opportunity cost)
and the marginal
cost of its
extraction.
Sustainable Energy Systems
Potential difficulties
How to allocate a
shadow price to the
natural resource?
The price attributed
can be insufficient
in the sustainability
point of view
The externalities
associated to the
use and extraction
of the resources
(negative
externalities) for
the future
generation are not
included in the
calculation of the
opportunity cost.
Scarcity Rent 3/3
Non Mercantile Natural Capital
Characteristics
 Unlimited
resources in
quantity, that are
not under any
system of property
law
 Free access
Sustainable Energy Systems
Difficulties
 How determinate
the shadow price?
 No market price
 No access costs
Environmentally-Adjusted Net Product
5th Framework Programme
Correction of the national
balance sheet taking into account
Environmentally-Adjusted Net
Product
the issues of the environment and
sustainable development
eaNNP = GDP – δKp – δKn
GDP - Gross Domestic Product
δKm - Depreciation of manufactured capital
δKn - Depreciation of natural capital
(resource depletion + environmental degradation)
Sustainable Energy Systems
16
Problems with the WS
One condition must be fulfilled
Super-abundance
Elasticity of
substitution
Technological
progress
Natural resources must be
available in an abundant
quantity
Is it?

Value of elasticity must be
equal or greater than one –
natural resources are
substitutable

Existing technology must
increase the productivity
of natural capital faster
than its depletion

The need of a
new
sustainability
concept
emerged:
Strong
Sustainability
(SS)
One example:
Oil
Sustainable Energy Systems
17
Agenda
Weak Sustainability
• Concept
• Indicators
Strong Sustainability
Case Studies
Sustainable Energy Systems
18
The creation of the SS concept
Non-substitutability
Natural capital
preservation
Strong
Sustainability
• Other forms of capital
can not substitute the
value of natural
capital
• Natural capital
can not decrease
over time to
assure
sustainability
• To guarantee the
well being of
future
generations we
have to preserve
our essential
natural resources
• e≤1
• DNC ≥ 0
…‘strong sustainability’, sees sustainability as
nondiminishing life opportunities. This should be achieved
by conserving the stock of human capital, technological
capability, natural resources and environmental quality
Brekke, 1997
Sustainable Energy Systems
19
There were developed 3 theories
Theories
Similarity to the WS
Conservationist
Description
 Created by Daly in the early 90’s
 Is the most radical theory which states that to
achieve sustainability, the natural capital must
remain constant
 Developed in the 90’s over the model of Barbier
London School
and Markandya
 Is an intermediate theory stating that a minimum
amount of natural capital must be maintained
Ecologicaleconomical
Sustainable Energy Systems
 Created by Ruth in 1994
 Is a theory where the economical agents must
know and apply the limits imposed by
environmental factors
20
Stationary state - base for Conservationists
Main hypothesis
The shadow price of
natural capital may
achieve the infinite
Interest rate /compound
interest is null
Elasticity of substitution
between natural and
physical capital is null
Economic activity must
be determined by the
capacity to regenerate
and assimilate
Technical progress has
limited impact on natural
capital
Management of natural
capital should be done by
regulatory agents
Economic and
demographic growth
rates must be null
Is this economically and
socially sustainable?
Sustainable Energy Systems
21
London School’s natural capital categories
Categories
Division
Description
 Mercantile natural
 The division of these two forms of capital
capital
Mercantilism of
capital
 Non mercantile
natural capital
 Substitutable
Substitutability
of capital
natural capital
 Critical natural
capital
Sustainable Energy Systems
is based on the possibility to trade a
certain asset
 Non mercantile natural capital is
multifunctional and so, harder to
substitute
 This hierarchy is established considering
the natural capital’s substitutability by
other forms of capital
 Critical natural capital should not
decrease below a minimum value so
the system can be sustainable
22
Modeling the critical natural capital
Maintenance of
minimum level of
critical capital
The Barbier and Markandya
model of 1990
 Existence of a minimum value for
environmental assets
 Utility optimization
a – lower threshold
not to be crossed
Kn* - Critical natural
capital
Sustainable Energy Systems
Hamiltonian
However, is very
difficult to create
measures to
assess the value of
natural capital
This value ends up
to be measured
monetarily
(resembling to the
WS)
23
The 3 corners of Ecological-Economical view
 Opportunity costs
 Substitutability
 Temporal preferences
Main concepts
Economy
Thermodynamic serves as
a tool to understand how
economy and ecology
should relate to each other
Ecology
 Material cycles
 Energy fluxes
 Complexity of
environment/systems
interactions
Sustainable Energy Systems
Thermodynamics
 Definition of the system and its
boundaries
 Fluxes of energy and mass
 Distinction of different systems
24
Ecological Footprint
Ecological Footprint measures how much land and water area human
population requires to produce the resources it consumes and to absorb its
wastes under prevailing technology.
http://www.footprintnetwork.org
Sustainable Energy Systems
25
Ecological Footprint
Biocapacity varies
each year with
ecosystem
management,
agricultural
practices (fertilizer
use and irrigation),
ecosystem
degradation, and
weather
Average per person resource demand (Ecological Footprint) and per
person resource supply (Biocapacity) in Portugal.
Sustainable Energy Systems
26
Agenda
Weak Sustainability
• Concept
• Indicators
Strong Sustainability
Case Studies
Sustainable Energy Systems
27
Case Studies
The Physical Destruction of
Nauru
Forest Management in Nepal
Water resources in Austria
Sustainable Energy Systems
28
Weak Sustainability
The Physical Destruction of Nauru 1/4
 Small island located in the central
pacific;
 < 20 km;
 1900 one of the highest grades of
phosphate rock (primary ingredient in
commercial fertilizers ) ever found was
discovered;
 90 years of mining caused devastation
of 80% of the island;
 Elevated plateau - Topside
Sustainable Energy Systems
29
Weak Sustainability
The Physical Destruction of Nauru 2/4
 Scraping of the surface soil;
 Removing of the phosphate between the
walls of an ancient coral;
 Mined out areas:
-
Disappearance of species;
-
Inaccessible to humans;
-
Unusable for habitation;
-
Unusable for crops, …
 Loss of vegetation on Topside:
- Hotter and drier micro climate.
Sustainable Energy Systems
30
Weak Sustainability
The Physical Destruction of Nauru 3/4
 High level of GDP in 1993;
 Trust fund done with the income from the phosphate
mining;
 Interests from this trust fund should have insured a
substantial and steady income and thus the economic
stability of the island;
 The Asian financial crisis, among other factors, has
cleared out most of the trust fund;
 Biologically impoverish island;
 The money traded has vanished;
 Trade with the outside world is now essential for
Nauruans to get the necessities no longer available locally.
Sustainable Energy Systems
31
Weak Sustainability
The Physical Destruction of Nauru 4/4
 People all over the world are making this
kind of decisions and with the same
ultimate result as in the case of Nauru;
 But the consequences are easier to see in
a small island nation;
 The development of Nauru followed the
logic of weak sustainability, and shows
clearly that weak sustainability may be
consistent with a situation of near
complete environmental devastation;
Sustainable Energy Systems
32
Strong Sustainability
Forest Management in Nepal 1/5
 The basic principal of the strong
sustainability is being applied in
different parts of Nepal for the forest
management at the local community
level;
 Nepal has vast ecological resources
ranging from subtropical to alpine
climatic ranges;
-
118 forest ecosystems;
-
75 vegetation types;
-
35 forest types;
 90% of the population lives in the forest
areas;
 Forest is a major resource: timber, fuel
wood, medicinal plants,…
Sustainable Energy Systems
33
Strong Sustainability
Forest Management in Nepal 2/5
 Forest depletion in Nepal:
-
Fuel wood collection;
-
Grazing;
-
Illegal logging;
-
marginal expansion of agricultural
areas;
 Food deficit, because people sell
firewood at the local market to purchase
food items
Sustainable Energy Systems
34
Strong Sustainability
Forest Management in Nepal 3/5
 In 1999, the total forest area was 29% of
the total area of Nepal;
 In 1988 it was 37%;
 50 years ago it was more than 50%;
 Deforestation rate – 1.7% per year;
 Forest Act in 1993;
 Forest regulations in 1995 lead to the
creation of FUGs – Forest Users Group
Sustainable Energy Systems
35
Strong Sustainability
Forest Management in Nepal 4/5
 The FUG is responsible to manage the forest;
 Constitution and operation plan approved by the
District Forest Officer;
 FUGs could:
- initiate plantation of crops, such as medicinal
herbs;
Sustainable Energy Systems
-
Fix prices of forestry products;
-
25% of the revenue used to enhanced natural
capital
Establish forest-based industries;
And use surplus funds in any kind of community
development work, but such activities should not
hamper main forest stock;
36
Strong Sustainability
Forest Management in Nepal 5/5
 Land ownership remains with the state, but
the land use rights along with the forest
resources except wildlife products, soils,
sands, etc. belong to the FUGs;
 In 2003 there were 12,079 FUGs (15% of total
forest area);
 Reverse the tragedy of the commons;
 61% of the total forest area;
 People are experiencing the resilience of the
local ecosystem over the period of one decade.
Sustainable Energy Systems
37
Strong Sustainability
Water Resources in Austria 1/3
 Austria is a rich country regarding water
resources;
 Protect the quality and quantity of the
water resources by one of the most
stringent legal frameworks 
Wasserrechtsgesetz, 1959;
 Critical regions:
-
Where large amounts of water are
extracted;
-
Agricultural production and industrial
waste sites;
 Water in a sustainability context can be
regarded as a regional (national) resource;
Sustainable Energy Systems
38
Strong Sustainability
Water Resources in Austria 2/3
 Within a naturally given catchment area the yearly extraction should not exceed
the yearly renewal rate of the water resource;
 The organic and inorganic load into the water resource should not exceed the
regeneration capacity (carrying capacity);
 The seasonal differences between water supply and demand should be taken into
account;
 Imports or exports from one region to another are only sustainable if previous
principles are fulfilled.
Sustainable Energy Systems
39
Strong Sustainability
Water Resources in Austria 3/3
 Austria has one of the most stringent water pollution acts in Europe;
 Every use of water, be it the extraction of groundwater or the discharge of
sewage, has to be limited according to the state of the art in control
technologies to minimize eventually harmful uses;
 Groundwater has to be protected in its natural state;
 Polluter-pays-principle and avoidance principle are the leading objectives.
Sustainable Energy Systems
40