Economic vs. Environmental sustainability

A key area of public lolicy in the last twenty years is the question of how, and how much, to protect the environment. At the heart of this has been the heated debate over the nature of the relationship between economic growth and environmental sustainability.

Is environmentally sustainable economic growth a contradiction in terms?

Sustainability is about meeting the needs of the present without compromising the ability of future generations to meet their needs. It implies care for the environment. Traditional economic growth has usually been at the expense of the environment for example the growth of China. But if you think about it you cannot have a sustainable economy if it isn't environmentally sustainable.  For example if you have an economy based on burning coal, because coal will run out one day, you will not be able to sustain this economy in the future.

China has achieved miraculous economic growth over the past 30 years to become the worlds second largest single-country economy. Since the introduction of market-oriented reforms began in 1979, economic growth has been the central task of the Chinese government.

However, growing gross domestic product at any cost has created a series of social and environmental problems, and consequently,  economic losses. In 2008, pollution and environmental degradation accounted for 10.51% of gross national income, according to calculations based on figures provided by the World Bank. Though problems have been prevalent since the beginning of China's modern industrialization,  environmental challenges have dramatically increased over the past three decades, raising both international and domestic concern. China is currently ranked 116 of 132 countries on the Environmental Performance Index, and since 2007, China has overtaken the US as the worlds largest greenhouse gas emitter.

Recognizing unsustainability of its growth model, the Chinese government has called for a major policy shift to address the environmental impacts of economic growth. In fact, China claims it is one of the first developing countries to propose and implement sustainable development as a national strategy.

Environmental Taxation

One of the most common policies used to tacklethe problem of pollution is the so-called green or environmental tax. A tax is placed on a product that damages the environment, or on a complementary product, in an attempt to reduce its production or consumption. Examples of green taxes include: petrol tax, vehicle excise duty, lamdfill tax, and the new carbon tax. The Irish Government also recently introduced a tax on plastic bags in a bid to reduce consumption and encourage recycling.

"Well designed environmental taxes and other economic instruments can play an important role in ensuring that prices reflect environmental cost - in line with the 'polluter pays' principle - and discouraging behaviour that damages the environment".

Summary of the main advantages of environmental taxes:

1. They can provide incentives for behaviour that protects or improves the environment, and deter actions that are damaging to the environment.

2. Economic instruments such as tax can enable environmental goals to be achieved at the lowest cost and in the most efficient way.

3. By internalising environmental costs into prices, they help to signal the structural economic changes needed to move to a more sustainable economy.

4. They can encourage innovation and the development of new technology

5. The revenue raised by environmental taxes can also be used to reduce the level of other taxes, which can help to reduce distortions in the economy, while raising the efficiency with which resources are used

Full cost accounting

This accounting method describes how goods and services should be priced to reflect their true costs (including environmental and other social costs). For example, if all the environmental costs associated with cup manufacturing were included in the price of paper and plastic cups, you would expect the least environmentally damaging to have the lowest price. Thus the consumer can make an environmental choice based on price - or can choose the more environmentally-damaging at a higher price, knowing that the additional environmental costs have been paid for.

Debt for nature swaps

In 1984 the World Wide Fund for Nature (WWF) initiated the debt for nature swap as a mechanism for enhancing conservation efforts in developing countries. The idea arose from the observation that much of the worlds biological diversity is in the same countries that have the biggest debt burdens. A debt for nature swap does not seek profit, but rather to provide additional funds for conservation activities within a country.

In 1988, WWF purchased an initial $390, 000 of Philippine debt at a discounted cost of $200, 000 (51% of face value). This debt was then redeemed by the Central Bank of the Philippines for the equivakent of the full face value of $390, 000 in Philippine pesos over a 2 year period. In other words, the Central Bank no longer owed $390, 000 in dollars to the commercial banks, but instead it agreed to pay the pesos equivalent to support designated conservation projects.

Rio +20

Rio de Janeiro:
The outcome of the Rio +20 summit provides further proof that the nation-state system is failing badly in tackling global environmental threats, say analysts. The UN's Conference on Sustainable Development had been billed as a once in a generation chance to overhaul an economic model that had left a billion people in poverty and imperilled the biosphere. But veteran observers who watched the 10 day event drag to a close on Friday shook their heads in dismay. To them, it was a fresh failure by the United Nations system, after the near-disastrous 2009 Copenhagen climate summit, to respond to eco-perils that are now approaching at express speed.