ECONOMIC SUSTAINABILITY

ECONOMIC SUSTAINABILITYECONOMIC SUSTAINABILITY

Presenters: Presenters: Irene Riaz Irene Riaz John Semper John Semper Luis Orozco-MendezLuis Orozco-MendezYamila Hernandez Yamila Hernandez

Submitted to Prof. Berin TanselSubmitted to Prof. Berin TanselJune 5June 5thth, 2007, 2007

Environmental Entrepreneurialship

OutlineOutline

Terms & DefinitionsTerms & Definitions

““Green” AccountingGreen” Accounting

Cost BenefitCost Benefit

Developed/Undeveloped NationsDeveloped/Undeveloped Nations

Pros & ConsPros & Cons

Q&AQ&A

Terms & DefinitionsTerms & Definitions

SustainabilitySustainability – – Meeting the needs of the Meeting the needs of the present without compromising the ability for present without compromising the ability for future generations to meet their own. future generations to meet their own. (World Commission on Environmental and Development, 1987)(World Commission on Environmental and Development, 1987)

– EnvironmentalEnvironmental– SocialSocial– EconomicEconomic

Terms & DefinitionsTerms & Definitions

Renewable source - Is energy derived from resources that are regenerative or for all practical purposes cannot be depleted.

(wikipedia, 06/01/2007)

““Green” AccountingGreen” Accounting

Properly Referred to as:Properly Referred to as:– Natural Resource AccountingNatural Resource Accounting– Environmental AccountingEnvironmental Accounting

GNP – Gross Domestic ProductGNP – Gross Domestic Product– Measures income not assetsMeasures income not assets

PNDP – Proper Net Domestic ProductPNDP – Proper Net Domestic Product– Measure of economic and environmental assetsMeasure of economic and environmental assets

““Green” Accounting (cont’d)Green” Accounting (cont’d)

““Green” GNPGreen” GNP

Z/A = N/A x Y/N x E/Y x Z/EZ/A = N/A x Y/N x E/Y x Z/E

where:where:A = Geographical AreaA = Geographical AreaE = ResourcesE = ResourcesN = PopulationN = PopulationY = IncomeY = IncomeZ = PollutantsZ = Pollutants

““Green” Accounting (cont’d)Green” Accounting (cont’d)

Factors Considered:Factors Considered:– Per capita incomePer capita income– Population densityPopulation density– Demand for ResourcesDemand for Resources– Efficiency of resource useEfficiency of resource use– Environmental strain and impactEnvironmental strain and impact

““Green” Accounting (cont’d)Green” Accounting (cont’d)

Striking a Balance to Achieve a Maximum Striking a Balance to Achieve a Maximum Level of WealthLevel of Wealth– Monitary assets (income)Monitary assets (income)– DebtsDebts– Resources availableResources available– Resources lostResources lost– Cost to maintain or restore resourcesCost to maintain or restore resources

Can being “green” be profitable?Can being “green” be profitable?

Economics and Sustainability:Economics and Sustainability: Cost Benefit Cost Benefit

“It took Britain half the resources of the planet to achieve its prosperity; how many planetswill a country like India require....?”

Mahatma Gandhi [when asked if, after independence, India would attain British standards of living]

Cost Benefit AnalysisCost Benefit Analysis

Contaminants removed (%)

0 20 40 60 80 100

Economics and Sustainability:Economics and Sustainability:BenefitsBenefits

Economic sustainabilityEconomic sustainability – generating maximum flow of economic generating maximum flow of economic

welfare. welfare.

Social sustainabilitySocial sustainability– people orientedpeople oriented

Environmental sustainability Environmental sustainability – refers to the preservation, the resilience and refers to the preservation, the resilience and

the adaptation of physical and biological the adaptation of physical and biological systems. systems. (Cedric Pugh, Sustainability, the Environment and Urbanization, 1996)(Cedric Pugh, Sustainability, the Environment and Urbanization, 1996)

Economics and Sustainability:Economics and Sustainability:ConsCons – – “Externalities” “Externalities”

Externalities Externalities exist whenever the production exist whenever the production or consumption inflicts involuntary costs or or consumption inflicts involuntary costs or benefits on other; i.e., costs or benefits are benefits on other; i.e., costs or benefits are imposed on others but are not paid for by imposed on others but are not paid for by those who impose them or receive.those who impose them or receive.

Types of ExternalitiesTypes of Externalities

P os it ive E xte rn a lityE xte rn a l D isecon om y

A ffec ted p arty is d am ag ed

N eg ative E xte rn a lityE xte rn a l E con om y

A ffec ted p arty is b en e fited

P ecu n ia ry E xte rn a lityexte rn a l e ffec t is tran sm itted th rou g h h ig h er p rices

E xte rn a lit ies

Developed/Undeveloped NationsDeveloped/Undeveloped Nations

Over 1 billion people world-wide depend, to varying Over 1 billion people world-wide depend, to varying degrees, on forest-based assets for their livelihoods.degrees, on forest-based assets for their livelihoods.15 of 24 essential services provided by ecosystems 15 of 24 essential services provided by ecosystems (ranging from food production, water quality and (ranging from food production, water quality and availability to disease management and climate availability to disease management and climate regulation) are currently being eroded.regulation) are currently being eroded.In developing countries, 20 per cent of the total loss In developing countries, 20 per cent of the total loss of life expectancy is attributable to environmental of life expectancy is attributable to environmental causes. In OECD countries, it is around 4 percent.causes. In OECD countries, it is around 4 percent.Unsafe water, due to poor access to water supply, Unsafe water, due to poor access to water supply, sanitation facilities and hygiene, is responsible for sanitation facilities and hygiene, is responsible for 3.1 % of all deaths worldwide. Over 99 % of this 3.1 % of all deaths worldwide. Over 99 % of this burden occurs in developing countries.burden occurs in developing countries.

Developed/Undeveloped NationsDeveloped/Undeveloped Nations

In the world’s cities, outdoor air pollution results in In the world’s cities, outdoor air pollution results in approximately 800.000 deaths annually, due to approximately 800.000 deaths annually, due to cardiopulmonary disease, lung cancer and acute respiratory cardiopulmonary disease, lung cancer and acute respiratory infections. This is the equivalent of 6.4 million years of life lost infections. This is the equivalent of 6.4 million years of life lost to premature mortality.to premature mortality.

Indoor air pollution, caused by smoke from stoves and fires, Indoor air pollution, caused by smoke from stoves and fires, causes around 1.6 million death s per year in developing causes around 1.6 million death s per year in developing countries.countries.

Environment-based wealth accounts for 25% of the total wealth Environment-based wealth accounts for 25% of the total wealth in low-income countries, 13% in middle-income countries, and in low-income countries, 13% in middle-income countries, and only 3% in OECD countries.only 3% in OECD countries.

Developed/Undeveloped NationsDeveloped/Undeveloped Nations

Developed/Undeveloped NationsDeveloped/Undeveloped Nations

Per Capita Eco-footprints of Selected Countries(Data from Wackernagel, et al . 1999)

Developed/Undeveloped NationsDeveloped/Undeveloped Nations

United Nations Commission on Sustainable Development (CSD) indicators

• Poverty • Natural hazards • Economic development• Governance • Atmosphere • Global economic partnership• Health • Land • Consumption and production patterns• Education • Oceans, seas and coasts• Demographics • Freshwater• Biodiversity

Developed/Undeveloped NationsDeveloped/Undeveloped Nations

Developed/Undeveloped NationsDeveloped/Undeveloped Nations

Limitations of SustainabilityLimitations of Sustainability

Technological LimitsTechnological Limits

Scientific AmericanScientific American (1989), “manage (1989), “manage planet earth”planet earth”

Limits on harvesting renewable resourcesLimits on harvesting renewable resources

Bottom line; “what may be managed, Bottom line; “what may be managed,

however, is us: human desires, however, is us: human desires,

economies, politics, and communities.” economies, politics, and communities.”

Throwaway EconomyThrowaway Economy

Society's obsession with economic growthSociety's obsession with economic growth

Reengineer product designReengineer product design

Closing the materials loop: Converting Closing the materials loop: Converting

linear flow-through (throwaway) economy linear flow-through (throwaway) economy

into a recycling economy.into a recycling economy.

Getting the Price RightGetting the Price Right

Must challenge the market to tell the Must challenge the market to tell the ecological truthecological truth

The current global economy is shaped by The current global economy is shaped by

distorted market prices that do not distorted market prices that do not

incorporate environmental costsincorporate environmental costs

China’s Yangtze River valleyChina’s Yangtze River valley

The true cost of gasolineThe true cost of gasoline

In conclusion…In conclusion…

““It makes far better sense to reshape It makes far better sense to reshape ourselves to fit a finite planet than to ourselves to fit a finite planet than to attempt to reshape the planet to fit our attempt to reshape the planet to fit our infinite wants.” infinite wants.”

(David W. Orr, 2004)(David W. Orr, 2004)

Any Questions???Any Questions???