Geneva, 5 March 2003 - Will the
world be able to sustain economic growth
indefinitely without running into resource
constraints or despoiling the environment
beyond repair? What is the relationship
between a steady increase in incomes and
environmental quality? Are there trade-offs
between the goals of achieving high and
sustainable rates of economic growth and
attaining high standards of environmental
quality?
These were some of the
questions that were discussed at the United
Nations Economic Commission for Europe (UNECE)
Spring Seminar devoted to "Sustainable
Development in the ECE Region",
which took place at the Palais des Nations,
in Geneva, on 3 March 2003.
Following a presentation
by Theodore Panayotou, from the Center for
International Development at Harvard University,
Cambridge, Massachusetts, United States,
on "Economic growth and the environment",
which was commented by Richard Herd from
OECD, Paris, Tomasz Zylicz, from the University
of Warsaw, and Kaj Bärlund, from the
UNECE, the debate concentrated on the relationship
between economic development and the level
of environmental damage.
In his presentation, Theodore
Panayotou introduced the concept of the
"Environmental Kuznets Curve"
(EKC), which describes the relationship
between changes in real income per capita
and environmental pollution.
At low levels of economic
development, i.e. low real income per capita,
there are very limited environmental pressures.
But over time, as the level of economic
activity increases and natural resources
utilization intensifies, resource depletion,
emissions and waste generation increase.
At higher levels of real
income, a turning point will be passed,
from where the higher levels of economic
activity and real incomes will tend to be
associated with falling levels of environmental
pollution. In other words, more wealthy
countries will tend to have a cleaner environment
than poorer countries. This reflects changes
in the structure of economic activity as
well as more efficient abatement technologies
and shifts in policies and preferences of
individuals.
More generally, the reaching
of the downturn phase of the Environmental
Kuznets Curve can be delayed or advanced,
weakened or strengthened by policy measures.
It is not the higher incomes per se which
bring about the environmental improvement
but the supply response and policy responsiveness
to the growing demand for environmental
quality, through enactment of environmental
legislation and development of new institutions
to protect the environment. Since it may
take decades for a low-income country to
reach the turning point of the EKC, the
damage accumulated in the meantime may far
exceed the present value of higher future
growth. Therefore, active environmental
policy to mitigate emissions and resource
depletion in the earlier stages of development
may be justified on purely economic grounds.
Similarly, current prevention may be more
cost-effective than a future cure.
In other words, in the
process of transition from rising incomes
and rising pollution to rising incomes and
falling pollution it is important to avoid
crossing critical ecological thresholds
and inflicting irreversible environmental
damage.
There was agreement among
the participants on the following policy
lessons:
o The ecological threshold
in the process of economic growth can
and should be lowered through policy and
technological innovation. Transition countries
should try to take advantage of the more
efficient abatement technologies that
are available.
o As concerns policy,
a stronger emphasis on a market-based
mix of economic instruments is needed,
such as the greening of fiscal policy,
the phasing-out of harmful subsidies and
the introduction of policy instruments
for the internalization of environmental
costs. But command-and-control measures,
i.e. environmental norms and standards,
also remain important.
o Democracy and the presence
of a strong civil society also contribute
to minimizing the environmental cost of
economic growth, and to the process of
decoupling these two.
o Comprehensive environmental
education is the key.
o Income inequality and
social exclusion, which tend to increase
environmental pressures, should be combated
through active policies.
For the second session on "Sectoral
dimensions of sustainable development: energy
and transport", the lead speaker
was David Newbery, Department of Applied
Economics, Cambridge University, United
Kingdom. The other panellists were: Thomas
B. Johansson, International Institute for
Industrial Environmental Economics (IIIEE),
University of Lund; Inge Mayeres, Katholieke
Universiteit Leuven; José Capel Ferrer,
UNECE, and George Kowalski, UNECE.
The presentation by Professor
Newbery stressed the role of economic policies
in adjusting energy demand and directing
demand to less carbon-intensive fuels. In
particular, he highlighted the need to adjust
prices to market levels in the transition
economies. Of course, this would have adverse
social implications in the short term but
if achieved gradually he felt the move was
possible - especially as in many cases this
would restore prices to relative levels
that had been acceptable in the past. In
the developed countries, notably in Europe,
the challenge is to produce a more rational
tax system for the use of fuels that would
inter alia tend to reduce demand for coal.
The area of transport gave
some of the most interesting insights for
policy makers concerned with sustainable
development. The following points were debated:
o Technical progress
has significantly reduced the environmental
externalities from cars.
o The scope for further
regulatory action on car externalities
is now limited by an unfavourable cost-benefit
ratio, given the significant reductions
in emissions that have already occurred
on account of technological developments.
o Congestion is now the
main externality stemming from the use
of cars.
o At the moment, it was
probably necessary to adopt second-best
solutions to reduce this problem. Regional
studies suggest that cordon pricing with
a time varying tariff could achieve almost
half of the welfare gains that could come
from full congestion pricing.
Finally, a number of participants
suggested that we should not lose sight
of the difficulty of stabilizing greenhouse
gas concentrations, especially as two billion
people do not currently have access to commercial
energy. Here, the discussion overlapped
with that in the first session where participants
had stressed the role of incentives to achieve
science- and technology-based solutions
to the problem of greenhouse gases emissions.
For further information please contact:
UNECE Economic Analysis Division
Palais des Nations
CH - 1211 Geneva 10, Switzerland
Tel: +41(0)22 917 24 79
Fax: +41(0)22 917 03 09
E-mail: [email protected]
Web site: http://www.unece.org/ead/2003seminar.htm
Ref. ECE/GEN/03/N01