Chapter 10 Environment and Development

1. Chapter 10 Environment and Development

2. Environmental Challenges • Deforestation • Global warming, climate change • Depletion of national resource • Air pollution • Clean water shortage • Soil quality • UN Millennium Goal to “ensure environmental sustainability”

3. Environment and Third World Countries • Livelihood of more than half of the economically active population in developing countries depends on environment through • Agriculture • Forest products • Animal husbandry • Fishery etc. • Will affect the poorest 20% of the poorest in urban and rural areas • Population pressures resulting in deforestation, urbanization and resultant pressures on infrastructure and health provision and education

4. Environment and Third World Countries • Cultivation of marginal land and falling productivity of land resulting in lower income • Health consequences of environmental problems are more severe for the poor as they do not have resources to spend on insurance or protect themselves against – poor sewage system, air pollution or contaminated water • Third world countries first priority is to reduce poverty, as the incidence of poverty is very high on these countries

5. Environment and Third World Countries • What would be the shape of Environmental Kuznets Curve? Will it be different for advanced countries and third world countries? • (Assignment: write a paragraph here. Read pg.487 and draw an environmental Kuznets Curve. Label your axis properly.) • Is growth good for third world countries from environment point of view?

6. Environment and Third World Countries • 400 to 700 million people – mostly women and children in poverty – are adversely affected by indoor pollution due to the dependence on biomass fuels – wood, straw, manure etc. • - 4 million childhood deaths due to dangerous fumes & smoke (from chronic respiratory illness) • Lack of clean water and sanitary conditions resulting in water-borne disease – once again, poorest people are the hardest hit group of the population • (Assignment: Read pg. 485-496 and collect statistic supporting the statements made in these slides.)

7. Environment and Third World Countries • Woman (and young children) and their health is affected by deforestation as they have to walk several miles to fetch water or wood.

8. Sustainable Development • Is it Growth vs. Environment? Is there a trade-off between the two goals? • Sustainable development is defined as follows • “meeting the needs of the present generation without compromising the needs of the future generations” • Overall stock of capital includes • Physical manufactured capital such as machines, factory, roads • Human capital – knowledge, skills • Environmental capital – forests, soil, water A sustainable development path requires a balanced approach to growth. However, there are challenges due to substitution and complementarities between physical and environmental capital.

9. D MC b P a 0 Q* Models of the environment • Privately owned resources • Market Resource Allocation Marginal benefit and cost Units of resource • Total net benefit is maximized when • Marginal benefit = Marginal cost of extracting • one more unit of the resource

10. Common Property Resources • There are externalities involved in the ownership and use of natural resources – tragedy of the commons • Environmental goods – a different market for pure air, safe water • Property rights issues

11. APL C AP* D W W MPL 0 LC L* Common Property Resources • In case of private ownership MPL = W • In case of commonly owned resources APL = W and MP of the worker is below the wage rate and social welfare must fall. Return to labor Numbers of laborers

12. Environmental Policies • Pro-poor policies require equitable distribution of natural assets (land etc.) and proper property rights policies • Privatization, foreign investment and regulations, must be adjusted to make the system work for the poor. • Proper taxation policies to capture externalities • Better pricing policies • More open trade policies of developed countries • Development assistance • (Read pg. 512-516 and case study: Philippines pg. 517-523)