SUSTAINABILITY, BIODIVERSITY AND TRADE

Transcription

1 1 SUSTAINABILITY, BIODIVERSITY AND TRADE Problems cannot be solved at the same level of awareness that created them Albert Einstein The greatest threat to our planet is the belief that someone else will safe it Robert Swan

2 2 Sustainable Development as a Global Objective Sustainable development refers to managing earth s resources to assure long-term quality and abundance for future generations Aims to achieve economic prosperity and environmental quality Also referred to as intergenerational equity Involves fundamental change in how society makes market decisions both consumption and production New Epoch In practice, there are criticisms and concerns

3 3 Sustainability, Biodiversity, and Trade Introduction Two period model Growth versus development Environmental Kuznets Curve Biodiversity Sustainable development Rules Measurement Policies Trade

4 4 Sustainability, Biodiversity, and Trade Introduction Two period model Growth versus development Environmental Kuznets Curve Biodiversity Sustainable development Rules Measurement Policies Trade

5 5 A Two-period Model The goal is to illustrate how to allocate a depletable resource over two time periods for which total demand is greater than the amount available. In-class example

6 A Two-Period Model As shown by demand curve, 15 units of resources would be used in period 1 and 15 units in period 2.

7 A Two-Period Model Results Marginal user cost increases over time at the rate of discount causing efficient prices to rise over time and thus reflecting scarcity. A higher discount rate will favor the present. The amount allocated to the second period falls as the discount rate rises.

8 8 Sustainability, Biodiversity, and Trade Introduction Two period model Growth versus development Environmental Kuznets Curve Biodiversity Sustainable development Rules Measurement Policies Trade

9 9 Growth versus Development Growth reflects an increase in people s living standards over time. GNP Economies grow because of Increasing resources Productivity growth Development is interpreted more broadly than growth GNP Reduction in income inequality An improvement in adult literacy rates A reduction in infant mortality Reduction in morbidity and mortality An improvement in a range of environment indicators

10 10 Sustainability, Biodiversity, and Trade Introduction Two period model Growth versus development Environmental Kuznets Curve Biodiversity Sustainable development Rules Measurement Policies Trade

11 11 Environmental Kuznets Curve (EKC) Research has examined whether a technical relationship exists between economic growth and pollution A model of this relationship is the Environmental Kuznets Curve (EKC), an inverted U shape, implying that: Early stages of industrialization are linked to relatively high pollution levels when growth is a priority and environmental controls are lenient or nonexistent More advanced economic development is linked to a shift in the opposite direction with greater concern for environmental quality and a strengthening of environmental regulation Consensus is forming that this tradeoff is not as severe as once believed

12 Environmental Degradation 12 Environmental Kuznets Curve Early stages of industrial development More advanced stages of development EKC Income per capita

13 EKC 13

14 14 Sustainability, Biodiversity, and Trade Introduction Two period model Growth versus development Environmental Kuznets Curve Biodiversity Sustainable development Rules Measurement Policies Trade

15 15 Biodiversity Biodiversity- the variability among living organisms for all sources The decision about what species and habitats to protect and how they should be protected is a major issue for societies In economic terms, biodiversity is becoming scarcer and scarcer as some species are lost and other become more vulnerable to extinction. The ecosystems that we depend upon to provide life support functions are losing the species that maintain these functions.

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17 17 Biodiversity Biodiversity- the variability among living organisms for all sources The decision about what species and habitats to protect and how they should be protected is a major issue for societies In economic terms, biodiversity is becoming scarcer and scarcer as some species are lost and other become more vulnerable to extinction. The ecosystems that we depend upon to provide life support functions are losing the species that maintain these functions.

18 18 Species on the Brink of Extinction White Rhino 10 most endangered species

19 19 Sixth Mass Extinction? Today, many scientists think the evidence indicates a sixth mass extinction is under way By the year 2100, human activities such as pollution, land clearing, and overfishing may have driven more than half of the world's marine and land species to extinction. Differences with previous Big Five mass extinctions Speed (more quickly) Cause (usually natural causes) Video

20 20 Biodiversity and the Species-Area Curve Loss of species varies by area size Implications for conservation policy

21 21 Rewilding Europe: Oostvaardersplassen Rewilding strategies, as pioneered in the Netherlands, advocate for the restoration of ecosystems maintained exclusively through natural processes, in essence the creation of new wilderness.

22 22 Biodiversity and the Species-Area Curve Loss of species varies by area size Implications for conservation policy Biodiversity loss involves more than the loss of a few highprofile species Easter Island

23 Easter Island 23

24 24 Emerald Ash Borer (EAB) and Health The death of ash trees due to EAB has been linked to increase mortality and morbidity. 100 million trees killed 6,113 deaths due to lower respiratory system 15,080 cardiovascular-related deaths Study across 15 states

25 Biodiversity Measurement: Shannon Index Assumptions All individuals are randomly sampled Population is indefinitely large, or effectively infinite All species in the community are represented Reality Particularly very diverse communities, guilds, functional groups Incomplete sampling significant error & bias Increasingly important as proportion of species sampled declines Simple mathematical consequence see next slide

26 Shannon Index Mathematics Equation H = -S p i ln p i p i = proportion of individuals found in the ith species p i estimated using n i / N

27 27 Example: Ecosystem 1 Species Name # Found P i P i ln[p i ] Species Species Species Species Species Totals

28 28 Example: Ecosystem 2 Species Name Species 1 Species 2 Species 3 Species 4 Species 5 # Found P i P i ln[p i ] Totals

29 Lazy S Kuznets Curve 29

30 30 Sustainability, Biodiversity, and Trade Introduction Two period model Growth versus development Environmental Kuznets Curve Biodiversity Sustainable development Rules Measurement Policies Trade

31 31 Sustainability Terms Capital Produced capital Human capital Social capital Natural capital Weak Sustainability (outcome approach) Strong Sustainability (opportunity approach)

32 Applying the Sustainability Criterion Hartwick rule Weak sustainability the maintenance of total capital Cons- utility depends on consumption only, various capital must be able to substitute for each other Safe minimum standard Strong sustainability the maintenance of the value of the stock of natural capital

33 33 Sustainability, Biodiversity, and Trade Introduction Two period model Growth versus development Environmental Kuznets Curve Biodiversity Sustainable development Rules Measurement Policies Trade

34 34 Sustainability Measurement Green net national product Genuine savings

35 Genuine Savings 35

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38 38 Sustainability, Biodiversity, and Trade Introduction Two period model Growth versus development Environmental Kuznets Curve Biodiversity Sustainable development Rules Measurement Policies Trade

39 39 Framework for Sustainable Development United Nations Conference on Environment and Development (UNCED) commonly known as the Rio Summit was a forum held in 1992 to discuss issues relating to sustainable development Included in the summit s key documents were: Agenda 21 a voluntary action plan outlining the course for worldwide progress toward sustainable development Rio Declaration a list of 27 principles to act as guidelines for achieving global environmental quality and economic development

40 40 Framework for Sustainable Development (continued) World Summit on Sustainable Development (WSSD) was held in Johannesburg in 2002 to renew interest in sustainable development and assess progress since the Rio Summit Among the summit s accomplishments: Adopted a plan to fully implement Agenda 21 Strengthened the notion of sustainable development Established over 300 partnership initiatives to complement government actions aimed at sustainable development

41 41 Framework for Sustainable Development (continued) Rio+20 United Nations Conference on Sustainable Development Recognizes the 20 th anniversary of the Rio Summit Two themes are prevalent Examining greening markets and a green economy couched in a sustainable development context Finding opportunities to strengthen the institutional framework for sustainable development (IFSD)

42 42 International Agreements Montreal Protocol and Amendments Aimed at phasing out ozone-depleting substances Established and made permanent a Multilateral Fund to help developing nations U.N. Framework Convention on Climate Change (UNFCCC) Garnered a commitment by each signatory nation to launch a strategy limiting releases of greenhouse gases (GHGs) Kyoto Protocol to the UNFCCC Calls for 38 developed nations to reduce GHG emissions to 5.2% below 1990 levels by 2012 with no targets on developing countries Provides for the use of market-based instruments, called flexible mechanisms to achieve emissions targets, including a trading system of GHG allowances

43 International Agreements (continued) London Convention (LC72) and 1996 Protocol Prohibits ocean dumping of certain wastes, including radioactive wastes Amended by the 1996 Protocol 2006 Amendments to the Protocol add provisions for carbon sequestration under the seabed (see Application 20.2) US-Canada Air Quality Agreement Aimed at combating acid rain and visibility impairment Implemented the Acid Rain Annex to set emissions caps on sulfur dioxide (SO 2 ) and nitrogen oxides (NO x ) Agreed to the Ozone Annex, committing to reducing transboundary ozoneforming pollutants, NO X and (VOCs) In negotiations for a Particulate Matter (PM) Annex 43

44 International Agreements (continued) Border 2012 Program 10-year plan between U.S. and Mexico to protect health and environment in the border region following sustainable development Supported by $208 million from Congress and $160 million from the Mexican government Border 2020 Program 8-year plan to succeed the Border 2012 Program Uses new principles, adds emphasis on chemical safety, and uses action plans to reach its goals Draft framework was released in

45 45 Sustainability, Biodiversity, and Trade Introduction Two period model Growth versus development Environmental Kuznets Curve Biodiversity Sustainable development Rules Measurement Policies Trade

46 Comparative Advantage in International Trade Comparative advantage The ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors. Absolute advantage The ability to produce more of a good or service than competitors when using the same amount of resources. Note: The basis for trade is comparative advantage not absolute advantage.

47 47 Example 1: Tiger Woods Should Tiger Woods mow his own lawn? Woods can mow his lawn for 2 hours. In the same time, he could be filming commercials for Nike and earn $1 million. OR Forrest Gump can mow the lawn in 4 hours or could McDonald s and earn $20. Let s compare opportunity costs.

48 48 Free Trade Example with UK and USA Assume each country produces two goods, food and cloth. Each country is endowed with 120 units of labor, which can freely move between the two sectors. Labor is the only input into production. Labor needed for each unit of output is given below. Determine each countries production possibility frontier.

49 49 Free Trade Before trade, given preferences, U.S. is consuming 20 units of food and 10 units of cloth; UK is consuming 12 units of food and 30 units of cloth. After trade each country specializes in the good for which they have a comparative advantage Exchange rate: Trade half of what each country produces Determine the gains from trade

50 Free Trade and Environmental Externalities Now assume the production of cloth in the UK results in a negative externality confided to the UK. The number of emission from cloth production follows e UK = 5Cloth UK What is the number of emissions without government intervention? The environmental regulator says 200 units of emission from cloth production is an acceptable standard. How does this affect UK s/global PPF and gains from trade? 50

51 Free Trade and the Environment 51

52 Free Trade and the Environment 52

53 53 Free Trade Versus Protectionism Proponents of free trade argue that nations should trade with one another because there are tangible gains, such as Higher worldwide output Efficiency gains from specialization More competition and lower prices in global markets Protectionism supports using trade barriers to protect the domestic economy from foreign competition, because they believe trade can have negative consequences such as Unfair competition Job losses Threats to environmental quality

54 Concerns about International Trade and Environmental Quality 54 Production costs are lower in nations with more lenient environmental standards, giving their producers a competitive advantage, sometimes called the pollution haven effect Quality of imports produced in nations with lax regulations on toxic chemical use, fuel efficiency, coal consumption, etc. may lead to international externalities

55 55 Counter Arguments Economic gains from trade will help poorer nations afford the costly cleanup of environmental pollution An improved economy can provide means to implement better environmental policy, as implied by the Environmental Kuznets Curve This argument is consistent with sustainable development Both sets of arguments were part of negotiations for major international trade agreements

56 North American Free Trade Agreement (NAFTA) Reached by U.S., Mexico, and Canada in 1992 Environmental provisions include: To commitment to sustainable development To implement NAFTA in accordance with environmental protection, not lowering standards to attract investment To aim for congruence of each country's environmental regulations To solicit environmental experts as needed in NAFTA dispute settlement panels Formed the North American Commission for Environmental Cooperation (CEC) to address environmental impact of increased trade 56

57 57 General Agreement on Tariffs and Trade (GATT) Executed in 1947, GATT was a major international treaty aimed at reducing trade barriers Environmentalists were concerned about how GATT rulings might run counter to environmental goals e.g., under GATT, an import cannot be restricted solely on the basis of an exporter using a pollution-generating input or production method After negotiations called the Uruguay Round, countries had to use least trade restrictive measures to achieve environmental goals, and World Trade Organization (WTO) was formed as successor to GATT

58 58 World Trade Organization (WTO) An international association aimed at facilitating trade and overseeing trade policy It established a Committee on Trade and Environment (CTE), whose directive is: To identify the relationship between trade measures and environmental measures to foster sustainable development To recommend any necessary changes to the multilateral trading system