Natural resources and sustainable development

Natural resources and sustainable development Joost Platje [email protected] 12. Sustainable Economic Development Theories of Sustainability, Sustainability Indicators • THEORY • Sustainable economic development theories of sustainability, sustainability indicators. Natural resources and SD 2 Capacity and capability for sustainable development - a transaction costs and property rights perspective Joost Platje Wrocław School of Banking [email protected] [email protected] 3 1. Institutional capital and SD • SD concerns inter- and intra-generational equity. • Aim - to create capabilities for individuals to live a high quality of life, while not reducing these capabilities for future generations. • Institutional capital determines society’s capacity to enter and maintain a path of SD. 4 Key determinants of sustainability • Stability and resilience of different systems, fundamental for the functioning of society – ecosystems, energy supply systems, – transport systems, – financial systems. • The institutional capacity to achieve this may be the bottom-line for preventing collapse of such systems. • But the cure can have side-effects, and sometimes worse than the disease! 5 INSTITUTIONAL CAPITAL AND SUSTAINABLE DEVELOPMENT • „The capability of actors in society to enhance human capabilities and create a more sustainable society (Platje, 2011).” • Application of transaction cost (TC) and property right economics on issues of http://www.sciinstitute.org/capacity.html 6 Institutional capital • „The institutional framework creating the capacity for and enabling management of human resources, as well as other types of capital (physical capital, infrastructure, human capital, etc.) to achieve ecological, social and economic sustainability (Platje, 2011).” http://sustainabledevelopment.un.org/index.php?menu=1 7 INSTITUTIONAL ANALYSIS • facilitates identification of “leverage points” – places in the system where intervention is most effective for achieving sustainable development. http://www.thwink.org/sustain/glossary/LeveragePoint.h 8 Institutional capital and elements of SD • Economic elements • Social elements • Environmental elements Winning entry from the Asia-Pacific cartoon contest on Climate Change and Human Development (United Nations Development Programme, Flickr) http://urbantimes.co/2012/05/sustainable-development-climate-changeadrian-macey/ 9 Economic elements efficiency • Efficiency – produce more using the same inputs – producing the same, using less inputs. • Which type of increase in production puts less pressure on the environment and supports equity? • Private, common and public property have different social, economic and environmental effects. 10 Economic elements – growth and stability • How much production do we need for a „good life”? Are our needs unlimited? • Stability – people do not like sharp downward changes in their income. http://meetville.com/quotes/tag/greed/page8 11 Social elements • Poverty, • Consultation / empowerment – who decides what is important? • Political freedom and freedom of press prevent famines (A. Sen). • But who is interested in letting other people determine their own lives? http://objective-morality.blogspot.com/ 12 Environmental elements • biodiversity / resilience, natural resources, pollution • Environment = all natural resources (e.g. land, water, air, fossil fuels, precious metals and other raw materials, animal and plant life) and other environmental factors. http://www.doomsteaddiner.net/blog/2012/05/04/ civilization-really/ 13 Environmental elements • Ownership provides incentives for sustainable use. • Social element – natural resources often provide income for the poor (e.g., forest, sea, river). • TC – costs of preventing overuse. http://www2.uregina.ca/yourblog/environmental-econom reducing-degradation-through-incentives/ 14 Environmental elements • Current problems – global system threats. • More complex and potentially disastrous situations than ever felt before in human history. • Should regulation assume the precautionary principle (like in the European Union)? http://www.globalchange.umich.edu/ globalchange2/ current/lectures/biodiversity/biodiversity.html 15 EU indicators of sustainable development (http:// ec.europa.eu/eurostat/web/sdi/indicators) Theme Headline indicator Socio-economic development Real GDP per capita, growth rate and totals Sustainable consumption and productio n Resource productivity Social inclusion Persons at-risk-of-poverty or social exclusion Demographic changes Employment rate of older workers Public health Healthy life years and life expectancy at birth, by sex Climate change and energy Greenhouse gas emissions Primary energy consumption Sustainable transport Energy consumption of transport relative to GDP Natural resources Common bird index Global partnership Official development assistance as share of gross national income Good governance No headline indicator Natural resources and SD 16 Indicators of institutional capital (source: Platje, 2011) Natural resources and SD 17 Subthemes Subthemes level 2 – EU and World Bank indicators Indicators to be developed measuring institutional capital Head indicator of institutional capital – institutional strength Enforcement of contracts, institutional stability and policy making by institutional governance for Institutional conditions, relation with other elements of institutional capital Enforceability of government Number of NGOs and civil society and private contracts; violent associations involved in protecting social and organised crime; fairness and environmental rights. of judicial process; speediness of judicial process; Identifiability of ownership - existence of nationalisation/expropriation; land and property register. Transaction quality of police; independent costs and effectiveness of functioning judiciary; legal framework relates to accountability (good governance). supporting legality of government; protection of intellectual, financial, material and immaterial assets; security of traditional property rights; importance of the informal economy; level of organised crime; importance of tax evasion in the formal sector; government respect for contracts; judicial Source: Based on Platje (2009). First and second accountability; ... columns (WB). based on Kaufmann et al. Formal rules creating and changing institutional governance when needed. Most WB indicators of rule of law rather concern the enforcement of contracts and policy making by institutional governance institutional strength as a condition for good governance. (2009) and Commission … (2005). EU = European Union indicator. WB = World Bank Indicator. Natural resources and SD 18 Incentives for sustainable production and consumption behaviour provided by formal institutions Export and import regulations; other regulatory burdens; restriction on the ownership of business and equity by nonresidents; price controls; excessive protection; rules limiting competition; antimonopoly law; competitiondisturbing environmental regulation; complexity of the tax system; banking/finance; formalities for starting-up business; labour market policies; price liberalisation; conditions for rural financial service development; etc. (WB). Indicators of private, common and public property right regimes influencing social and environmental sustainability, e.g., regulation supporting sustainable consumption and production. Influenced by the quality of regulations and policy coherence; existence of social and environmental Existence of property right regime for regulations. natural resources and the distribution of access and withdrawal rights, in order to The paradigm of the establish whether SD is a club good. necessity of economic growth is Issues of SD in legal acts, directives, policy implied by many documents etc. Distribution of property World Bank and EU ownership and wealth. indicators. Related to incentives and the propensity to lie and cheat (see institutional equilibrium). Incentives to take charge of ones’ own life. Natural resources and SD 19 Capability enhancing formal institutions Freedom of association; freedom of speech; freedom of press; freedom of political participation; religious freedom; freedom of movement of persons; guaranteed access to information ... (WB). Freedom of possession, use and management of property, freedom of contract, conditioned by regulations needed for sustainable production and consumption. Freedoms also should include the “Freedom House categories of civil liberties” (BenYishay and Betancourt, 2008, 30), such as freedom of enterprise and belief (“independent media; freedom of religious institutions and communities; academic freedom and lack of political indoctrination in education; open and free private discussion”) and personal autonomy and individual rights (“free choice of residence, employment, institution of higher education; private property and entrepreneurial freedom; social freedoms, e.g., gender equality, choice of marriage partners and size of family; equality of opportunity and absence of economic exploitation”). Natural resources and SD WB indicators concern voice and accountability – institutional strength as a condition for good governance. Capabilities achieving a quality of life. for good 20 Subthemes Indicators to be developed Institutional conditions, for measuring institutional relation with other elements capital of institutional capital Head indicator of institutional capital - Good governance Participation, voice and accountability (EU, WB) Subthemes level 2 – EU and World Bank indicators Voter turnout in national parliamentary elections; response to EU internet public consultation (EU). Specific issues within themes, and various measures implementing headline objectives are: voter turnout in EU parliamentary elections by gender, by age group and by highest level of education attained; E-government online availability; Egovernment usage by individuals (EU). Transaction costs of access to information and access to institutional governance for different stakeholders, in particular weak stakeholders. Transaction costs of access to media and establishing an NGO or civil society association. Measurement of access to information by the number of newspapers circulating or number of Internet subscribers or people with Internet access (Spangenberg et al., 2002, 66). The differentiation of activities and the percentage of society Civil society organisations; active in NGOs or civil society media (WB). organisations. Institutional thickness, such as Vested interests, environmental associations, accountability of public charity, culture, socio-culture, officials, lack of censorship, labour unions, youth effectiveness of law making associations, sports clubs, and control by national neighbourhood associations, parliament, ... (WB). political associations (Coffé Natural resources and SD and Geys, 2005). Existence, functioning and Accountability – property rights and competencies make owners identifiable and responsible. Determined by different types of freedoms (see institutional strength, capability enhancing institutions). Capabilities and incentives to take charge of ones’ own life. While e-government and access to the Internet may be relevant for HDCs, the number of newspapers circulating may be more relevant for LDCs (Spangenberg et al., 2002, 60). 21 Political stability and Political factions absence of violence / organised along language, terrorism (WB) ethic and / or religious divides; risk of a military coup; political terrorism; societal conflict; political assassination; civil war; armed conflict; violent demonstrations; autonomy and separation; state of emergency; frequency of political killings, disappearance and torture (WB). Need indicators to distinguish between real numbers and perceived threats. Natural resources and SD Influenced by institutional strength and institutional equilibrium. May also be an expression of the strength of institutions and an institutional equilibrium, as well as of dangerous stakeholders questioning the system. 22 Government Bureaucratic delays; rate of effectiveness government personnel (WB) turnover; quality of government personnel; global E-government; quality of public infrastructure; quality of public schools; quality of supply of public goods; capacity of tax administration to implement measures; quickness of adaptation to new economic challenges ... (WB). Quickness of adaptation to Transaction costs for the use social, economic and of institutional governance. environmental challenges. Quality of supply of Private-public partnerships capability-enhancing public for the provision of public goods (e.g., education, health goods and innovative care, infrastructure), solutions (Moulaert, 2002). enhancing participation in social, economic and political life. Natural resources and SD Determines the resilience of a system. 23 Science Objective and independent science representing the research needs of different groups and supporting system survival. For economic science this implies a paradigm change from economic performance and efficiency to the aims of system survival and expansion of human capabilities Indicators to be developed – e.g., development of new methods of production and environmental protection etc.. No. of patents on eco-efficient production technologies. Topics of research (priorities), what type of sustainability issues does research focus upon? “Potential scientists and engineers per million; … scientists and engineers engaged in R&D per [unit of population]; expenditure on R&D as a percentage of GDP (Spangenberg et al., 2002, 65) Natural resources and SD 24 Regulatory quality (WB) and policy coherence (EU) Proportion of environmentally harmful subsidies; number of infringement cases brought in front of the Court of Justice, by policy area; administrative costs imposed by legislation (EU). Specific issues within themes, and various measures implementing headline objectives are: share of major proposals in the Commission’s Legal and Work Programme for which an impact assessment has been undertaken; transposition of Community law, by policy area (EU). Indicators of the Influences freedom of sustainability impact contract and transaction assessments carried out. costs appearing due to limitations on property rights. Indicators of the effectiveness of institutional Determines the resilience of change. a system and path of institutional change. Challenge of the development of indicators showing tradeoffs between low transaction costs of economic activity and high transaction costs of harming the environment or infringing labour rights, etc., in order to assess the effects of policy. Most WB indicators of regulatory quality rather concern the existence of formal institutions and the incentives they provide. Efficiency of the tax collection system; ease of doing business related to social, environmental and economic regulation; Natural ease of resources and SD starting a company (WB). 25 Control of Corruption; losses and corruption costs resulting from (WB) corruption; government efforts to tackle corruption; frequency of firms making extra payments connected to: import/export permits, public utilities, tax payments, awarding of public contracts, obtaining favourable judicial decisions; frequency of bribery in taxes, customs and judiciary; how many judges, government officials, civil servants do you think are involved in corruption (WB). Need to distinguish between factual numbers and perceived levels of corruption, which are related to trust in institutional governance. Size of economy. Corruption is a sign of weak institutions and inefficient institutional governance. informal Natural resources and SD 26 Subthemes Subthemes level 2 – EU and World Bank indicators Indicators to be developed Institutional conditions, for measuring institutional relation with other elements capital of institutional capital Head indicator of institutional capital – institutional equilibrium Trust in and satisfaction with institutional governance Trust in the fairness of elections; trust in parliament, satisfaction with democracy; satisfaction with public transportation system, roads and highways and the educational system; (WB, voice and accountability). Confidence/trust in the police force; confidence/trust in the judicial system (WB, rule of law). Public trust in the financial honesty of politicians (WB, control of corruption). Trust in structures of institutional governance providing information (e.g., land register, government agencies). Trust in structures policy for SD. government implementing WB indicators concern voice and accountability, as well as rule of law – institutional equilibrium as a condition for institutional strength and good governance. Trust in civil society organisations, associations, NGOs, media, etc. Trust in science. Natural resources and SD 27 Trust in and satisfactio n with formal institution s Mentality, including xenophobia, nationalism, corruption, nepotism, willingness to compromise (WB, control of corruption). Satisfaction with / Creates a basis for acceptance of existing (dis)obedience of existing laws and regulations. formal rules. Mentality and values concerning lying and cheating, corruption, etc. Natural resources and SD 28 Mental NA models, value systems and paradigms determining priorities in sustainable development Priorities among the population Priorities determine the Priorities of strong stakeholders direction and speed of Priorities of stakeholders with institutional change for SD. vested interests. “Percentage of people who say they have enough (Meadows, 1998, 20),” reflecting priorities concerning growth. Subjective indicators of happiness, well-being, satisfaction, etc. (see Constanza et al., 2008), as they show people’s priorities (Diener and Suh, 1999), as well as the subjective need for improvement in quality of life. Propensity to lie and cheat Number and strength of dangerous stakeholders questioning the existing system (related to political stability). Natural resources and SD 29