Economic Development and the Environment
Chapter Thirty-Two
Syllabus topic 2, "Sustainable Development."
Pages 95 to 97 of 663
In one line
Economic growth uses the environment as an input and as a dump, and the whole argument of this paper is about whether that relationship can be changed or only managed.
In exam wording: the relationship between economic development and the environment is one of dependence and damage: development draws on natural resources as inputs and uses environmental systems to absorb waste, so growth measured by conventional national accounts systematically understates its environmental cost; international environmental law responds by internalising that cost, by differentiating obligations according to responsibility and capacity, and by transferring finance and technology.
Why MU asks this so often
She sets it as a short note in 2018 and again in 2016, as part of a whole question in 2015 and 2016, and it underlies the questions on the global market and on developing nations. Four of the seven printed papers touch it.
The reason is that it is the question the whole subject exists to answer. Every treaty in Modules II, III and IV is a particular answer to it.
The relationship, stated precisely
Three flows connect the economy and the environment.
- Resources in. Minerals, timber, fish, water, land. Development consumes them.
- Waste out. Emissions, effluent, solid waste. Development discharges them.
- Services. Pollination, flood control, climate regulation, soil formation. Development depends on them and rarely pays for them.
Conventional national accounting records the first flow as income and ignores the second and third. A country that cuts its forests records the timber as output and records nothing at all for the loss of the forest. That is the accounting error at the root of the problem, and the International Court of Justice put a figure on the third flow for the first time in 2018.
The case that priced the third flow
Facts. Certain Activities Carried Out by Nicaragua in the Border Area (Costa Rica v. Nicaragua), Compensation, ICJ Reports 2018, p. 15. The Court had already held, in December 2015, that the disputed territory in the northern part of Isla Portillos belonged to Costa Rica and that Nicaragua's excavation of three channels there and its military presence were unlawful. The area includes a wetland of about three square kilometres protected under the Ramsar Convention. The parties could not agree on compensation.
Held. Damage to the environment, and the consequent impairment or loss of the ability of the environment to provide goods and services, is compensable under international law. The Court rejected both parties' valuation methods and made an overall valuation of its own, awarding Costa Rica one hundred and twenty thousand United States dollars for the impairment or loss of the environmental goods and services of the impacted area in the period before recovery, and two thousand seven hundred and eight dollars and thirty-nine cents for restoration costs, together with specified monitoring expenses. Compensation must not be punitive, and there must be a sufficiently direct and certain causal nexus between the wrongful act and the injury.
Economic Development and the Environment
Why it matters here. It is the first judgment of the Court to put a money figure on the loss of an ecosystem's services, which is the third flow above. Whatever one thinks of the figure, the principle is now settled.
The four positions in the argument
An examiner is looking for the argument, not just the description. There are four positions and a candidate should be able to state all four.
One: growth is the problem. The limits-to-growth position. The environment has a finite capacity and any growth in throughput must eventually exceed it.
Two: growth is the solution. The environmental Kuznets curve position. Pollution rises with income and then falls, because richer societies demand and can afford abatement. The evidence supports it for local pollutants such as particulates and sulphur dioxide, and does not support it for carbon dioxide or biodiversity loss. Say both halves.
Three: growth is neutral and composition is what matters. What is produced and how matters more than how much. This is the decoupling position, and it is the working assumption of the Sustainable Development Goals.
Four: the question is distributional. The damage and the benefit fall on different people. That is the position the developing States have taken since Stockholm, and it is what common but differentiated responsibilities expresses.
Worked example
A country of a hundred million people with an average income of two thousand dollars is deciding between a coal plant and an imported gas plant costing thirty per cent more per unit.
- Position one says neither, and reduce demand. Politically impossible in a country with power cuts.
- Position two says build the coal plant and clean up later. That is what the industrialised world did, and it is the argument the developing world has always used against being told not to.
- Position three says the extra thirty per cent is the price of composition, and asks who pays it.
- Position four gives the answer international law has actually adopted: the incremental cost is what the financial mechanisms exist to meet. Article 4, paragraph 3, of the Framework Convention on Climate Change obliges developed country Parties to provide agreed full incremental costs, and Article 11 establishes the mechanism to do it.
That worked example is the whole of MU's question in one decision.
What it does NOT mean
It does not mean poor countries pollute more. Emissions per person are overwhelmingly higher in rich countries. What is true is that local environmental damage is often worse where regulation is weak, which is a different proposition.
Economic Development and the Environment
It does not mean the trade-off is always real. Efficiency measures often pay for themselves, and the health cost of air pollution is a direct economic loss, not an environmental luxury.
Quick revision
- Three flows: resources in, waste out, services depended on. Conventional accounting records only the first.
- Certain Activities 2018: environmental damage and the loss of environmental goods and services are compensable; the Court valued them itself.
- Four positions: growth is the problem, growth is the solution, composition is what matters, and the question is distributional.
- The Kuznets curve holds for local pollutants and not for carbon dioxide or biodiversity.
- The legal answer is incremental cost financing, Framework Convention Articles 4 and 11.
Test yourself
1. Which flow does national accounting miss, and which case corrected it in law? The loss of environmental goods and services. Certain Activities Carried Out by Nicaragua in the Border Area, Compensation, ICJ Reports 2018, p. 15, held such loss compensable and valued it.
2. State the environmental Kuznets curve and its limit. Pollution rises with income and then falls as societies demand and can afford abatement. It is supported for local pollutants such as particulates and sulphur dioxide and not for carbon dioxide or biodiversity loss.
3. What is the legal answer to a developing State asked to choose a costlier and cleaner technology? Incremental cost financing. Article 4, paragraph 3, of the Framework Convention on Climate Change obliges developed country Parties to provide agreed full incremental costs, and Article 11 sets up the financial mechanism.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.