Growth That Keeps the Environment in Mind
Chapter Thirty-Five
Syllabus topic 2, "Sustainable Development."
Pages 103 to 105 of 663
In one line
MU asks how global economic development can take place with environmental issues in mind, and the answer has three parts: break the link between output and damage, put the cost into the price, and pay the countries that cannot afford the switch.
In exam wording: development can be reconciled with environmental protection through decoupling, meaning growth in output without a proportionate growth in resource use and emissions; through internalisation of environmental cost by taxation, liability and market instruments; and through international transfers of finance and technology to meet the incremental cost of the cleaner option in developing countries.
The three parts
Part one: decoupling
Relative decoupling means resource use grows more slowly than output. Absolute decoupling means resource use falls while output grows. Only the second solves anything, and it has been achieved for some pollutants in some countries and not for material use worldwide.
The techniques are:
- Efficiency. Less input per unit of output.
- Substitution. A cleaner input for a dirtier one, which is what the Montreal Protocol achieved.
- Circularity. Recovering material at the end of life rather than extracting it again. The Basel Convention's amendments on plastic waste and the various producer responsibility rules are the legal expression of this.
- Structural change. A shift from material-intensive to less material-intensive activity.
The objection to relying on efficiency alone is the rebound effect: cheaper operation increases use. The answer, historically, is a cap, which is why Article 2 of the Montreal Protocol fixes quantities and not efficiencies.
Part two: internalisation
Rio Principle 16: national authorities should endeavour to promote the internalisation of environmental costs and the use of economic instruments, taking into account the approach that the polluter should, in principle, bear the cost of pollution, with due regard to the public interest and without distorting international trade and investment.
Four instruments do this work.
| Instrument | How it works | Example in this book |
|---|---|---|
| Tax or charge | Adds the cost to the price | Carbon taxes; India's cess on coal, 2010 to 2017 |
| Liability | Makes the polluter pay after the event | The Indian rule of absolute liability; the Civil Liability Convention 1969 |
| Tradable permit | Caps the total and lets the price find the cheapest reduction | Kyoto Protocol article 17 emissions trading |
| Deposit or bond | Holds money against future damage | Reclamation bonds in mining law |
Part three: transfers
A developing State asked to choose the costlier and cleaner option is being asked to spend money it has on a problem it did not mainly cause. International law's answer is the incremental cost principle: the developed country Parties pay the difference between the cheaper option the State would otherwise have chosen and the cleaner one the treaty requires.
The mechanisms are the Multilateral Fund under Article 10 of the Montreal Protocol, the financial mechanism under Article 11 of the Framework Convention on Climate Change, the Global Environment Facility, and the finance obligations in Article 9 of the Paris Agreement.
Growth That Keeps the Environment in Mind
Worked example
A State must replace an ageing chlorofluorocarbon-based refrigeration industry.
- Decoupling. Substitution, not efficiency. A more efficient chlorofluorocarbon plant still destroys ozone.
- Internalisation. A ban rather than a tax, because the substance is being eliminated, not moderated. Article 2 of the Montreal Protocol sets the schedule.
- Transfer. Article 5 gives the State a grace period; Article 10 gives it money from the Multilateral Fund to convert its plants.
- Enforcement. Article 4 restricts trade in the controlled substances with non-Parties, which removes the option of buying them cheaply from outside the regime.
That is the complete answer to MU's question, in one industry, using one treaty. It is the strongest worked example available in the whole subject and it is worth learning as such.
What it does NOT mean
It does not mean green growth is proved. Absolute decoupling of material use from output has not been demonstrated at global scale, and an honest answer says so.
It does not mean the transfers have been adequate. The hundred billion dollar a year goal set in the climate negotiations for 2020 was not met on time, and the dispute about what counts as climate finance is unresolved.
It does not mean the market instruments always work. An emissions trading system with an over-generous cap produces a price near zero and changes nothing, which happened in the early phases of more than one scheme.
Distinctions
| Relative decoupling | Absolute decoupling | |
|---|---|---|
| Definition | Impact grows more slowly than output | Impact falls while output grows |
| Achieved for | Material intensity in most economies | Sulphur dioxide and ozone-depleting substances |
| Not achieved for | Global material use, and global greenhouse gas emissions | |
| Sufficient? | No | Yes, if fast enough |
Quick revision
- Three parts: decouple, internalise, transfer.
- Decoupling: efficiency, substitution, circularity, structural change. Relative is not enough; absolute is what counts.
- Rebound effect is why caps beat efficiency standards.
- Rio Principle 16 on internalisation; four instruments: tax, liability, tradable permit, bond.
- Incremental cost financing: Montreal article 10, Framework Convention article 11, Paris article 9, and the Global Environment Facility.
Test yourself
1. Distinguish relative from absolute decoupling and say which matters. Relative means impact grows more slowly than output; absolute means impact falls while output grows. Only absolute decoupling reduces the total, so only it solves the problem.
2. Why does the Montreal Protocol set quantities rather than efficiency standards? Because an efficiency standard is defeated by the rebound effect. Article 2 fixes calculated levels of production and consumption, which caps the total regardless of how efficiently the substances are used.
Growth That Keeps the Environment in Mind
3. What is incremental cost, and which article obliges its payment in the climate regime? The difference between the cheaper option a developing State would otherwise choose and the cleaner one the treaty requires. Article 4, paragraph 3, of the Framework Convention on Climate Change obliges developed country Parties to provide agreed full incremental costs.
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.