CHAPTER 10

THE ENVIRONMENT AND DEVELOPMENT

ECONOMICS AND THE ENVIRONMENT
 Environmental issues affect and are affected by
economic development
 Classic market failures lead to too much
environmental degradation
 Poverty and ignorance may lead to non-
sustainable use of environmental resources
 Environmental decay and global warming are
serious issues we face today
THE BASIC ISSUES
SUSTAINABLE DEVELOPMENT AND
ENVIRONMENTAL ACCOUNTING

 Sustainable development has been defined as

“meeting the needs of present generation
without compromising the wellbeing of future
generations”
 Sustainability: reflects the need for
careful balance between economic
growth and environmental
preservation.

Environmental accounting: principles

and practices that are mainly used
by organizations to more accurately
trace environmental costs back to
specific activities.
 SUSTAINABLE NET NATIONAL INCOME IS:
An environmental accounting measure of the total
annual income that can be consumed without
diminishing the overall capital assets of a nation
(including environmental capital).
NNI  GNI  Dm  Dn
*

Where:
NNI* - is sustainable national income
GNI - is Gross national income
Dm - is the depreciation of manufactured capital
assets
Dn - is the depreciation of environmental capital
 MORE EXPANSIVELY, SUSTAINABLE NET NATIONAL
INCOME IS:

NNI  GNI  Dm  Dn  R  A
**

Where
NNI** - is the revised NNI calculation
GNI, Dm, and Dn - are defined as before
R - is expenditure needed to restore
environmental capital (forests,
fisheries,etc.)
A - is expenditure required to avert
destruction of environmental capital (air
pollution, water and soil quality, etc.)
ENVIRONMENT RELATIONSHIPS TO POPULATION,
POVERTY, AND ECONOMIC GROWTH
Population, Resources, and the Environment
 A slowing of population growth rates would help
ease the intensification of many environmental
problems.
 Rapidly growing populations have led to land, water,
and food shortages in rural areas and to urban
health crises stemming from lack of sanitation and
clean water.
 If increases in GNI and food production are slower
than population growth, per capita levels of
production and food self-sufficiency will fall.
ENVIRONMENT RELATIONSHIPS TO POPULATION,
POVERTY, AND ECONOMIC GROWTH
Poverty and the Environment
Poverty and lack of development policies would
force the people to overuse natural resources:
 Destruction of forest / Cutting down the trees

 Contaminate the water

 Pollute the air

 Soil degradation
ENVIRONMENTAL KUZNETS CURVE
 A graph reflecting the concept that pollution
and other environmental degradation first rises
and then falls with increases in income per
capita.
Environment and Rural and Urban Development
Rural Development and the Environment
 The increased accessibility of agricultural inputs to
small farmers and the introduction of sustainable
methods of farming will help create attractive
alternatives to current environmentally destructive
patterns of resource use.
Environment and Rural and Urban Development
Urban Development and the Environment
 Urban development can magnify the risk of
environmental hazards such as flash flooding.
 Pollution and physical barriers to root growth
promote loss of urban tree cover.
 Animal production are inhabited by toxic
substances, vehicles, and the loss of habitat and
food sources.
Natural Resource–Based Livelihoods as a
Pathway Out of Poverty
 In low income countries, high dependence on natural
resources: agriculture, fishing, forestry, and hunting.
 But access to the benefits of these resources is often
highly inequitable.
 Poor have been losing control of some of their
traditional natural resource commons, including
forests, fields, and fishing areas.
 Governments may grant or allow foreign or national
companies’ logging, fishing, and mining without regard
to the people who depend on these lands and
resources for their livelihoods and way of life.
Natural Resource–Based Livelihoods as a
Pathway Out of Poverty

Solution: “Pro-poor Governance”

 Empowerment of the poor.

 Policy that target poor people generally aimed

at reducing poverty.
 Improve the assets and capabilities of the poor.
The Scope of Environmental Degradation
 Environmental challenges in developing countries will
be caused by poverty
 The principal health and productivity consequences of
environmental damage (in developing countries)
include:
 water pollution and scarcity

 air pollution

 solid and hazardous wastes

 soil degradation

 deforestation

 loss of biodiversity

 global warming
GLOBAL WARMING AND CLIMATE CHANGE:
SCOPE, MITIGATION, AND ADAPTATION

SCOPE OF THE PROBLEM

According to IPCC, there are four zones highly
vulnerable to greenhouse gas–induced climate
change these are:
1. Sub-Saharan Africa because of drying
2. Asian megadeltas because of flooding
3. small islands due to multiple sensitivities
4. Arctic – widespread melting of snow and ice
GLOBAL WARMING AND CLIMATE CHANGE:
SCOPE, MITIGATION, AND ADAPTATION

MITIGATION

What are the strategies to lessen it?

 Development of “carbon markets,” taxes on carbon, and

subsidies to encourage faster technological progress
 Establishing a long-term quantity cap on greenhouse
gases in the atmosphere to guard against environmental
catastrophe
 Develop and implement a mechanism for paying
developing countries for forest preservation
GLOBAL WARMING AND CLIMATE CHANGE:
SCOPE, MITIGATION, AND ADAPTATION
ADAPTATION
Climate change adaptation - “a process by which
strategies to moderate, cope with and take advantage of
the consequences of climatic events are enhanced,
developed and implemented.” – UNDP
TWO FORMS:
 “planned” (or policy) adaptation - undertaken by
governments that respond directly to citizens and the
government incentives affect what individuals choose to
do.
 “autonomous” (or private) adaptation - undertaken
directly by households, farms, and firms in response to
climate change they experience or anticipate.
Example: Autonomous Adaptation to Climate Change by
Farmers in Africa
 livelihood diversification

 livestock herding

 ecological diversification

If autonomous adaptation increases the marginal

benefit of planned adaptation and vice versa, they are
considered complements. But if autonomous adaptation
reduces the need for planned adaptation and vice versa,
then they are substitutes.
URBAN DEVELOPMENT AND THE
ENVIRONMENT
ENVIRONMENTAL PROBLEMS OF URBAN SLUMS
 Families work long hours

 Income is uncertain

 Difficult trade-offs must be made between

expenditures on nutrition, medical care, and
education
 Greater risk of being exposed to dangerous
environmental condition
 Health-threatening pollutants

 Debilitating and ultimately fatal respiratory infections

 Diarrhea
INDUSTRIALIZATION AND URBAN AIR
POLLUTION
The early stages of urbanization and
industrialization in developing countries are generally
accompanied by rising incomes and worsening
environmental conditions. Cross-sectional analysis of
numerous countries at different levels of income
suggests that some types of urban pollution tend first to
rise with national income levels and then to fall. This
effect has been dubbed the environmental Kuznets
curve.
INDUSTRIALIZATION AND URBAN AIR
POLLUTION
The principal sources of air pollution, which pose
the greatest health threat associated with
modernization, are energy use, vehicular emissions, and
industrial production. Industrialization can lead to
increases in waste either directly through emissions or
indirectly by altering patterns of consumption and
boosting demand for manufactured goods. The
production of manufactured goods generally entails the
creation of by-products that may be detrimental to the
environment.
Where;
- S = 𝑀𝐶𝑃 , supply curve
that represents the
marginal private costs
associated with producing
good X.
- 𝑄𝑀 , free-market
equilibrium output
- 𝑃𝑀 , free-market
equilibrium price
- 𝑀𝐶𝑆 , marginal social cost
curve
- Q*, efficient outcome
- P*, price
PROBLEMS OF CONGESTION, CLEAN WATER,
AND SANITATION
As serious as the threat of rising levels of
industrial emissions of pollution may be to the health of
urban inhabitants in developing countries, the two most
important environmental factors affecting the health of
the urban poor are the inaccessibility of clean water and
the lack of sanitation.

Postponement of investments in the infrastructure

required for provision of urban water and sanitation can
lead to much greater costs in the future. Poor access to
water has led to widespread systems of private wells,
which can overtax existing groundwater supplies.
PROBLEMS OF CONGESTION, CLEAN WATER,
AND SANITATION
Foreign-exchange earnings may also be severely
threatened by contaminated water supplies. Health
standards in developed countries may prohibit the
importation of agricultural goods produced with
potentially contaminated water.
RAINFOREST DESTRUCTION
(How It Costs You and Steps You Can Take Today)
 FACTS:
 People cut down 15 billion trees every year (worldwide).
 In United States, 30% of previously forested areas are already
gone (occurred during a logging boom in 1880).
 In the East, 99% of old-growth forests have either been cleared
for farming or housing or replaced by second-growth forests.
 In the Midwest, oak savannas have been reduced to small
areas surrounded by cornfields.
 In the Pacific Northwest, diverse, ancient forests have been
replaced with a monoculture of young trees regularly harvested.
 In the Philippines, Forest Management Bureau of the
Department of Environment and Natural Resources provided
that we are losing approximately 47,000 hectares of forest
cover every year.
RAINFOREST DESTRUCTION
(How It Costs You and Steps You Can Take Today)

CAUSES:
 Agriculture

 Illegal Logging

 Development

 Wildfires
RAINFOREST DESTRUCTION
(How It Costs You and Steps You Can Take Today)

EFFECT:
 Deforestation costs $4.5 trillion each year
through the loss of biodiversity
 Eliminated millions of species (In fact, 80% of
Earth’s land animals and plants live in forests).
 Worsens climate change
RAINFOREST DESTRUCTION
(How It Costs You and Steps You Can Take Today)

SOLUTIONS:
 The United Nations’ Reducing Emissions from
Deforestation and Forest Degradation program
has funded $117 million into deforestation
reduction in 44 developing countries.
What you can do?
 Avoid products using palm oils
 Donate to charities that plant trees
 Become carbon neutral
POLICY OPTIONS IN DEVELOPING AND
DEVELOPED COUNTRIES
What Developing Countries Can Do
Range of Policy Options:
 Proper Resource Pricing

 Community Involvement

 Clearer Property Rights and Resource Ownership

 Programs to Improve the Economic Alternatives of the

Poor
 Raising the Economic Status of Women

 Industrial Emissions Abatement Policies

 Proactive Stance toward Climate Change and

Environmental Degradation
POLICY OPTIONS IN DEVELOPING AND
DEVELOPED COUNTRIES
How Developed Countries Can Help Developing
Countries
Industrial countries can help developing nations in their
efforts to improve the environment of development in
three areas:

 Trade Policies
 Debt Relief
 Development Assistance
POLICY OPTIONS IN DEVELOPING AND
DEVELOPED COUNTRIES
What Developed Countries Can Do for the Global
Environment

 Emission Controls
 Research and Development
 Import Restrictions
 Case Study
A World of Contrasts on One Island: Haiti and the
Dominican Republic
 Travelers to Haiti who flew across the border from
the DR saw an astonishing contrast: Haiti to the west is
barren, while the DR to the east is lush forest—except
where Haitians desperate for fuel wood for income from
charcoal production have made forays across the border.
 “a cycle of poverty and environmental destruction has
denuded hillsides.”- United Nations Development
Programme (UNDP)
 “the border looks like a sharp line with bends, cut
arbitrarily across the island by a knife, and abruptly
dividing a darker and greener landscape east of the line
(the Dominican side) from a paler and browner
landscape west of the line (the Haitian side)- Jared
Diamond (American geographer)
 HAITI DOMINICAN REPUBLIC
low human development medium human
ranked 161 2012 New HDI development ranked 96 on
(western part of Hispaniola) the 2012 New HDI (eastern
part of Hispaniola)
real income: $1,877 real incomes: $2,345
12% of average U.S. income 16% of average U.S. income
level
real GDP fell in Haiti to real GDP in the DR had
$1,581 risen to $9,664
Haiti’s average income by average income was more
2007 was less than 4% of than 22% of that in the
U.S. levels United States
The Beginning of the Tale of Contrasts between Haiti
and Dominican Republic

Hispaniola was “discovered” in 1492 by Christopher

Columbus, but a large majority of its hundreds of
thousands of Arawak and Taino people soon died—of
diseases brought by the Spaniards, overwork in
enslavement, and genocide. Slaves were then forcibly
brought in from Africa.
Haiti soon became one of the highest-income
countries in the world, albeit with one of the highest
extremes of inequality in history, with a large,
impoverished, and brutalized slave population supporting
a small, wealthy elite. In contrast, the DR, with fewer slave
plantations, was more the tortoise to Haiti’s hare.
GEOGRAPHY AND ORIGINAL ENVIRONMENTS
HAITI DOMINICAN REPUBLIC

Occupied 36% of the land area, The DR occupies about 64% of

Haiti is about the size of the the land area
Hawaiian Islands

Haiti is more mountainous, and Rainfall is slightly higher in the

its mountains block the rain DR
INSTITUTIONS: HISTORICAL LEGACY
The Spanish New World repartimiento system, in which
Spanish-born peninsulares received land tracts and the right to use
native labor, was first implemented in Hispaniola. When importing
slaves became too expensive for the Spanish, the French gained
control of Haiti in 1697. The colony became a major slaveholding
plantation economy and the wealthiest European colony in the New
World. But a large majority of the population were slaves. A slave
revolt led Haiti to independence in 1804.
The DR became fully independent only after 1843. It was
undermined by war and intrigue, such as restoration of Spanish
authority briefly in the 1860s and occupation by the United States
from 1916 to 1924.
INSTITUTIONS: HISTORICAL LEGACY
During the occupation, significant infrastructure was built, including
schools, roads, and ports—projects continued and extended to
hydropower under the subsequent brutal Trujillo dictatorship; this
helped facilitate a relatively higher growth rate, though inequality was
reinforced while freedoms were repressed.

The United States occupied Haiti from 1915 to 1934. Basic

security and order were restored, and road construction, expanded
public health, education services, and other infrastructure improved.
However, after U.S. occupation, the dictator François “Papa Doc”
Duvalier—a brutal ruler like Trujillo in the DR—did not focus on
modernizing Haiti.
POLICY EFFECTS
HAITI DOMINICAN REPUBLIC
suffered from political instability growth rates accelerated
failed to diversify its economy country’s GDP grew and net
manufacturing exports per
capita doubled
continued to focus on sugar depended on a clean
environment, both on its
beaches and in its forests, for
ecotourism
Deforestation has led to the
massive loss of fertile soil which
lowers the productivity of farms
HUMAN CAPITAL

HAITI DOMINICAN REPUBLIC

- highest illiteracy rate - has done a far better job

- school system is badly than Haiti at providing its
underfunded and people with the human
disorganized capital they need to
- large HIV/AIDS problem compete in a globalizing
economy.
ANALYSIS AND OBSERVATION
Some of the key issues in the border is:
 the illegal extraction and trading of natural resources
such as charcoal and firewood
 There are large numbers of people crossing illegally
from Haiti to the DR to search for livelihood
 Illegal fishing

These issues might result to a short term but high

instability and conflict risk to the relations between the two
countries.