Chapter14 %20Dev_Env-10 - de Janvry and Sadoulet Chapter 14...

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de Janvry and Sadoulet 1 10/30/10 Chapter 14 Sustainable development and the environment Revised November 11, 2009 I. Links between development, resource conservation, and environmental sustainability Development, natural resource use, and the environment have become so inextricably linked that they need to be jointly managed. This is a new phenomenon. It used to be that we could design industrialization strategies without concern for resource depletion, pollution, and climate change; or unleash a Green Revolution in agriculture without immediate concern for chemicals flowing into water tables and loss of biodiversity. This is no longer the case. The synergies have become so large that the very success of development is conditional on its impact on resource availability and environmental sustainability (see for example Al Gore’s An Inconvenient Truth in Wikipedia, 2009). Examples where this applies are the following: Water use for irrigation in agriculture contributes to a global water shortage and deterioration of potable water quality. 80 to 90% of the world’s captured fresh water is used by agriculture, at a time when rapid urbanization and industrialization place new claims on water. Overdraft of underground water aquifers, often enhanced by farmers’ electricity subsidies for pumping as in India, leads to falling water tables. Water shortages in the major food producing regions of the world is enough to affect aggregate food supplies and prices. Declining water quality either requires expensive treatment or imposes threats on the health of consumers. What are some of the causes? They include unregulated negative externalities caused by chemical fertilizers, pesticides, and animal effluents; ill defined property rights over water, often an open access resource inviting over-use; inefficient technologies; lack of markets for environmental services to reward Take home messages for Chapter 14 1. Managing resource use and environmental sustainability are hugely important for successful development, particularly for poverty reduction. Discrepancies between private incentives and the social optimum are created by market failures (externalities, public goods, sustainability considerations, missing markets for environmental services), incomplete property rights, and high discount rates. 2. Negative externalities induce over-production of the polluting good relative to the social optimum. Policy instruments to attack this problem include tax, subsidies, quotas, cap-and-trade, and assigning property rights to allow private bargains. 3. Incomplete property rights (open access, common property resources (CPR) without cooperation) induce over-extraction from the resource leading to exhaustion. Cooperation in the use of a CPR can be socially efficient.
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This note was uploaded on 02/09/2011 for the course ECON c171 taught by Professor Alaindejanvry during the Fall '10 term at University of California, Berkeley.

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Chapter14 %20Dev_Env-10 - de Janvry and Sadoulet Chapter 14...

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