Transcript Sustainable Development

Chapter 20
Sustainable Development
International Trade and
International Agreements
© 2007 Thomson Learning/South-Western
Callan and Thomas, Environmental Economics and Management, 4e.
Understanding
Sustainable Development
Sustainable Development as a
Global Objective
 Sustainable development refers to managing earth’s
resources to assure long-term quality and abundance for
future generations
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Aims to achieve economic prosperity and environmental quality
Also referred to as intergenerational equity
 Involves fundamental change in how society makes
market decisions – both consumption and production
 In practice, there are criticisms and concerns
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e.g., Nobel Laureate Robert Solow argues against using
sustainable development as a policy objective because it is a
vague concept; instead consider sustainability as an
obligation to future generations
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Growth and the Environment
 Sustainable development relies on the premise that
economic growth and environmental quality must not
be competing goals. Why is this important?
 Data show that the environmental impact per unit of
income associated with growth must decline between
3.5 and 4 percent per year to avoid further pollution
and natural resource depletion
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Problem is more serious for developing countries that have
high growth rates and rapidly rising populations, such as
China and India
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Growth and the Environment
Environmental Kuznets Curve (EKC)
 Research has examined whether a technical relationship
exists between economic growth and pollution
 A model of this relationship is the environmental Kuznets
curve (EKC), an inverted U shape, implying that:
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Early stages of industrialization are linked to relatively high
pollution levels when growth is a priority and environmental
controls are lenient or nonexistent
More advanced economic development is linked to a shift in
the opposite direction with greater concern for environmental
quality and a strengthening of environmental regulation
 A consensus is forming that this tradeoff is not as severe
as once believed
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Pollution
Environmental Kuznets Curve
Early stages of
industrial
development
More advanced
stages of
development
EKC
Income per capita
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Framework for Sustainable
Development
 United Nations Conference on Environment and
Development (UNCED) – commonly known as the
Rio Summit – was a forum held in 1992 to discuss
issues relating to sustainable development
 Included in the summit’s key documents were:
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Agenda 21 – a voluntary action plan outlining the course
for worldwide progress toward sustainable development
Rio Declaration – a list of 27 principles to act as
guidelines for achieving global environmental quality and
economic development
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Framework for Sustainable
Development (continued)
 World Summit on Sustainable Development (WSSD)
was held in Johannesburg in 2002 to renew interest in
sustainable development and assess progress since
the Rio Summit
 Among the summit’s accomplishments:
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Adopted a plan to fully implement Agenda 21
Strengthened the notion of sustainable development
Established over 300 partnership initiatives to complement
government actions aimed at sustainable development
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Controlling
Transboundary Pollution
International Agreements to
Control Transboundary Pollution
 Montreal Protocol and Amendments
 Aimed at phasing out ozone-depleting substances
 Established and made permanent a Multilateral Fund to help
developing nations in this effort
 U.N. Framework Convention on Climate Change (UNFCCC)
 Garnered a commitment by each signatory nation to launch a
strategy limiting releases of greenhouse gases (GHGs)
 Kyoto Protocol to the UNFCCC
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Calls for 38 developed nations to reduce GHG emissions to 5.2%
below 1990 levels by 2012 with no targets on developing countries
Provides for the use of market-based instruments, called flexible
mechanisms to achieve emissions targets, including a trading
system of GHG allowances
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International Agreements to Control
Transboundary Pollution (continued)
 London Dumping Convention (LDC)
 Prohibits ocean dumping of certain wastes,
including radioactive wastes
 US-Canada Air Quality Agreement
 Calls for each country to set emissions caps on
sulfur dioxide (SO2) and nitrogen oxides (NOx)
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International Trade and
Environmental Protection
Free Trade Versus Protectionism
 Proponents of free trade argue that nations should
trade with one another because there are tangible
gains, such as
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Higher worldwide output
Efficiency gains from specialization
More competition and lower prices in global markets
 Protectionism supports using trade barriers to protect
the domestic economy from foreign competition,
because they believe trade can have negative
consequences such as
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Unfair competition
Job losses
Threats to environmental quality
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Concerns about International Trade
and Environmental Quality
 Production costs are lower in nations with
more lenient environmental standards, giving
their producers a competitive advantage,
sometimes called the pollution haven effect
 Quality of imports produced in nations with lax
regulations on toxic chemical use, fuel
efficiency, coal consumption, etc. may lead to
international externalities
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Counter Arguments
 Economic gains from trade will help poorer nations
afford the costly cleanup of environmental pollution
 An improved economy can provide means to
implement better environmental policy, as implied by
environmental Kuznets curve
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This argument is consistent with sustainable development
 Both sets of arguments were part of
negotiations for major international trade
agreements
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International Trade
Agreements and
Environmental Goals
North American Free Trade
Agreement (NAFTA)
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NAFTA was reached by the U.S., Mexico, and Canada
in 1992
Provisions dealing with the environment include:
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Commitment to sustainable development
Agreement to implement NAFTA with the aim of
environmental protection and not to lower standards to
attract investment
Consensus to aim for congruence of each country's
environmental regulations
Agreement that NAFTA dispute settlement panels will
solicit environmental experts as needed
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NAFTA (continued)
 The three nations formed the North American
Commission for Environmental Cooperation (CEC) to
address environmental impact of increased trade
 In 1992, the U.S. and Mexico initiated an Integrated
Border Environmental Plan (IBEP)
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Aimed at improving water quality, monitoring air pollution,
tracking hazardous waste, and promoting pollution
prevention for the border region
Border 2012 Program extends efforts of the IBEP and the
Border XXI Program; aims to protect health and environment
in the border region following sustainable development
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General Agreement on Tariffs and
Trade (GATT)
 Executed in 1947, GATT was a major international
treaty aimed at reducing trade barriers
 Environmentalists were concerned about how GATT
rulings might run counter to environmental goals
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e.g., under GATT, an import cannot be restricted solely on
the basis of an exporter using a pollution-generating input
or production method
 After negotiations called the Uruguay Round, countries
had to use least trade restrictive measures to achieve
environmental goals, and World Trade Organization
(WTO) was formed as successor to GATT
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World Trade Organization (WTO)
 An international association aimed at
facilitating trade and overseeing trade policy
 It established a Committee on Trade and
Environment (CTE), whose directive is:
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To identify the relationship between trade
measures and environmental measures to foster
sustainable development
To recommend any necessary changes to the
multilateral trading system
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