OLANIYI EVANS
DEPARTMENT OF ECONOMICS
UNIVERSITY OF LAGOS, 2011
+234 803644990; +234 8096683620
Introduction
When a problem is identified, it is easier to find solution to it. Deliberate attempts can then be made to change or alter the behavior or the pattern to meet up with the given socio-economic goal.
In analyzing the economics of Environmental Sustainability, we will look at it based on the five stages of problem analysis itemized below;
1. Problem Statement and Principal Issues.
Under this, we ask questions such as;
a. What is the problem?
c. How important is it?
d. What are the Principal Issues
2.Relative importance of the problem in diverse regions
a. Relative importance of the problem?
b. Magnitude of the problem in different areas?
3.Possible goals and objectives.
a. Specific goals.
b. Preventive goals.
c. Control and stability goals.
4.Role of Economics
This is important in recognizing the role of economics and the economic components involved in the problem because there are a lot of other components
5.Policy alternatives and consequences.
After identifying a problem, we identify various policy options and the effects of this policy actions on the various variables involved, in order to achieve proper policy objectives..
Problem Statement and Principal Issues
The issue of environmental sustainability did not start today, but has been a foremost issue in the mind of economists. Economists are becoming increasingly aware of the implications of environmental issues for the success of development efforts. Environmental sustainability is essential in sustaining development.
Seven basic issues define the environment of development.
The Seven issues are;
a. The concept of sustainable development and linkages between the environments.
b. Population and resources.
c. Poverty
d. Economic growth
e. Rural development
f. Urbanization
g. The global economy
The study we are set to carry out seeks to analyze the economics of sustainable development.
Environmental sustainability is the ability to maintain the qualities that are valued in the physical environment. A functionally definitive perspective is to see it as the entire composition of the mechanisms and processes of preserving the concerns and state of the environment while meeting the current challenges of development and providing an improved capacity for the future generations to meet their challenges.
Environmental sustainability arises out of the recognition of the fact that the environment is the source of development and its sustaining factor. In essence, the welfare of humanity depends solely on how much of emphasis is laid on preserving earth and its resources from degradation, depletion and from cultural practices of employment and wealth creation with adverse impacts and effects on the environment. In that respect, we define two stances on this issue;
· The Purely environmental perspective and;
· The Economic perspective.
Environmentally, a growing, dynamic and developing system must satisfy these conditions to be termed sustainable;
· The maintenance and culture of a stable resource base
· Control over exploitation of renewable resources
· Defense of non renewable resources and management of depletion processes and,
· Investment in the provision of close and complementary substitutes to resources in specified categories of availability and renewability and,
· The maintenance of resources not termed economic in the strictest sense such as, ecology and biodiversity
In economic terms, a sustainable system must be able to provide goods and services on a continual basis whether short term or long term, manage levels of debt and technological tendencies on the environment and also manage existing and possible imbalances with implicit effects of damage to the earth and its ecology. Therefore, an economically and environmentally sustainable system incorporates development with the ability to be in existence dynamically, ensure the survival and growth of the environment and preserve the capacity to initiate, fund and control progress in technology and human welfare.
In Nigeria as well as other developing countries that fall within the low income countries bracket, the combined effects of poor structural economies, redundant technology-output systems, non optimality in public welfare and low levels of adaptability and control of biodegradation effects makes the economics of environmental sustainability a focal point in the development agenda. What policy makers and stakeholders may not recognize is the inherent complexity in addressing this concern with bipolar sides of normative issues in welfare maximization of the populace and the environment with the positive questions of enhancing technological progress and rapid industrialization which reflect the basic objectives of development. The purpose of this paper is then to examine in critical detail the pivotal focal points and trends in the economic aspects of environmental management and sustainability with an emphasis on two contemporary major events that have come to define the landscape of these issues; global warming and the environmental issues of the Niger Delta region.
The analysis of this theme is an analysis of the development process within the dimensions of the social, economic and environmental. The questions posed by the interrelation of these fields are many but the few listed below will give a pragmatic insight into the nature and the scope of it.
What if a need for increased food production constricts land use for endangered species and other members of the ecological community?
What of efficient energy sources have a greater tax incidence on the poor, recognizing the fact that the tax they pay forms a greater part of their expenditure?
With population growth, what is the equilibrium condition that meets food production, environmental non-degradation such as deforestation and the stability of this equilibrium?
Which goals take precedence in the economic strategy of government, do the pay-off matrices contain a minimal level of public welfare in the most costly consequences and what economic systems will dictate the achievement of these goals?
Are there trade-offs? Are these trade-offs manageable, what makes them Pareto-optimal and will they ensure and enhance the more ethical issues of social equity, economic equality and poverty reduction?
The economic issues in environmental sustainability are then defined further to ascertain the nature of sustainability as a valid economic concept. The premise then is that sustainability translates into substitutability; the substitution of complementary and substitutive goods one for another to maintain a balance of natural capital. The natural capital of the environment must be substituted in employment with human and manufactured capital to ultimately ensure that there is no abatement in the effective quality of the physical resources available. This brings into the fore the issues of the relative economic impacts of actions to satisfy the needs of the present. If for example, development requires the destruction of trees to bring about say in quantitative terms a measured utility of about 150 dollars, taking into account the time value of money and changes that can occur, at a growth rate of 5% for a hundred years that translates into of 13,150 dollars worth of a burden for the generation that bears that cost. The concern here is the commensurability of the costs in the present generation and that of the future generation. The economic consequences might lead to a newer allocation of resources in the future generation that might not achieve the welfare maximization objectives of that period.
The economic concerns of environmental sustainability also come in other ways. The prevention of ozone depletion or loss of specific atmospheric gases might be predicated on the adoption of alternative or newer production and technological systems with costs of control and adaptation present in the short run as well as in the long term. To maintain a fair and stable ecological and environmental balance means a process of directed investment and reinvestment in the non renewable components of the physical and ecological environment or their close substitutes. The economic question pertaining to preceding argument then lies in how the source of the financing is done; is the private sector going to be solely responsible which means that market efficiency would be used for the distribution and allocation of resources or by fiscal means of taxation where government contends with negative effects of policy like a greater incidence on the poor component of the tax base or oscillations in the price mechanisms and its possible impacts for the subsistence producers and consumers with inelastic demand and supply.
The other economic implications of environmental sustainability also need to be addressed. The neo-classical paradigm of economics assuming production with unlimited substitutability of production factors and inputs has given way to a broader measure of wealth that incorporates the value of natural capital. Substitutability has to correct the injustice in income distribution attributed to growth and increasing prosperity without decreasing inequality. The growth models of Cobb Douglas and Solow have been explanatory to this point in identifying that continuous welfare maximization is constrained by minimum energy and material requirements. The Solow model advocates that for growth to bring about constant consumption despite declining resources flow there has to be a suitable path of capital accumulation with the necessary conditions of a greater substitution of capital for labor. The human aspect to this dimension encompasses rural urban migration. In the last decades of the century, the world’s biggest cities have had a greater condensation of the population in the urban centers, constraining resources and posing greater challenges in income distribution and redistribution. The multidimensional nature of these problems has spurred the formation of blocs in favor of or against environmental development in leading schools of thought.
The theme primarily is on measuring and accounting the economics of developmental processes and sustainable processes on the environment. Environmental degradation and depletion have over the years seen a rise in and there have been growing concerns about the fate of the earth to support life further if humanity’s development engines continue the release of massive waste and pollution into the earth without some form of mechanism or instruments to alleviate the negative impact. The recent increased spate of interest has been sparked off by the current events that have threatened our existence which are spillover effects of unaccounted growth and development trends over the years. Such events include the global warming and climate change experienced in most parts of the world and the loss of a sizeable mass of the ice lands and continents of the south Americas that form an integral part of the maintenance of the balance in aquatic and natural ecosystems.
In the development process, the first contact with the environment is with the sourcing and use of capital for production. Natural capital is employed first in land as the source of extraction, mining and manufacture of all goods and services. In these processes, the activities are done without recourse to the loss of value of the physical quality of the land. As encapsulated above under the 7 focal points, the limits imposed on us by the earth’s finite resources and the growth of the human population with its attendant inequality gives rise to processes that ravage at an alarming rate much of the world’s environmental features. The increase of population requires that there must be a corresponding increase of greater proportion in food supply. This constraint requires a more extensive use of technology and natural products. The continual population growth exerts a strain on the fertility levels of the soil and since forests have to be cleared and razed, they impose a cost on the economy to invest in alternative planting to replace the used up ones. For most of the times, government has to contend with an increase in consumption and higher consumption patterns but a constant return in taxation revenue to meet the costs of cleaning up the harmful effects. The effects of poverty and other factors in the development process such as externalities both internally resulting from the processes and its institutions themselves and externally via policies of other member nations and governments of the world especially in our own context of LDCs having to share the burden of meeting the climate change reduction objectives multilaterally with guidelines and policies that might be difficult to implement and execute on the home front. As a succeeding argument, trade policies among nations on specific commodities such as carbon or graphite might affect a country’s economic capacity and ability to maintain a preferable rate of growth of its own sector and still meet its obligations as a member of the international comity on quotas and exchange tariffs to facilitate the cuts in carbon emissions or heat emissions from graphite mining as the case may be. The increasing rate of globalization poses a constraint on how much of optimality in economic growth a country can achieve given that it engages in trade. While the rest of the world might be in active pursuit of cleaner alternative energy sources, for most developing countries and Nigeria in particular, the existing economic structures are labor-based and for those that are capital based, the technologies are insufficient and thus a move from such economic systems in the short run as has been necessitated by many of the world’s summits on environment and development issues creates a demand gap that most resources of the nations within this bracket whose incomes are to a great extent functionally determined by the trade policies of their advanced counterparts must be depleted to achieve.
On a lower scale, internal economic issues and conflicting interests are generated from the development process and maintain the environment. Does government tax more to engage in more efficient energy and production systems to accomplish the objectives of faster growth and yet still greener cities? Even then, can environmental economists objectively put a price tag on the depletion processes of today and state specifically with all confidence that a set sum of finance would curtail the future effects of today’s actions meant to satisfy the public welfare? These are some of the issues at stake. Because of the nature of the problem, we set a compromise between the two issues by drawing a negotiation of both objectives. Thus, the main premise or concept under examination in this study is
“Development as an institution to meet human needs of food, water and health, the eradication of poverty and inequality and the preservation of the essential quality, health, services and beauties of the environment that requires stabilizing the climate at safe levels, sustaining energy materials and natural resources and maintain the world’s ecosystems and habitats”.
Some Problem definitions;
ü Urbanization: urbanization is the direct cause of a high population growth rate and rural urban migration. The most visible feature of this problem is the existence of slums in our urban cities. The problem is just a ripple effect of the inability of the government to institute development that keeps up with the pace of population growth. This phenomenon can be traced to poverty and has a serious consequence on the sewage and refuse disposal capabilities of the government. Environmental conditions in cities have waned given the current indices of the unemployed youth and dependent population being found in the highest bracket of the city population.
ü Overpopulation: the increase in population is not matched by a similar increase in the quality of life because of the technology adopted that is constrained to over inflate pollution effects
ü Deforestation: this practice can be attributed to the existence of subsistence farming practices and technology. The steady loss of Sudan and Sahel habitats is attributed towards the general loss of natural fertility levels of the soil. The woods from the forests are mostly employed as cooking fuels given that there are no macro scale implementations of the available sustainable energy systems
ü Desertification: The gradual encroachment of lands by the Sahara desert has been a long term issue for countries of sub-Saharan Africa but not more pronounced than the present due to the deforestation problems mentioned above. The estimated rates of sand to land covering may reach a staggering average of 2.8% by the year 2020. The already obvious consequences of this phenomenon include the drying up of the Lake Chad and its basin in north-eastern Nigeria. The people of that region have had to depend solely on the run off waters and tributaries of the Niger for irrigation and fishing purposes. For a general deductive basis, it is not farfetched to observe that the environmental concerns of carbon dioxide emissions cannot be competitively controlled in the absence of a functioning habitat of shrubs and forest trees.
Relative Importance of the problem in diverse regions
The issue of sustainable environment development since it borders on development which is a human process has different interpretations for different regions and human systems. The peculiarity and diversity of the problem is a probable function of the economics, socio and cultural systems, geography and demography, governing levels of development, growth and underdevelopment. How do we relate these? How do we construe the problems of loss of wetlands in the Amazon as a threat to sustainable environment development and not put the same loss of wetlands in Mongolia as such because they are done by different practices and different purposes. More still, how do we draw the border when the chain of impacts and consequences have of a local action generates issues and problems in international and global circles.
The issues of sustainable environmental development have different components with different effects in different cultural situations, seasons and economic conditions. For a country like ours, development issues that have to deal with the environment cut across certain typical and prevalent conditions like the poverty levels that are demographically biased, distributions of the national income, government policies and reforms with a noted attribute of never getting completed and at their half completed implementation stage leaving a trail of impact on the environment which poses a financial strain the government neglects to take care of. For example, the white paper by the Ledum Mittee committee on the Niger Delta gave a note on environmental degradation caused by oil spillage and the attendant effects on the surrounding farms and water resources with also the long term diffusion effects in the Atlantic, the nearest international water expanse. In this case, the need for petroleum refining poses a sustainable development problem for the country which depends on it as its main export commodity and has a gap in efficient production systems and is unable to implement technology transfer due to trade policies and a deficiency in the educational framework to support it; another development issue. But also, the degradation stretches its limit to the Atlantic and is a source of concern for the continued improved quality of the ecosystem and the basic environment variables of purification levels, salt balance, acid base levels, and physical quality of fish. Sustainable development of this portion of the Atlantic then comes into a clash with the economic concerns of Nigeria and pollution control requires a newer method of production or abatement control which increases environmental renewal costs for the Nigerian government. Compare this scenario to deforestation of the forests of the Amazon Basin and its attendant impact on the stability of the atmosphere of which the forests are a major contributor. The government of Bolivia might possibly want a decrease in lumbering activities in that region but has to confront the issue of unemployment for the lumber jacks and timber workers.
Nigeria has experienced a growth of environmental concerns in her development objectives. From independence, the country has had to tackle environmental concerns but perhaps even more pronounced now as problems than before as desirable sustainable conditions. Beginning with the take off of the manufacturing sector, the country has had issues with combining its growth even though slowly progressive. The most pressing problems have been in ensuring urban development while mitigating the negative effects of massive rural urban migrations from the rural towns and the preservation of natural forests and other specific ecological habitats because of the growing use of cheap sources of fuel wood and inputs for subsistence food production and consumption. The country recorded high rates of deforestation and a gradual pollution of the rivers and oceans mainly from urban residents in the big cities like Lagos and industrial concerns also situated in the urban areas such as the refineries, heavy metal industries and the budding soaps and organic chemical industries sector (Oil exploration and refining giants in the country flare up massive amounts of gas that could be employed as power generation sources but are constrained by available technology, the costs of transfer learning, training and innovation and also the dearth of specific economic action framework, indicators and points on environmental sustainability levels to form the basis for making effective laws) .
In addition, government has also had to deal with infrastructure creation and energy and power generation without compromising at economically viable costs without significant disruptions to the environment. While the country may be said to have had a fair environmental performance index over the years, in recent times this theme has become more prominent with the spate of the global warming and climate change coupled with the proliferation of industries without the existence of regulatory and protectionist agencies to safeguard the environment’s interests in the wake of the use of almost non efficient production methods and techniques coupled with the lackadaisical attitude of the populace to the conservation of the quality of the environment. The growth in government expenditures has not taken cognizance of depreciation in natural capital in its accounting for welfare objectives and targets. Because of this, it is estimated that with the Sahara desert encroaching at about 6 kilometers each year, about 12,000 kilometers of the country’s landmass will be lost to encroachment. In all these, the methods for evaluating the economic costs of respective actions by government are not suitably objective or indicative of the depth of the problems at stake.
What makes Nigeria’s case a special case for quick resolution can be inferred from the peculiar characteristics and constraints that such as the fact that it is a developing nation and still contending with poverty still very prevalent though with a geographical bias on the north. The variedness in the abilities of the rich south and poor north to take care of special development problems and the fiscal financing systems implemented to address development problems makes it all the more complicated. The country’s revenue allocation system centralizes the revenue and expenditure patterns in the federal unit of government thereby putting all component units on an equal pedestal level to achieve development. This fiscal system allows for the spread and multiplicity of economic imbalances causing state governments and federal agencies to employ other sources of output and wealth creation without recourse to the cost to the environments. The heterogeneity in the spread of the nation’s resources provides a justifiable reason for the past spending and production patterns of governments that have contributed to the general state of the environment. For the purpose of this study, indicators with a fair degree of general and universal relevance will be made use of especially in the latter part of the study.
As a concluding remark on this section of the study, it is pertinent to note that the fact that the country’s economy is mostly informal in nature makes almost every member of the public averse to the financial and fiscal responsibility of the actions that have a relationship model. It is probably more economical for the government to levy a specific lump sum tax on direct purchases to meet the obligations on environment and development sustainability than to have an efficient tax remittal system that makes sure the incidence of any action negative to the sustaining of development and the environment is born by the agent or causal mechanism of such an action. But, the inequality in incomes and the failing of the government to establish a precedence of taxpayers’ belief and concern about the environment has made such taxation policy useless. Furthermore, the country’s economic system being dictated more by private forces of demand and supply leaves only room for minimal intervention by government in ensuring that the society shares the cost of negative externalities on the environment.
SPECIFIC GOALS AND OBJECTIVES
The consequences of development actions and programmes have consequences for the environment’s sustaining and improvement capacity if not constrained with the environment in mind. To this end, some goals and objectives in line with sustainable environmental development have been created to serve as provisional guidelines, roadmaps and criterions for achieving viable development of the environment in the achievement of viable development of human welfare. These goals are discussed under these descriptions
§ Enhance cooperation at the international, regional and national levels to reduce air pollution including trans- boundary pollution, acid deposition and ozone depletion. Each party to agreements undertakes to implement quality management systems and processes to control pollution from production which is feasible with low cost production systems
§ To develop and apply pollution control and measurement technologies for stationary and mobile sources of air pollution and to develop alternative environmentally sound technologies
§ Establish a system of protected areas or areas where special measures need to be taken to conserve ecological diversity.
§ Increase the area of forests and other sustainably managed forests worldwide and reverse forests loss through continual measures to prevent deforestation and to ensure afforestation and reforestation
§ To take climate change consideration into account in income accounting and measurement and also conduct impact assessments with a view of minimizing the adverse effects on the economy and the quality of the environment of projects and development programmes
PREVENTIVE GOALS
The UN, world bodies notably, The World Commission on Environment and Development of 1987 and economic agreements such as the World Conservation Strategy of 1980 have made some targets and goals to prevent phenomena and occurrences that might interfere with the ability of development to achieve and stabilise sustainable development of the problems. Jane Goodall, a world conservationist and environmental biologist has outlined these:
v Greater use of greener and energy efficient production mechanisms
v Resource use that favours ecological stability
v Climate and temperature stability of the earth’s mild and extreme regions
v Climate change levels of about 2.6% average for seasons of 10 years
v Natural repletion levels of about 5-7% for rainforests per annum and 12-16% for aquatic diversity and stability per annum
v Preservation of atmospheric pollution levels of 12% and lower. The economic aspect of this is by entrenching an internationally binding tax on countries whose atmospheric pollutions reach above the median of 15% at long time intervals
v Deforestation levels of 5% per annum
v Low inequality of resources among regions and groups
CONTROL AND STABILITY GOALS
Ø To improve the efficient use of water resources by reallocating among competing uses and also developing local strategic water management policy implementations.
Ø Identification of special ecological reserves within aquatic and trans-aquatic boundaries should be preserved whilst satisfying the basic needs of maintaining food production systems that are aquatic based and leaving intact the fragility of the surrounding ecological environment.
Ø Improved steady state long term adopted mitigation strategies involving the gradual progressive movement towards a cleaner atmospheric conditional and oxygen Free State levels by cutting carbon emissions from greenhouses and CFC zones towards 8% per annum.
Role of Economics
Traditionally, development has always been evaluated and measured along economic ideologies and standards. Growth, per capita income and other measures have been the basis for defining development and the current trend that accounts for the environment is only a modified system that weighs cost and benefits in development terms. But exactly what does economics define in the phenomenon of development and what is its role in the entirety of sustainable environmental development?
We begin with an introductory explanation of how economics define sustainable development and the environment. What is the consequence of a road construction exercise that cuts across a wetland or a forest on the ability of that affected region to maintain a stable climate and preserve its ecological commune? Obviously, the answer to that question may not readily be understood by all stakeholders in the development process. But there is an alternative to bringing the realities of development to full understanding and creating controls to negative processes that hinder the self sustaining ability and capacity of the environment. Economics provides a cost benefit approach to the measurement of the impacts and meaning of the development process on the environment. Beginning with the already existing development paradigms, indicators of sustainable environment development that provide a compromise between the improvement of welfare and the improved health of the environment are the starting points in estimating the definition of sustainable environmental development. If sustainable environmental development is the ability of the environment to preserve and improve on its continuing ability and health, then the EPI index that accounts for growth and decay by measuring the decrease in the physical quality of natural capital is a fair approximation.
Even so, how do we approach the environmental development problem without incorporating that the cultural practices that are responsible for degradation are a result of less energy efficient production methods or in more discrete terms decreasing external economies and returns to scale? In another dimension economics provides the only effective and method for incorporating environmental sustenance in the development policy process. Sustaining the environment and attaining development must necessitate reinvestment and repletion processes. The mechanism for the provision of these given the constraint of maximal social welfare dictates that economics provides the economic system and the financing options for renewal activities. The only effective methods so far in achieving renewal and reinvestment have come from not from social ventures like tree planting or community based awareness campaigns but from taxation measures that incorporate a financial weight account for the negative impact for each unit of commodity produced into the mainstream taxation policy that provides a continual independent mechanism for control and reinvestment. In determining the impact of present resource allocation and the future costs for the environment with generations having newer allocation choices the input comes from a cost benefit simulation of the trends in prices and the future value of natural capital at discounting rate for depletion of its physical quality.
In a localised example of our nation, the problems associated with sustainable environmental development problems have historical roots in economic causes. Beginning with environmental degradation issues of the big commercial cities like Lagos and Port Harcourt, the inabilities of government to provide a mechanism for taxation and economic sanction for environmental degrading practices of production and the creation of renewal roadmaps have led to severe consequences on land and other ecological resources. The history of the accounting procedures of national income do not reflect a measure of decreasing environmental quality and it is evidenced in government policy on environmental that has been more reactive than proactive. In recent times, the strong stance on environmental development sustainability issues have only been sparked off by facts that the negative costs of environmental degradation translate into large monetary resources that could have optimal alternative use in income redistribution. Public finance in Nigeria has only recently allowed for a separate fund for environmental management and abatement control given the spate of gas flaring and the attendant inability of the nation to meet current power generation targets. Of course it is not gainsaying to notice that economic interpretation of the gas flaring and its impact on atmospheric stability that affects the existence of plants and disrupts the natural nutrients cycle responsible for food production and soil stability in different climate types. Also the development of blueprints and designs to optimize sustainable environment development programmes have not considered the trends of inflation in prices and the decreasing strength of naira due to global trade policies and a weak home economy. The role economics plays in sustainable environmental development has transcended beyond evaluation to include control and redefinition and the design of best unbiased policy alternatives with the least exacerbating effects on the welfare of those who share the burden of adjusting the development process or sharing its externalities as typified by the recent tax burdens imposed on states with a greater emissivity of carbon from greenhouses and use of carbon intensive production methods and the liberalization of trade agreements to favor imports from countries with greater compliance with general reform practices.
Policy Alternatives and Consequences
The following actions might help decision makers in finding a solution that satisfy all growth condition.
1. Actively seeking ‘win-win’ policies that simultaneously yield both economically and environmentally (and socially) sustainable paths.
2. Pre-empting excessive environmental (and social) harm through ex-ante environmental (and social) assessment of projects and policies, introducing remedies that eliminate imperfections (like policy distortions, market failures and institutional constraints), and strengthening capacity for environmental protection.
3. Considering the fine-tuning of growth inducing economy wide policies (e.g., altering their timing and sequencing), especially where severe environmental (and social) damage could occur.
To better include sustainability concerns in macroeconomic analyses, the conventional system of national accounts (SNA) must be improved, and new measures of environmental and social progress developed. Gross domestic product (GDP) is the common market-based measure which influences macroeconomic policy. Its shortcomings include neglect of income distributional concerns, non-market activities, and environmental effects. Current SNA measures do not adequately reflect either the depletion of natural resource stocks (like deforestation), or environmental damage (due to pollution)
Various measures of national product and wealth are under consideration, including natural resource (stock) accounts, resource and pollutant flow accounts, environmental expenditure accounts, and alternative national accounts aggregates
The United Nations Integrated System of Environmental and Economic Accounting
(SEEA) is a pioneering step towards standardizing various accounting approaches (UN
Development Level (e.g. per capita income)
Development Level (e.g. per capita income)
It adds satellite accounts to the conventional SNA (without modifying the core accounts), involving disaggregation o f the standard accounts to highlight environmental relationships, linked physical and monetary accounting, imputations of environmental costs, and extensions of the SNA production boundary.
The SEEA framework may be used to estimate various national accounts aggregates such as ‘green GNP’ -- which are adjusted downward to reflect the costs of net resource depletion and environmental pollution.
The Case of Global Warming
The threat of the phenomenon of climate change especially those effects of variability resulting from carbon emissions has created a new sphere of international economics defined within a context of universal participation and volatile prices. The policies that the developed world has adopted include the cutting of greenhouse and other important forms of carbon emissions by about 40% and the harmonization of the prices of carbon into benchmark prices for it to find alternative use other than waste. The concerns for every nation of the world here is how much the costs of mitigating climate change and emissions control will impact the availability of foreign revenue and the pricing systems. Given that the results of climate variability and global warming are negative externalities and market failures, i.e., no one pays for the current and future costs of their polluting and earth heating activities.
In another dimension, asking consumers and everyone to pay for increased carbon-based products provides an incentive to engage research and development in manufacturing processes with low carbon utilization. The taxes and levies on utility based emissions is also government’s signal about the need for the free market provision of the services of emission control and the generation of emission-free technologies. The policy implications of the phenomenon are enormous being a global public good. The cost of its control might involve a change in environmental laws that will override the local systems of farming and deforestation. Statistical data gives an insight that the marginal abatement costs of control are very high at high emission levels and this places a constraint on technological processes of output formation for most of the countries of the developing world. For these blocs of nations, the basic and main source of power is via hydro electricity and the heat produced from the generating plants and spill over effluents are a great source of concern for the biodiversity and ecological communes that surround or are found within that area.
For Nigeria, if the mechanism of combating global warming is by the consensual agreement to cap prices of carbon in the global markets then these interesting implications should be noted
Firstly, the traditional processes of farming and manufacture that follow cultural practices of deforestation will have to be replaced very effectively in the short run with substitutive production techniques and systems. In any case, the policy instruments to achieve this is clearly by market failure and the burdens of taxes and incidences make this not feasible given a current Value Added Tax Rate of 10% and high volatility of the naira subject to the fluctuations and pricing decisions of the oil markets that also contribute a large portion to Nigeria’s environmental degradation issues.
Second, the international enforcement of carbon taxes impedes the use of the current level of technology. The capital intensive productions processes of the country are yet to match up with environmental and conservation standards of the countries of the developed world. Newer and more efficient energy sources and technologies are going to derive their inputs from either direct sunlight or hydrological processes putting a constraint on the availability and access of water for the millions of people without access to locally internalized purification and distribution systems among other issues of biodiversity sustainability for member s of the aquatic ecological commune.
The analysis we have made has been constructed on new paradigms in ideologies. The natural capital is more encompassing to include the interactive ecosystems and the cumulative capital gains of conservation measures on one component and its positive effect on the others.
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