Environmental Resource Management: Lecture 4 Page 1 of 9

ENVIRONMENTAL RESOURCE
MANAGEMENT
THEORY OF RESOURCE MANAGEMENT
Lecture 4: Sustainability paradigms and evidence on sustainability

In this final lecture in the first section of the course, we conclude our review of the theory of resource
management by considering two further aspects of sustainability.

Firstly, we briefly review two policy paradigms designed to provide a basis for implementing
sustainable resource management policies in practice.

Secondly, we look at some of the attempts to model the interactions between economic growth and the
environment, and consider a few of the results such work has generated, focusing on the evidence this
provides about the sustainability of our resource management policies.

1. New policy paradigms for sustainability

Before we consider some of the evidence on sustainability that research has recently generated, it will be
helpful to review briefly two of the new policy paradigms that have recently been offered as a basis for
managing resources in a sustainable fashion. Paradigms are essentially new ways of looking at issues -
new sets of beliefs - which may themselves change the way people approach problems.

The two we shall consider are:

industrial ecology (reference: Marstrander R 1996 "Industrial ecology: a practical framework for
environmental management" in Welford R and Starkey R eds The Earthscan Reader in Business and the
Environment London, Earthscan, pp.197-207)

and

ecological modernisation (reference: Weale A 1993 "Ecological modernisation and the integration of
European environmental policy" in Liefferink J D, Lowe P D, Mol A P J eds European Integration and
Environmental Policy London, Belhaven Press, pp.196-216)

Industrial ecology

In the words of one contributor:

Industrial ecology is a systems approach to guide development towards a more sustainable industrial
system (Marstrander, op.cit. p.202).

Marstrander goes on to quote from a US National Academy of Sciences 1992 Colloquium, which used
the following definition of this paradigm, describing industrial ecology as:

a new approach to the industrial design of products and processes and the implementation of

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sustainable manufacturing strategies. It is a concept in which an industrial system is viewed, not in

isolation from its surrounding systems, but in concert with them. Industrial ecology seeks to optimise the
total material cycle from virgin material to finished material, to component, to product, to waste
product, and to ultimate disposal (op.cit. p.199).

The main thrust of the argument on which this paradigm rests is that industry and commerce must now
view their activities as a whole, in terms of the overall impact they produce on the environment, rather
than as separate elements within the production process.

In doing so, industry and commerce should design their production systems to minimise their impact on
the environment. This means that new operating systems should be based on models of production
which limit the use of energy and resources as inputs and which also limit the waste by-product outputs.

For such a philosophy to operate in practice, concerted action is required at local community level to
establish a coherent industrial ecosystem. Instead of individual decisions on investments undertaken by
individual economic units and agents, all aspects of the production process would be viewed as part of
such an industrial ecosystem. Mutual inter-dependencies would be identified which could lead to
reduction in the use of materials and in the discharge of residues and wastes.

This approach would require a much more pro-active role for land use planners and environmental
managers, designed to co-ordinate the development of new production systems. Perhaps the best current
examples of such an approach are provided by the integrated waste disposal, power generation and
district heating systems which have been initiated in some parts of Europe.

Industrial ecology approaches the task of implementing sustainability by considering the extent to which
existing economic systems use flows of materials and energy in ways which are efficient and
sustainable. Those who apply this approach try to identify "closed loops" in which no residual flows
between the system and its environment will occur.

As we have already noted, the law of increasing entropy suggests that, however well integrated, no
process can ever be a perfect closed loop in this sense.

Nevertheless, the set of beliefs behind this paradigm is that by persuading industry, commerce, planners
and environmental managers to work to make the production process self-sustainable within the
community as far as is feasible, new production systems will evolve which can with careful design be
made to approach more closely to the target of sustainable development than is presently achieved.

Ecological modernisation

In contrast with the systems analysis origins of the industrial ecology paradigm, ecological
modernisation owes its origins to policy-makers and their desire to find some form of accommodation
between economic and environmental objectives.

When environmental concerns first came to the fore amongst industrialised nations in the late 1960s,
environmental problems were still largely perceived as symptoms of market failure and resource
allocation problems.

Appropriate environmental solutions were taken to be measures which would rectify misallocation of
resources and re-establish a correct balance in the use of the environment. A concern with long term
sustainability was conspicuous by its absence.

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In the majority of cases, the desire to rectify environmental problems resulted in measures which placed
the burden of responsibility and cost onto the shoulders of producers. This was epitomised in the
concepts of "the polluter should pay" and the internalisation of externalities.

The net result of this reactive or fire-fighting approach was to foster a view that concern for
environmental issues involved a trade-off with the desire for higher living standards implicit in
economic growth.

As a result, in many countries strong bodies of resistance to increased environmental regulation were to
be found, based on the belief that material well-being was threatened by undue concern with the
environmental. Amongst the arguments put forward was a belief that undue regulation would hamstring
the production process and leave markets open to competitors without such extra costs.

Gradually, within the European Union a much more pro-active approach began to be adopted towards
environmental regulation, and the benefits which might flow from a more sustainable approach to the
issue. This approach came to be termed "ecological modernisation".

This paradigm attempts to translate:

the objectives of sustainable development into action in ways that avoid having to halt economic
progress (Roberts op.cit. p.1).

This belief that the economic and environmental interpretations of sustainability can be reconciled in
ways which will lead to the promotion of sustainable development can be seen to best effect in the
evolution of the European Union's Environmental Action Programmes (EAPs).

Initially focused on correcting market failures, successive EAPs have come to emphasise the role of
environmental protection as a facilitator of economic development rather than a burden upon it. A
central tenet of the current Fifth EAP is that future economic development within the European Union
requires sustainable policies with regard to the environment.

There are several strands to this proposition. One is that failure to promote sustainability locks
environmental costs into the economic system. These have to be met at some point and at some time, in
ways which will impose long term economic and social burdens on the communities involved. An
obvious example in this context are the additional costs imposed by the absence of a traffic management
strategy which takes into account environmental externalities.

Another strand is the belief that high environmental standards provide a competitive edge for those
industries within the European Union selling primarily in non-local markets.

Given the need for high-income nations to exploit their comparative advantages in the production and
sale of high value-added products, this line of argument suggests that compliance with the best
environmental standards through applying European expertise will allow such industries (including
tourism) to improve their world market share.

The resulting innovative environmental technologies and management systems will in turn provide the
source for new economic development and employment opportunities.

A closely associated argument is that failure to apply sufficiently stringent environmental standards to
the production of goods and services increases the risk of trade sanctions, as trading blocs and trade

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agreements single out for discrimination products made under poor environmental (and social)
conditions.

The precautionary principle adds a further strand by providing the basis for a more risk-averse strategy
in the management of the environment, one which looks on higher environmental standards as desirable
in their own right rather than as a cost that has to be met by industry in selling its products.

In this way the ecological modernisation paradigm offers a vision of sustainability as a trigger for
innovation and development based on technical change, which supplements the industrial ecology
paradigm.

While this paradigm has been developed most fully for the manufacturing sector, ecological
modernisation is of equal relevance to the built and natural environments and to the provision of local
public services to their communities.

The alacrity with which local government has adopted Local Agenda 21 (LA21) in the UK, about which
you will learn more later in the course, provides some of the clearest evidence of the spread of a belief in
ecological modernisation within policy-making bodies in this country and the EU in general.

2. Evidence on sustainability

We can now conclude this review of the theory of resource management with a brief consideration of
the evidence on sustainability.

We start by looking at sustainability from the perspective of economic development. This involves
reference to two studies which deal with the relationship between the economic growth of low income
nations and the effects this might have on the environment.

One of the messages sent by the Brundtland Commission Report on Environment and Development was
that concern for the environment should not be used as an excuse for neglecting the welfare of the
world's poor.

Brundtland interpreted sustainability in terms of our ability to meet current and future needs of
humanity, rather than simply protecting the environment. Its report concluded that:

Far from requiring the cessation of economic growth, sustainable development recognises that the
problems of poverty and under-development cannot be solved unless we have a new era of growth in
which developing countries play a larger role and reap larger benefits (WCED 1987, p.40).

The report went on to argue the benefits of economic growth in alleviating environmental constraint in
low income countries:

Growth must be revived in developing countries because that is where the links between economic
growth, the alleviation of poverty and environmental conditions operate most directly (WCEP 1987,
p.51).

So for Brundtland, there should be no trade off in developing countries between economic growth and
sustainability: the two should be regarded as complementary in meeting present and future human needs.
We shall see how the two studies in our review put flesh on these arguments.

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The final study in this review focuses not on a poor country, but a relatively backward part of the United
States of America: Kentucky. This Appalachian state suffers both from a weak economic performance
relative to the rest of the USA, and environmental problems.

The study involved in this case shows how the environmental effects of efforts to improve local
economic performance can be modelled.

There are a growing number of modelling approaches to the links between the economy and the
environment. These include the materials balance approach and systems analysis, neither of which we
shall have time to consider.

The technique in the study we have chosen uses input-output analysis. This can be used to provide a
detailed insight into the links between any local economy and the local environment in which it
operates.

Economic development and sustainability

The two studies considered here are both reproduced in Goldin I & Winters A L eds (1995) The
economics of sustainable development Cambridge U P, which is on three day loan in the Library.

a. Pollution levels and economic development

Tables 2.1-2.5 in today's handout are taken from Grossman's study on the relationship between pollution
and economic growth. Grossman regresses the data from international sources on air and water pollution
against income levels in the countries reporting these results.

His research indicates that there is no straightforward link between pollution levels and income levels. In
the initial stages of economic development, as poor countries begin to industrialise, pollution levels
normally rise.

However, as economic development progresses, pollution levels in most cases begin to diminish after
peaking.

Grossman generates these findings by making use of a great deal of valuable data about the environment
that has been collected since the 1970s, but which has yet to be fully analysed.

One of the main sources for his data is the Global Environmental Monitoring System (GEMS), a joint
effort of the World Health Organisation (WHO) and the United Nations Environmental Programme
(UNEP).

GEMS was initiated in 1974 as a means of promoting and co-ordinating the collection of environmental
data in different countries across the world.

Grossman regresses data from such sources against per capita income levels to see how pollution levels
vary with incomes and economic growth.

As the handout demonstrates, in the majority of cases there is what theory would predict: an inverted
"U" or "bell-shaped" relationship between income levels and pollution.

This indicates that in the early stages of economic growth environmental quality generally can be

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expected to deteriorate, while later on as income levels rise further improvements in environmental
quality become evident.

What are the mechanisms at work which might account for this characteristic bell-shaped relationship
between pollution and economic growth?

Grossman suggests that three elements are at work in determining how pollution levels change as
income levels rise. These are:

l the scale of economic activity;

l the composition of economic activity;

and

l the technology used for economic activity.

The scale effect will produce a positive relationship between economic activity and pollution. In other
words, all else equal, a greater scale of economic activity will lead to higher levels of pollution.

However, in practice, other things are not equal. As income levels increase, so the pattern of products
people want changes, and the composition of economic activity changes in response. Dirtier, heavier
industrial processes are replaced by lighter, more high-tech ones, and the service sector grows rapidly.
This change in the composition of economic activity will reduce the propensity for pollution
dramatically as income levels rise.

In addition, technological progress will cause less polluting technologies to replace dirtier ones. This
will occur partly because economic growth allows countries to invest in more modern, less resource-
intensive techniques, but also because the more prosperous the citizens of a country become, the more
concerned they are to live in a cleaner environment.

Taking all these factors together, changes in the composition of economic activity and the substitution of
more efficient and cleaner technologies will in most circumstances offset higher levels of economic
activity, and produce a downturn in pollution levels above a certain stage of economic growth.

As the data indicate, the turning points for different pollutants vary considerably. For example, the
levels of suspended solids and toxic materials in air and water increase rapidly at first as per capita
incomes rise towards middle income levels, but then they fall off.

Other pollutants continue to rise beyond this before declining as income levels approach those in high-
income countries.

For a few pollutants, such as carbon dioxide and nitrous oxide, the turning points appear to be well
beyond the levels of income currently attained by the richest countries.

b. Population growth, economic development and sustainability

Baldwin's research, taken from the same source, tackles a politically sensitive issue: the question of the
contribution of population control to sustainability.

For Baldwin, countries are unlikely to achieve sustainability until they can reduce the burden of rapid

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increases in population. Reduction in population growth rates will come most effectively with economic
growth.

This is not simply because people become more prosperous. A major factor in the inverse relationship
between population growth rates and economic growth is the greater social security people enjoy as they
become more well-off. This reduces the social pressures on them to have large families as an insurance
policy against misfortune.

In support of this argument and the statistical studies he undertakes, Baldwin finds the World Resources
Institute in agreement with his conclusions:

alleviating absolute poverty also has important practical consequences for sustainable development,
since there are close links between poverty, environmental degradation, and rapid population growth
(WRI 1992).

The argument here is very similar to that advanced by Grossman. Although economic growth increases
the scale of activity, and may therefore initially result in higher levels of pollution, eventually this will
be offset by compositional and technological changes leading to lower levels of pollution.

On the other hand, attempts to slow down or stop economic growth in poor countries will simply
increase poverty, boost population growth rates and lead to greater environmental degradation in itself.

The main contribution offered by Baldwin's study is the stress on spreading the benefits of economic
growth as equally as possible, so that population growth rates slow rapidly as development begins, and
the pressure on the environment is more readily alleviated.

Better social policies would include improvements in the security of employment, better education and
training, state pension programmes, other social security and health arrangements and better
employment opportunities for women.

In this way, economic policies which promote equitable growth will also reduce the long term threat to
sustainable development from population pressures in low income countries and the pollution levels
associated with these.

Economic growth and sustainability in high income nations

As we have seen, a strong case can be made out for saying that economic growth is necessary for
sustainability when we consider low-income countries. To what extent is this equally a valid argument
for high-income countries?

In the final study we shall consider, the Centre for Environmental Management of the University of
Louisville, Kentucky, attempts to address this issue. In work just published, it runs a computer-
generated model linking economic activity with environmental effects to see what impact changes in the
Kentucky economy will have over the next thirty years on the local environment.

One of the purposes of this type of research is to consider to what extent the environment will act as a
constraint on achieving improved economic performance in laggard economies such as Kentucky.

The Kentucky researchers used a model of the input-output relationships between economic activity and
the environment initially developed by the Stockholm Environmental Institute. This offers a detailed set

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of technical coefficients linking changes in population levels and economic activity with changes in air,
water and soil pollutant levels, rates of natural resource consumption and land use patterns.

The results should be regarded as indicative, because such models which combine economic and
environmental relationships are still in the early stages of development, being much more complicated
than the standard economic input-output format.

What the Kentucky researchers did was to run the model on the basis of four sets of assumptions.
Firstly, they ran it assuming that the current pattern of economic activity continued with no structural
changes over the next thirty years.

The results of this assumption can be seen in the baseline status quo outcomes indicated in the table in
your handout.

This indicated that there would be increased pressure on the environment if nothing was done. Not only
would energy demands increase, but the level of pollutants would in some cases exceed current US
standards for required minimum environmental quality. In other words, the law would be broken if
nothing was done to halt current trends.

Secondly, the model was run on the basis that the proposals for restructuring the Kentucky economy,
designed to boost economic performance, were implemented, with nothing done to ameliorate the
effects on the environment. This is shown as the restructured status quo in the table.

Under these circumstances, the environmental impact would be even worse. So the Kentucky team
concluded that in this case, we had a situation very close to the new paradigms of industrial ecology and
ecological modernisation.

Rather than the environment acting as a drag on economic growth, without steps to implement
environment improvements the proposals to boost the Kentucky economy simply could not be realised.
In other words, environmental improvements were an essential component of economic improvements
in the case of Kentucky.

The types of environmental improvements considered are listed in the final page of your handout. They
consisted of technological changes and changes in policy and practice.

As the first table indicates, although by themselves the technological changes had bigger impacts than
the policy changes, the most effective response was a combination of the two.

This is illustrated by the bar chart graph, which compares the baseline status quo with the restructured
economy and combined technological and policy improvements for the environment.

As can be seen, in this case, some of the environmental variables actually improve over the period in
question.

The conclusions drawn by the Kentucky researchers from this work are that:

environmental factors will slow the rate of economic growth and make the projected gains by 2025
unattainable given current standards for required minimum environmental quality. Thus the problem is
not one of the trade-offs between the environment and the economy but, rather, the development of
policies and programmes and private sector practices that will protect the environment in order to

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permit more economic development (authors' emphasis, op.cit. p.8).

After seeing how in low-income countries, economic growth can be argued to be an essential component
of sustainability, in this study we are seeing how sustainability can be argued to be an essential
component of economic growth.

Conclusions on the theory of resource management

This concludes our consideration of the theoretical aspects of environmental resource management. In
the four lectures available we have reviewed as much as time will permit both the links between
sustainability and economic growth and the implications for policy, and the characteristics of
environmental resources that make their management such a complicated task.

You should have derived from this some idea of the major analytical issues currently being addressed in
this area, and be able to relate this both to your later lectures on resource management in practice, and to
the individual case studies you will subsequently consider.

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