E/2013/50/Rev.

1
ST/ESA/344
Department of Economic and Social Affairs

World Economic and Social Survey 2013

Sustainable Development Challenges

United Nations
New York, 2013
 DESA
The Department of Economic and Social Affairs of the United Nations Secretariat is
a vital interface between global policies in the economic, social and environmental
spheres and national action. The Department works in three main interlinked areas:
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data and information on which States Members of the United Nations draw to review
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ongoing or emerging global challenges; and (iii) it advises interested Governments on
the ways and means of translating policy frameworks developed in United Nations
conferences and summits into programmes at the country level and, through technical
assistance, helps build national capacities.

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E/2013/50/Rev. 1
ST/ESA/344
ISBN 978-92-1-109167-0
eISBN 978-92-1-056082-5

United Nations publication

Sales No. E.13.II.C.1
Copyright @ United Nations, 2013
All rights reserved
 iii

Preface
The present edition of the World Economic and Social Survey rightly focuses on the ma-
jor issue of our time: sustainable development. As we work to reach the Millennium
Development Goals by 2015 and shape a global vision for the period beyond, we must
evaluate progress and look ahead to emerging challenges.
The global goal of halving poverty was achieved in 2010. We have seen remark-
able gains in access to improved sources of water, the fight against malaria and tuberculo-
sis, improved conditions for slum dwellers in cities, enrolment in primary education and
the advancement of women.
At the same time, we must acknowledge that progress has been uneven and
insufficient. Environmental sustainability is under threat, with accelerating growth in
global greenhouse gas emissions and biodiversity loss. More than a billion people still
live in extreme poverty. Nearly all of them suffer from hunger. Eradicating poverty must
remain central to the international development agenda.
The United Nations Conference on Sustainable Development (Rio+20) reaf-
firmed commitment to sustainable development and adopted a framework for action and
comprehensive follow-up. The World Economic and Social Survey 2013 serves as a valuable
resource as we look towards translating the outcome of Rio+20 into concrete actions.
In particular, it offers in-depth analyses of some of the cross-sectoral issues identified at
the Conference, notably urban sustainability, food and nutrition security and access to
modern energy services for all.
Eradicating extreme poverty, promoting sustainable consumption and pro-
duction, and managing the planet’s natural resource base for the benefit of all are the
overarching challenges of sustainable development. I commend the World Economic and
Social Survey 2013 and emphasize its value to all those seeking a solid understanding of
these major issues which will underpin our progress towards the future we want.

BAN KI-MOON
Secretary-General
iv

Acknowledgements
The World Economic and Social Survey is the annual flagship publication on major develop-
ment issues prepared by the Department of Economic and Social Affairs of the United
Nations Secretariat (UN/DESA).
The Survey was prepared under the general supervision and direction of Rob
Vos, former Director of the Development Policy and Analysis Division (DPAD) of UN/
DESA, and Willem van der Geest, Chief of the Development Strategy and Policy Unit
of DPAD. The core team at DPAD included Diana Alarcón, Nicole Hunt, S. Nazrul
Islam, Alex Julca, Marco V. Sánchez, Oliver Schwank, Sergio Vieira and Eduardo Zepeda.
Administrative support was provided by Lydia Gatan. Michael Brodsky of the Department
of General Assembly Affairs and Conference Management copy-edited the original manu-
script. Israel Machado of DPAD and Ramona Kohrs and Jose Tatad of the Department of
Public Information provided bibliographic support.
Substantive contributions were also made by Chantal Line Carpentier and
Richard Alex Roehrl of the Division for Sustainable Development (DSD) of UN/DESA
and by Shari Spiegel of the Financing for Development (FfD) Office of UN/DESA.
We gratefully acknowledge the background research contributions of Martín
Cicowiez, Stephany Griffith-Jones, Mark Howells, Helena Molin Valdes, José Antonio
Ocampo, Matteo Pedercini, Vladimir Popov, John Toye, Tom van der Voorn and David
Woodward. Substantive feedback was also received from Rodolfo Lacy, Jorge Nunez,
Paulo Saad, David Satterthwaite and Claudia Sheinbaum. Further thanks are due to the
participants of several workshops, organized to facilitate the preparation of this Survey,
for the insights they provided. They include, apart from the contributors mentioned
above, Jorge Bravo, Barney Cohen, Sarah Cook, Barry Herman, Pingfan Hong, Bela
Hovy, Ronald Lee, Eduardo Lopez Moreno, Deepak Nayyar, David O’Connor, Elina
Palm, Jonas Rabinovitch, Hamid Rashid, Nikhil Seth, John Shilling, Maximo Torero and
John Winkel.
Critical overall guidance was provided by Shamshad Akhtar, Assistant
Secretary-General for Economic Development at UN/DESA.
 Overview

Summary

yy The world is faced with challenges in all three dimensions of sustainable develop-
ment—economic, social and environmental. More than 1 billion people are still
living in extreme poverty, and income inequality within and among many countries
has been rising; at the same time, unsustainable consumption and production
patterns have resulted in huge economic and social costs and may endanger life
on the planet. Achieving sustainable development will require global actions to
deliver on the legitimate aspiration towards further economic and social progress,
requiring growth and employment, and at the same time strengthening environ­-
mental protection.
yy Sustainable development will need to be inclusive and take special care of the needs
of the poorest and most vulnerable. Strategies need to be ambitious, action-oriented
and collaborative, and to adapt to different levels of development. They will need
to systemically change consumption and production patterns, and might entail,
inter alia, significant price corrections; encourage the preservation of natural endow-
ments; reduce inequality; and strengthen economic governance.
yy The World Economic and Social Survey 2013 aims towards contributing to the
deliberations on sustainable development with a focus on three important cross-
sectoral issues: sustainable cities, food security and energy transformation. While
the entire range of thematic areas identified for action and follow-up in section V
of the outcome document of the 2012 United Nations Conference on Sustainable
Development, entitled “The future we want” (General Assembly resolution 66/288,
annex), cannot be covered comprehensively in this Survey, highlighting three of the
cross-sectoral issues may hopefully contribute to the addressing of sustainable de-
velopment challenges in the follow-up to the Conference.

Global sustainable development

challenges post-2015
In September 2000, world leaders adopted the United Nations Millennium Declaration1
which provided the basis for the pursuit of the Millennium Development Goals. A global
consensus was successfully forged around the importance of poverty reduction and human
development. Since then, the global community has managed to uplift a large segment of
1 See General Assembly resolution 55/2.
vi World Economic and Social Survey 2013

the poor and vulnerable. The world reached the poverty target five years ahead of the 2015
deadline. In developing regions, the proportion of people living on less than $1.25 a day
fell from 47 per cent in 1990 to 22 per cent in 2010. About 700 million fewer people lived
in conditions of extreme poverty in 2010 compared with 1990. Still, results fall short of
international expectations and of the global targets set to be reached by the 2015 dead-
line. It remains imperative that the international community takes bold and collaborative
actions to accelerate progress in achieving the Millennium Development Goals.
Continuation of current development strategies will not suffice to achieve
sustainable development beyond 2015. Moreover, relying on “business as usual” scenarios
presents clear risks, because evidence is mounting that:
(a) The impact of climate change threatens to escalate in the absence of adequate
safeguards and there is a need to promote the integrated and sustainable
management of natural resources and ecosystems and take mitigation and
adaptation action in keeping with the principle of common but differentiated
responsibilities;
(b) Hunger and malnourishment, while decreasing in many developing countries,
remain persistent in other countries, and food and nutrition security continues
to be an elusive goal for too many;
(c) Income inequality within and among many countries has been rising and has
reached an extremely high level, invoking the spectre of heightened tension
and social conflict;
(d) Rapid urbanization, especially in developing countries, calls for major changes
in the way in which urban development is designed and managed, as well as
substantial increases of public and private investments in urban infrastructure
and services;
(e) Energy needs are likely to remain unmet for hundreds of millions of house-
holds, unless significant progress in ensuring access to modern energy services
is achieved;
(f) Recurrence of financial crises needs to be prevented and the financial system
has to be redirected towards promoting access to long-term financing for in-
vestments required to achieve sustainable development.
Over the past years, the global challenges to sustainable development have
been driven by a broad set of “megatrends”, such as changing demographic profiles,
changing economic and social dynamics, advancements in technology and trends towards
environmental deterioration. A better understanding of the linkages among these trends
and the associated changes in economic, social and environmental conditions is needed.
The United Nations Conference on Sustainable Development, held in Rio de Janeiro,
Brazil, from 20 to 22 June 2012, highlighted a range of interlinked challenges which call
for priority attention, including decent jobs, energy, sustainable cities, food security and
sustainable agriculture, water, oceans and disaster readiness.2 The present Survey focuses
on three of these cross-sectoral issues with immediate implications for realizing sustainable
development, namely: (a) sustainable cities, (b) food and nutrition security and (c) energy
transformation. The other challenges are important, but a comprehensive discussion of
them is beyond the scope of this Survey.
2 See http://www.uncsd2012.org/about.html.
 Overview vii

Partial convergence and persistence of inequalities

The progress that has been achieved in recent decades—and its unevenness—are tied
intrinsically to changes in the global economy. Fast growth in some large emerging
economies has led to a partial convergence in living standards, which exists side by side
with abject poverty and a persistence of inequalities. Inequality undermines prospects for
inclusive growth, equal access to social protection, and broader sustainable development
by negatively affecting aggregate demand, investments in health care and education, and
sociopolitical and economic stability.
In the decades ahead, diverse population dynamics have the potential to
further exacerbate inequalities, both in developing and in developed countries, and at
the global level. Increased urbanization, and rapid population growth, as well as popula-
tion ageing, while reflecting rising prosperity in many countries, will put major stress on
national and local infrastructures and public finance, as well as caregiving, health and
education systems.
To address these challenges and to position for global sustainable development
after 2015, a strengthened global development agenda will have to facilitate transforma-
tion in the way goods and services are produced, in the way jobs are created, in global
consumption patterns, in the management of natural resources, and in the mechanisms
of governance.

Strategies for pursuing sustainable development

Agenda 21 (United Nations, 1993) emphasized the interconnectedness among the three
dimensions of sustainable development. Its actual implementation, however, arguably did
not occur in the integrated manner envisaged. While the Millennium Development Goals
focused attention on selected social and human development priorities, the world today
witnesses emerging new challenges, aggravated by multiple financial, economic, food and
energy crises, which have threatened the ability of all countries to achieve sustainable
development. The United Nations Conference on Sustainable Development reaffirmed the
political commitments of the international community to pursue sustainable development,
under the principles of Agenda 21, including the principle of common but differentiated
responsibilities.

Implementation process of Agenda 21 and the

United Nations Conference on Sustainable Development
It is now clear that economic, social and environmental implementation efforts need to
be reintegrated, and the tracks of discussion currently unfolding under the rubrics of the
Millennium Development Goals and future sustainable development goals need to be
thought of as dimensions of the sustainable development paradigm.
An important sustainable development challenge arises from unsustainable
consumption and production patterns that have evolved in developed countries, a pattern
that is increasingly being followed by developing countries. For example, per capita green-
house gas emissions levels in developed countries are 20-40 times greater than needed for
stabilization of the atmospheric greenhouse gas concentration. The per capita ecological
footprints in developed countries are 4-9 times greater than their bio-capacity. The high
viii World Economic and Social Survey 2013

degree of inequality that accompanies and promotes these patterns makes them socially
unsustainable and constrains achievement of the human development goals. Without an
effective global agenda, high-income households, in developed as well as developing coun-
tries, are likely to continue to adopt unsustainable consumption practices.

Need for inclusive strategies and technology innovation

The outcome document of the United Nations Conference on Sustainable Development 3
provides guidance for achieving the transition to sustainable development as a means of
increasing the well-being of current and future generations in all countries. Sustainable
development strategies need to be inclusive and take special care of the needs of the poorest
and most vulnerable. Strategies need to be ambitious, action-oriented and collaborative,
taking into account different national circumstances.
They will need to systemically change consumption and production patterns,
and might entail, inter alia, significant price corrections; encourage the preservation of natu-
ral endowments; reduce inequality; and strengthen economic governance. Such a process
will need to minimize the types of consumption and production that have negative exter-
nalities, while simultaneously seeking to maximize the types of consumption and produc-
tion that create positive externalities. Examples of minimizing negative externalities include
reduction of environmental pollution, while examples of positive externalities include, for
example, technology adaptation, reduction of food waste and enhanced energy efficiency.
Technology will certainly play a major role in this transformation. Changes in
consumption patterns can drive the creation of new technologies necessary for sustainabi­
lity and their adoption and diffusion at the desired pace. Success in bringing about these
changes will require substantial reorganization of the economy and society and changes
in lifestyles. Economic and financial incentives for the creation and adoption of new tech-
nologies will be needed which may include innovative policy reforms.
Poverty eradication, changing unsustainable and promoting sustainable
patterns of consumption and production, and protecting and managing the natural
resource base of economic and social development are the overarching objectives of and
essential requirements for sustainable development. In this large context, protection of
climate and environment will need to be pursued as a universally shared goal. The global
relocation of manufacturing and services sectors will also mean that appropriate technical
regulation and social standards need to be adopted by developing and developed countries,
with technical and financial support for developing countries.
The global sustainable development transformation entails, inter alia, signifi-
cant price corrections, a strong commitment to preserving natural endowments, a reduc-
tion of inequalities, introduction of environmental accounting, strengthening of public
spheres of life, redirection of the financial sector to the real economy and sharing of profit
and employment. Transformation along these lines may be expected to increase the well-
being of people, especially the poorest.
Sustainable development strategies of developing countries will continue to
give priority to human development, with the eradication of poverty as its central goal.
Human development requires more attention to be directed towards quality issues as
well as coherence at the national level. Human development success depends to a large
extent on using the opportunities created by globalization and on minimizing its negative
3 General Assembly resolution 66/288, annex.
 Overview ix

effects. In this context, better management of capital flows and macroeconomic regula-
tions may be necessary and coherence between national development strategies and global
decision-making is important. Global institutions have to accommodate the special needs
of developing countries, especially those of the least developed countries, the small island
developing States, the landlocked developing countries and the countries in post-conflict
situations. The global agenda will also need to attach greater importance to human rights,
conflict prevention, good governance and reduction of inequality.
Developing countries have in fact put forward initiatives that are more ad-
vanced than those implemented by developed countries so far. For example, Ecuador
and the Plurinational State of Bolivia enshrined the “rights of nature” in their recent
constitutions. Many developing countries are developing their own sustainable lifestyle
and consumption patterns, and offer aspirational models. Drawing on their traditional
knowledge, they can in many areas leapfrog to more sustainable means of production, in-
cluding greening of agriculture, industry and services. Developed countries can facilitate
this process by offering appropriate cooperation in means of implementation, for example,
through technology adaptation and transfer. Thus, both developed and developing coun-
tries can enter into a virtuous cycle of cooperation and engagement so as to ensure global
sustainable development.

Towards sustainable cities

Urbanization provides new jobs and new opportunities for millions of people in the world,
and has contributed to poverty eradication efforts worldwide. At the same time, rapid
urbanization adds pressure to the resource base, and increases demand for energy, water,
and sanitation, as well as for public services, education and health care.
Since 2007, more than half of the world’s population has lived in urban centres
and it is estimated that the proportion will have exceeded 70 per cent by 2050. Eighty per
cent of the world’s urban population will live in developing regions, especially in cities of
Africa and Asia.
During 1950-2010, a net 1.3 billion people was added in small cities, more
than double the number of people added in medium cities (632 million) or large cities
(570 million). The policy implications of the rising significance of middle and large settle-
ments in the next 15-20 years are worth noting. In the future, these cities will be primarily
located in low- and middle-income countries. In many developing countries, rapid urbani-
zation calls for additional resources, and capacity development of local governments has
become a pressing issue. It should also be noted that urban areas are constantly evolving
as a result of people’s mobility, natural population growth, socioeconomic development,
environmental changes, and local and national policies.

The number of people living in slums might triple by 2050

if no policy framework is established to address this issue
In many cities of low- and middle-income countries, access to public services (e.g., water,
sanitation, electricity and health care) remains inadequate. Challenges to the institutional
capacities for improving access to sound infrastructure, decent employment, and reducing
vulnerability to pollution, natural disasters and other risks, loom large. Upper middle-
x World Economic and Social Survey 2013

and high-income countries with urban centres that already have access to basic public ser-
vices face the challenge of becoming more efficient in the use of energy and water, reducing
the generation of waste and improving their recycling systems. Large and wealthier cities,
in particular, may have well-managed resource systems but they also have larger ecolo­­
gical footprints.
Climate change impacts increase cities’ vulnerabilities and put further stress
on the adaptive capacities of the poor. Similarly, the ongoing economic crisis has increased
underemployment of the educated youth in cities of poor and rich nations. Inequalities
between rural and urban areas and within urban areas have been persistent features in
many developing countries. About 1 billion people still live in slums lacking access to basic
infrastructure and services such as water, sanitation, electricity, health care and education.
There might be 3 billion slum dwellers by 2050 unless decisive actions are taken.

Effective urban management is a condition

for cities’ sustainability
The policy framework for the sustainable development of urban areas requires multilevel
cooperation among local, national and global communities and partnerships to mobi-
lize public and private resources. Democratic legitimacy and stakeholder consultation
are important.
Sustainable development of urban areas requires integration and coordination,
including regarding land-use issues, food security, employment creation, transportation
infrastructure development, biodiversity conservation, water conservation, renewable en-
ergy sourcing, waste and recycling management, and the provision of education, health
care and housing.
Synergies can be identified, e.g., between waste and recycling management
(environmental management) and access to water and sanitation (social development), be-
tween air quality conservation and green public transportation, and between production
and distribution of renewable energy sources and green energy access, as well as between
the goal of reducing inequities (effective urban governance) and access to education and
health care (social development).
The Survey proposes an integrated set of investments in infrastructure, public
services and capacity development for different groups of countries. An integrated ap-
proach to rural and urban development is critical. Investment in economic and social
infrastructure in rural areas might improve productivity, reduce poverty and inequity and
create additional opportunities for sustainable livelihoods.
Sustainable development of cities in poor countries entails investment in in-
frastructure such as roads, water, sewers, electricity and services such as schools, public
transportation and health care. Leapfrogging investment in a green industrial transforma-
tion can generate youth employment. In cities of middle- and high-income countries,
investment in infrastructure, renewable energy, buildings, and improved electricity and
water efficiencies is important. Investment in the reduction of waste production and im-
provement of waste collection and recycling systems is needed in most cities across the
world. Providing access to modern energy services is a real challenge to urban authorities
in developing countries which often do not have enough capacity to respond, nor the
ability to raise the needed long-term financial resources for investment.
 Overview xi

A “one size fits all” approach towards sustainable development in cities is

precluded, since cities’ priorities, objectives and paths are highly diverse. Policy frame-
works need to promote a common integrated approach, while differentiating among the
responsibilities of upper-, middle- and low-income countries. Consequently, measures of
sustainable development progress also need to be tailored to the particular challenges and
opportunities identified and prioritized by the cities’ main stakeholders.

Ensuring food and nutrition security

It is essential to ensure that everyone in the world has access to enough nutritious food.
The Survey highlights the challenges in this regard and the changes to the food system that
are needed to ensure food and nutrition security by 2050.

The target of halving the proportion of people suffering

from hunger in sub-Saharan Africa will not be met
Basic food insecurity still affects 1 billion people, as many as in 1970. However, the pro-
portion of people who are undernourished declined from about 20 per cent in 1990-1992
to 15 per cent in 2008-2010. Progress has been uneven across regions and the 2007-2008
food and financial crisis posed additional challenges. Under current conditions, the target
of halving the proportion of people suffering from hunger by 2015 will not be met in
sub-Saharan Africa and South Asia.
Because of low quality and low diversity of available food, the challenge of
malnutrition is broader than the issue of hunger or undernourishment. Individuals may
take in enough calories for daily subsistence, but still suffer from “hidden hunger” with low
levels of micronutrients owing to the lack of diversification of diets. This is a problem in
both developing and developed countries, affecting 30 per cent of the world’s population.
The excess of calories is another rising major global public-health concern, as overweight
and obesity result in more than 2.8 million deaths among adults every year.
Estimates indicate that food production will have to increase 70 per cent
globally to feed an additional 2.3 billion people by 2050. Food demand is anticipated
to continue to shift towards more resource-intensive agricultural products, such as live-
stock and dairy products, thereby exerting additional pressure on land, water and bio­
diversity resources.
On the supply side, meeting an increasing food demand is a major concern,
given the rise of resource constraints. Current agricultural practices are a leading source of
greenhouse gas emissions, while also leading to other problems, such as loss of soil fertil-
ity and water pollution from run-off. Increased temperatures and more volatile weather
patterns caused by climate change may already be affecting crop yields, affecting incomes
and agricultural production.
Increased land use for biofuels will increase constraints on the supply side and
may lead to higher food prices, further affecting the most economically disadvantaged.
Similarly, current urbanization trends accelerate the diversion of land use from agricul-
tural production.
xii World Economic and Social Survey 2013

The food, water, energy, environment and climate nexus

An integrated approach to food security and the environment should take into consid-
eration the food, water, energy, environment and climate nexus, while reorienting food
production, distribution and consumption. Food security, while minimizing environmen-
tal impacts and increasing natural resource efficiency, will require increasing agricultural
productivity, in particular in developing countries where agriculture accounts for a large
share of gross domestic product (GDP) and where large productivity gaps still exist. Rapid
increases in yields are deemed feasible, in particular where productivity gaps are high. At
the same time, the protection of soil quality and crop and grazing land management, in-
cluding restoration of degraded lands, have been identified as having the greatest agricul-
tural potential to mitigate climate change, in addition to being cost-effective. Additional
public investments in agriculture-related research and development will be crucial to
increasing productivity.
The private sector will need to play a major role in expanding research, particu-
larly in biotechnology, with a focus on food security. Special efforts are also needed to close
the productivity gap of smallholder farms, which offer great potential for engagement
in sustainable agricultural practices. Faster productivity gains among a large number of
small-scale producers in very different agroecological regions will require improved dis-
semination and adaptation of technology to meet their specific needs.
A broad-based rural development strategy has to include infrastructural in-
vestments to better connect producers to output markets, including in rural-urban link-
ages and the improvement of distribution systems and storage facilities. The prospect of
new economic opportunities, including institutional changes that facilitate access to input
markets, as well as credit and insurance markets, will also encourage smallholders, espe-
cially women farmers, in developing countries to increase their productivity.
Social protection mechanisms, including social safety nets, must also be part
of a broader rural development strategy to facilitate access of low-income households to
food. This will not only protect the most vulnerable against short-term economic shocks,
but also contribute to long-term resilience by facilitating their access to food and by
strengthening the ability of smallholders to manage risks and adopt new technologies
with higher productivity.

Reducing food wastage may contribute to the

sustainability of the food system
To reorient food consumption towards diets that are less-resource intensive and more
nutritious will also be crucial for food sustainability. In particular, reducing food wast-
age may contribute significantly to the sustainability of the food system. Currently, it
is estimated that 32 per cent of the total food produced globally is wasted. In order to
substantially reduce the quantity of food lost and wasted, changes have to take place
at different levels of the food chain: production, storage, transportation and consump-
tion. In developed countries, efforts are most needed at the retail and consumer end,
owing in part to management practices and consumption habits. In developing coun-
tries, interventions are needed at the producer end, before food reaches the market, to
address inadequate harvesting techniques and storage conditions. Speculation in land
and water has to be addressed at both the national and the international level. More
 Overview xiii

investment funds will be needed to help implement these strategies and to support
other countries in developing their own strategies for reinforcing the resilience of food
production systems.
The international community can help developing countries in their efforts
to design and implement policies that increase resilience to food price volatility and to
climate variability. Priority actions should include reviewing trade policies to ensure that
they support food and nutrition security, while establishing a transparent food market
information system with timely information on regional and international stocks. The reli-
ability and timeliness of early warning systems need to be improved at both the national
and regional levels, with a focus on countries that are particularly vulnerable to price
shocks and food emergencies. The current global trading system also needs to be reformed
so that the poorest can be provided with just and fair access to markets.
Changing the production and consumption patterns of wealthier countries
and consumers, including dietary habits, could make a remarkable contribution to en-
suring food and nutrition security. The livestock sector, which has grown rapidly to meet
the increasing demand for meat, is a prime contributor to water scarcity, pollution, land
degradation and greenhouse gas emissions. This trend will need to be reversed in the
context of more sustainable diets, but as long as market prices do not reflect such scarci-
ties, there will be insufficient incentives for behavioural changes. Publicity, advocacy,
education and legislation will need to be used to bring about such cultural changes so as
to reduce high levels of retail and domestic food waste in high- and upper middle income
countries; furthermore, better policy instruments for promoting sustainable diets are
still needed.

The energy transformation challenge

The transformation of the energy system needs to be a core element of the sustainable
development agenda, in order to improve the living standards of people with equity and
environmental sustainability. Under the Secretary-General’s Sustainable Energy for All
Initiative and in other contexts, explicit energy goals (or targets) have been suggested
to end the dependence on traditional biomass as a source of thermal energy; to improve
access to reliable, adequate and high-quality electricity; to facilitate convergence to best
practices in the provision of energy services; and to ensure that unreliable or low-quality
energy sources do not compromise the opportunities of the working poor who are self-
employed or run household enterprises.

Transformation of the energy system needs to be a core

element of the sustainable development agenda
The latest estimates confirm that emissions trends will likely lead to temperature increases
with potentially catastrophic consequences. Even if all currently planned mitigation poli-
cies were fully implemented—including expanded use of renewable energy sources and
improvements in energy efficiency—a stabilization of greenhouse gas emissions at 450
parts per million (ppm) will not have been achieved by 2050.
If one focuses on the rise in renewable energy, the advances in reducing pol-
lution in some cities, the implementation of policies to improve sustainable development,
xiv World Economic and Social Survey 2013

and the adoption of international sustainability agreements, the world is undoubtedly

greener today than it would have been if no actions had been taken. However, even after
taking into account all of these factors, the likely outlook is that the desired emissions
reduction targets will not be met.
According to some projections, emissions concentrations might reach between
650 and 700 ppm of carbon dioxide equivalent (CO2e) by 2050 and between 800 and
1,300 ppm of CO2e by 2100 (Organization for Economic Cooperation and Development,
2012c). These increases would be associated with increases in global average temperature
of 2°C -3°C by 2050 and of 3.7°C -5.6°C by 2100.
Multiple pathways towards sustainable energy have been identified. There are
many existing energy technology options for mitigating emissions and increasing wel-
fare. Hundreds of scenarios have shown that the world can follow a large number of
energy paths towards sustainable development which require, however, ambitious policies,
improved international cooperation, including in means of implementation, behavioural
changes and unprecedented levels of investment.

Sustainable development pathways share common features

Despite their variety, sustainable development pathways share common features. First, the
sooner the implementation of policies starts, the greater the technological flexibility and
the less costly the actions required. Second, policies increasing efficiency in the delivery of
energy services can go a long way. Perhaps the most important insight provided by scenario
analyses is that the world can go a long way towards controlling emissions, if it invests
decisively in energy efficiency. Scenarios emphasizing improvements in end-use efficiency
tend to meet sustainable development goals, such as ensuring (almost) universal access
to electricity, maintaining air quality, and limiting global average temperature increases.
However, if efficiency gains turn out to be small, the world will become highly dependent
on rapidly improving innovation and increasing the supply of “clean” energy. Another
insight is that sustainable development pathways have been devised that exclude nuclear
power, and carbon capture and storage (and its bioengineering variants), technologies that
face great sociopolitical and technical challenges. However, their exclusion would make
the attainment of sustainable development much more challenging and require special
measures to improve energy efficiencies and reduce demand.
Scenario results indicate that, in the absence of additional targeted pro-poor
energy policies, by 2030, some 2.4 billion people will still rely on solid fuels for cooking,
or 300 million more than the 2.1 billion so reliant in 2005. The implementation of a
highly ambitious package of policies directly addressing the energy-poverty nexus has the
potential to ensure access to modern energy of an additional 1.9 billion of people. The
policy package would have to combine financing (including microfinancing), to cover the
upfront costs of enabling access to modern energy and the purchase of appliances, with a
50 per cent fuel subsidy in relation to market prices. Even such an ambitious set of policies,
however, would still leave 500 million people without access to modern energy, most of
them in rural Africa and in remote areas. Additional specific targeted programmes im-
plemented through international development cooperation would be needed for modern
energy services.
 Overview xv

Energy transformation can be compatible with

economic and social inclusion
The sustainable energy transformation can be compatible with economic and social inclu-
sion. In particular, near universal access to clean cooking fuels and electricity can be
achieved in harmony with measures devised to contain the increase of emissions and,
pertinently, at a comparatively modest investment cost.
The Survey does not view technology as the main limiting factor for energy
transformation, but is less sanguine about the economic, social and cultural hurdles as-
sociated with the implementation of national policies and achievement of a commensurate
level of international cooperation.
The complex challenges that a sustainable energy transformation faces range
from issues of growth, macroeconomic balances, and technology innovation and its diffu-
sion, to human development concerns. They confer great importance on policy coherence.
Moreover, industrial policies, technological innovation, transfer and adaptation, and en-
ergy plans based on integrated energy assessments require decisive, ingenious and coherent
national policymaking and international cooperation.
Low-carbon, inclusive growth requires that the set of conditions needed to
create the “enabling environment” for change be in place: policy space and coherence;
international financing; international cooperation; and enabling international institu-
tions, establishing rules and norms. It requires an enabling environment for the industrial
policies needed to accelerate economic growth and foster green sectors, as well as for large
public and private investment projects. Adequate international financing needs to be
available, especially to developing countries and the least developed countries. Domestic
sources should be tapped to the extent possible, but the size of required investments will
make international finance necessary. Designing national sustainable development strate-
gies demands the integration of complex processes across the macroeconomy, the energy
sector, and the deployment of technology, policies for social and economic inclusion, and
the environment. Building national capacities and international cooperation in these areas
will be important. The world needs a big push—one that is public investment-led, based
on international development cooperation, and capable of catalysing private sector invest-
ment and innovation so as to sustainably transform the energy system.

Financing sustainable development

Responding to the above-mentioned challenges requires large-scale investments. It is
recognized that the fulfilment of official development assistance (ODA) commitments
is crucial. Innovative financing mechanisms can also make contributions to developing
countries in respect of mobilization of additional resources for financing for develop-
ment. Sustainable financing needs to be ensured across sectors, including agriculture,
forestry, energy, health and education, as well as across economic segments, such as
small and medium-sized enterprises, infrastructure and innovation, in both developed
and developing countries. Special attention needs to be directed towards financing the
global commons (e.g., the atmosphere, oceans, biodiversity and forests) and global health.
This Survey shows that delivering on present commitments to achieve the Millennium
Development Goals already requires substantial additional public expenditure. It also
xvi World Economic and Social Survey 2013

identifies financing challenges related to the Survey’s three focus areas: sustainable cities,
food security and energy transformation.

Achieving the Millennium Development Goals

requires stepping up public spending
Evidence drawn from country-level economy-wide modelling analyses for 27 developing
countries suggests that achieving the Millennium Development Goals by 2015 requires
significantly stepping up upfront public spending in developing countries.4 First, a busi-
ness-as-usual scenario assessed progress towards meeting the Millennium Development
Goals under expected economic growth, existing public spending priorities and budget
financing policies. This baseline scenario assessed whether the countries would be “on
track” or “off track” to achieve the targets, taking into account non-linearities in the
effectiveness of social spending in achieving those targets. All 27 country-level studies
found that, while substantial human development progress would be made with the cur-
rent public expenditure scenario, only two countries (Chile and Cuba) would fully meet,
by 2015, a set of targets for primary school completion, reduction of child and maternal
mortality rates, and expanded coverage of drinking water and basic sanitation.
For the cases in which business as usual was found not to be sufficient to
achieve the goals, the analyses examined a number of policy scenarios under which public
spending was stepped up as much as needed to achieve those goals from 2010 to 2015.
Meeting the human development targets was found to be affordable for only a
minority of countries: 18 countries would need to raise their public spending by an extra
2 percentage points or more of GDP relative to the baseline with current policies. The
public spending needed to meet the targets in the countries studied was estimated at about
7 per cent of GDP and, in some cases, the estimate was even higher.
An update of these analyses for six of the countries of Latin America and the
Caribbean took into consideration the global financial crisis, by comparing social indica-
tors under two scenarios, with and without the growth slowdown. It was found that the
additional public spending requirements would have to rise by 1.6 -3.4 per cent of GDP
per year between 2010 and 2015 as a result of the economic growth slowdown—on top of
the spending requirements that had been estimated for these six countries.
As indicated in the Survey, mitigation policies designed to curb carbon emis-
sions through the adoption of renewable sources of energy will require substantial ad-
ditional investments. Given the existing financing constraints, accelerated investments for
sustainable development could overstretch countries’ public finances.

Sustainable development requires coherence

of fiscal policy and public investment allocations
Coherent policies for greenhouse gas mitigation, economic growth and human develop-
ment need to be devised. The Survey presents evidence that taxing of greenhouse gas emis-
sions in developed and developing countries can be useful. Not only could fiscal policy
4 These analyses were conducted by national researchers and government experts, with technical
support from the Department of Economic and Social Affairs of the United Nations Secretariat and
the World Bank. While Latin America has been comprehensively covered, only nine case studies for
countries in Africa and Asia have been completed to date.
 Overview xvii

contribute to GHG mitigation, but—combined with a set of coherent policies—it could

also change unsustainable consumption patterns, promote human development, and off-
set some of its potential economic costs. Three policy scenarios were simulated to illustrate
that this may be the case, using the examples of three oil-importing developing countries.
These scenarios are compared with a baseline which represents a continuation of currently
expected economic growth and public spending interventions up to 2030.
The results show that, keeping all other things equal, unilateral taxes on the
domestic price of fuel oil would depress intermediate and especially final consumption of
fuel oil in the three countries. It is likely that carbon emissions would consequently be
reduced and industries that supply oil-intensive goods for the domestic market and exports
would be penalized. In fact, GDP growth is likely to be negatively affected.
If, alternatively, the new tax revenues were allocated to investing in public
infrastructure, or expanding service delivery in education, instead of being used to reduce
the budget deficit, the output loss would be offset partially or in some cases fully, mainly
because such investments could spur productivity growth. Increased availability of public
infrastructure or better-educated workers would tend to raise productivity growth above
the baseline.
Increased public infrastructure or service delivery in education could also have
a positive impact on human development. Without coherent policy interventions, taxing
fuel oil consumption alone could reduce promotion rates in primary education, as house-
holds’ demand for education decreases with decreasing economic activity.

Financing the sustainability of cities will

require multilevel cooperation
A close partnership between local and national authorities is needed to finance the sus-
tainable development of cities. While cities need to raise financial resources from capital
markets directly, financial oversight mechanisms must be in place to manage risks so that
municipal borrowing does not result in an excess of non-performing loans in the banking
system or the incurring of huge financial liabilities by the central government.
Poorer cities need international cooperation and additional resources to sup-
port green technology adaptation, and capacity development, and to provide access to
public transportation, housing of sound construction, water and sanitation, electricity,
health care and education. It is indeed a daunting task to finance investment in public
infrastructure, including adaptation to and mitigation of climate change, which often
demands large sums of upfront finance whose returns would be reaped mainly in the
medium and long terms.
Richer cities need policies to encourage renewable energy and to reduce inef-
ficiency and wasteful consumption. Regulatory measures are important for determining
pricing structures, taxes and subsidies for households and industry—for the development,
for example, of compact neighbourhoods and the retrofitting of buildings. Various types
of taxes can be used to finance the gap between the financial outlay and the actual cost of
services, for example, lower fares for public transportation.
Thus, for poor and rich cities alike, part of the financing would have to be di-
rected towards addressing global environmental challenges and the livelihoods of present
and future generations.
xviii World Economic and Social Survey 2013

City financing may entail the use of a wide

variety of instruments
Financing strategies for sustainable development in cities can draw upon a wide range of
instruments. Bond banks and resource pooling can be useful instruments for reducing
risk. Cities in developing countries have successfully issued bonds (without a guarantee
from the national Government) to finance water supply and sewerage projects. Public-
private partnerships can also help raise funds for infrastructure projects, particularly
in developing countries with limited access to long-term credit. Public-private partner-
ships have been used to finance the production of renewable sources of energy and waste
management. Cities may also leverage the value of land to finance infrastructure, either
through the outright sale of land by auction or by issuing leaseholds to leverage the land’s
value. These instruments can generate the initial capital needed to cover start-up costs of
infrastructure investments. However, land-based financing instruments require relatively
strong and effective institutions and well-articulated legal frameworks.
Sources of finance can have different degrees of stability and predictability.
Taxation tied to business profits, which can fall during times of crisis, incurs greater risks
than real estate taxes, because the revenues from the latter are more stable and easier
to predict.

Agricultural development will require

significant investments
Investment needs for primary agriculture and its downstream industries in developing
countries were estimated at US$ 9.2 trillion (2009 dollars) over the 44-year period from
2005-2007 to 2050.
There are obstacles preventing higher investment in primary agriculture and
especially in small farms. The insufficiency of public services limits potential returns to
farmers’ investments. Another issue is related to the lack of price incentives for small-scale
producers, in particular when there are price controls on food products which reduce
their potential net revenue. A third issue is the lack of access by smallholders to formal
insurance protection against risks.

Private sector investments will be needed

Private investments in agriculture, particularly international private investments, are
needed and can play an important role in boosting productivity and ensuring food se-
curity, when directed towards strategic needs. However, in order to increase the positive
impact of these investments, Governments need to design policies and legislation that
can create a more conducive climate for inclusive and sustainable investments. Direct
incentives, for instance, such as tax incentives, can encourage investments that directly
support local smallholders. Contract farming can also lead to positive investment, when
small-scale farmers are assisted in contract negotiation and dispute resolution.
It is clear that public sources alone are not sufficient to address the needs in
these domains. A framework for financing sustainable development needs to ensure that
financing from private and public sources at the national, regional and international levels
is secured. Financing has fallen short in areas that are critical for sustainable growth:
 Overview xix

long-term investment, including infrastructure financing, research and development and

investment in riskier sectors, such as small and medium-sized enterprises and innovation;
and financing of international cooperation.
Further, the long time-frame necessary for infrastructure investments is out-
side the investment parameters of many institutional investors, even those considered to be
“long-term” investors. The issue of a very long investment time-horizon arises in particular
for low-carbon infrastructure projects, owing to higher risks and lower expected returns
over the life of the project. In general, low-carbon technologies cannot compete with ex-
isting technologies, and this is unlikely to change unless market prices incorporate, to a
much greater extent, the societal costs of using brown technologies, with their high levels
of greenhouse gas emissions and other environmental risks.

Sustainable development will require significant

investment from international private actors
A significant share of the investments necessary to achieve sustainable development will
have to come from private sources, which nonetheless will depend on the availability
of public funds to match those investments, through the provision of guarantees and/
or regulation to assure future revenue streams. Public financing, regulation and private
market-based financing will therefore have to be combined, based on the specific charac-
teristics of the newly created assets.
A framework for the financing of sustainable development will need to be
supported by an enabling policy environment at national and international levels and by
renewed commitments to ODA. Such a framework will need to include policy initiatives
to internalize externalities, better align private incentives with public goals, and finance
efforts to address global challenges. Policy coherence across domestic, regional and in-
ternational initiatives is crucial, as international and regional policy agreements shape
national strategies, while national policies are part and parcel of the international and
regional framework.
 xxi

Contents
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
Acknowledgements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv
Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxi
Explanatory notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxvii

I Global trends and challenges to sustainable development post-2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

A more challenging context for global development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Underlying global megatrends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A more integrated, but multipolar and heterogeneous global economy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
A deeper globalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Financial globalization and financialization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Convergence, but greater vulnerability and heterogeneity in the global economy. . . . . . . . . . . . . . . . 7
Persistent inequalities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Demographic changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Environmental degradation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Threats to global ecosystems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
A strong sustainability challenge? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Sustainable development in a more interdependent world. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Mutually reinforcing trends and challenges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Strategies for sustainable development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

II Strategies for development and transformation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Process tracks of implementation of Agenda 21 and its consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
The impasse with regard to climate change mitigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Worries regarding poverty eradication and other human development goals. . . . . . . . . . . . . . . . . . . . . . . . . . 26
Millennium Development Goals and Sustainable Development Goals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Means of achieving an integrated post-2015 agenda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Causes of the climate change mitigation impasse. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Causes of human development concerns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Towards reintegration of human development and environment protection goals. . . . . . . . . . . . . . . . . . . . . 30
Strategies for transformation in developed countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Role of technology in ensuring sustainability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
xxii World Economic and Social Survey 2013

Shifts in consumption patterns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Means of bringing about shifts in consumption patterns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Environmental accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Shifts in consumption and quality of life. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Shifts in consumption patterns and the implications for employment and income. . . . . . . . . . . . . . . . . . . . . 38
Sustainable development strategies in developing countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
A heterogeneous developing world. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Further progress in achieving the current Millennium Development Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Human development through more equitable
distribution post-2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Development in a more environmentally constrained post-2015 world. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
The South’s initiatives towards sustainable development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Challenges of financing human and sustainable development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
A new type of global cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

III Towards sustainable cities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
The city and main urbanization trends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
The scale and scope of urbanization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Diverse paths and paces of urbanization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Changing patterns of urban settlements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Is there a twin path between urbanization and economic growth?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
A framework for sustainable cities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
The challenges associated with building sustainable cities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Socioeconomic inequalities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Sprawl and weakened capacities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Energy access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Common and differentiated impacts of natural hazards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Opportunities for building sustainable cities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
An integrated and coordinated approach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Trade-offs between investments?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Learning by doing in building sustainable cities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Act locally with national support and global coordination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Financing sustainable cities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
The scale and scope of needed finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
A policy framework for sustainable financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Examples of financing strategies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

Annex: Examples of plans and policies for building sustainable cities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

 Contents xxiii

IV Ensuring food and nutrition security. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Multiple dimensions of malnutrition: undernourishment, micronutrient deficiencies and over-nutrition . . . . . 87
Under-nutrition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Food insecurity persists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Impacts of under-nutrition: undernourishment and micronutrient deficiencies . . . . . . . . . . . . . . . . . . 89
Over-nutrition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Obesity on the rise. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Impacts of over-nutrition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Increasing food availability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Increasing agricultural productivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Extension services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Increasing investment in R&D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Sustainable management of natural resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Current unsustainable practices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Improving management of natural resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Investments in rural infrastructures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Improving access to food. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Limited access to food . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Generating income in rural areas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Improving agricultural income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Non-farm economy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Social security and safety nets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Safety nets in the short term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Social security in the long term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
A pro-food security international trade system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
The trade system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Food security stocks and information transparency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Diets and consumption patterns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Sustainable diets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Health and education policies to enhance nutrition security. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Information campaigns and educational programmes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Consumption patterns: reducing waste. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Increasing financing for the agricultural sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
The importance of increasing public investment in agriculture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Incentives for private investment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
International support for agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
xxiv World Economic and Social Survey 2013

V The energy transformation challenge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
The evidence for climate change and human-activity generated emissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
The room for effective action is shrinking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
The many paths to a sustainable energy transformation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
The IPCC special report on renewables (2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
United Nations Environment Programme emissions gap report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
OECD Environmental Outlook to 2050. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Global Energy Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Sustainable energy with economic and social inclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
The challenge of transforming the energy system. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
The technology challenge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
The investment challenge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
Implementing sustainable development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Sustainable development pathways. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
The enabling conditions for the transformation of the energy system. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Coherent national policies for sustainable development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Sustainable energy systems in a global development agenda. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
 Contents xxv

Boxes
II.1 System of Environmental-Economic Accounting 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
II.2 Sustainable development initiatives from the South. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
III.1 Definition of a city and data issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
III.2 How Curitiba became a reference point for sustainable development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
III.3 Plan Verde of Mexico City . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
III.4 The 10 essentials for urban resilience. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
III.5 A partnership in Dhaka to convert organic waste to a resource and generate carbon credits. . . . . . . . 77
IV.1 Purchase of large extensions of land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
IV.2 Infrastructure’s potential to drive productivity and sustainable food
production: the case of Uganda. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
IV.3 Sustainable diets and reduced food waste. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
V.1 The energy system. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
V.2 Tax oil to invest in education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
V.3 Policies and markets may provide unintended welcoming effects:
Sweden is importing garbage to generate electricity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
V.4 Bangladesh: between a coal-based energy system at hand and
a promising but distant sustainable energy system. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
V.5 Mauritius: coping with climate and land-use, energy and water resources. . . . . . . . . . . . . . . . . . . . . . . . . . 154
V.6 Burkina Faso adds energy in order to reduce emissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
xxvi World Economic and Social Survey 2013

Figures
I.1 World non-fuel merchandise exports by type of goods, 1998-2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
I.2 Annual growth of GDP per capita, high-, low- and middle-income countries, 1990-2011. . . . . . . . . . . . . 7
I.3 Income share of the top 1 per cent for a sample of developed
and developing countries, 1915-2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
I.4 Projected population by development region, medium variant, 1950-2050 . . . . . . . . . . . . . . . . . . . . . . . . . 13
I.5 Urban and rural population growth, high-, low- and middle-income
countries, 1950-1955 to 2045-2050 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
I.6 CO2 emissions of developed and developing countries, as allocated to production
and consumption (production plus net exports), 1990-2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
II.1 Different tracks of the implementation process of Agenda 21 and the consequences . . . . . . . . . . . . . . 25
II.2 Income of the poorest decile, World (excluding China), 2000-2250. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
II.3 Distribution of global absolute gains in income, 1988-2008:
more than half of those gains went to the top 5 per cent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
II.4 Share of the poor in per capita growth, 1981-2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
II.5 Framework for integrating human development and environmental protection goals
and making them universal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
II.6 Average ecological footprint per person in developed and developing countries, 1961 and 2007. . . 32
II.7 Increased share of plastic in gross domestic product, 1900-2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
II.8 Factors influencing subjective well-being . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
II.9 Unemployment rate of the most skilled labour under the baseline scenario and
Millennium Development Goals-financing scenario, Costa Rica and Yemen, 2005, 2015 and 2030. . . 50
III.1 Population trends and projections, 1950-2050. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
III.2 Urbanization and economic growth, developed regions and
Latin America and the Caribbean, 1970-2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
III.3 GDP per capita and urban share of total population,
sub-Saharan Africa and least developed countries, 1970-2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
III.4 Pillars for achieving sustainability of cities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
IV.1 Number of people undernourished and prevalence of undernourishment, 1 990-2012. . . . . . . . . . . . . . 88
IV.2 Distribution of undernourished people in the world, by region, 1990-1992 and 2010-2012. . . . . . . . . . 90
IV.3 Age-standardized prevalence of obesity among adults aged
20 years or over, by WHO region, 1980 and 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
IV.4 Public research expenditure on food and agriculture, 1981-2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
IV.5 Lost and wasted food, by type of product. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
IV.6 Agricultural expenditures and the Comprehensive Africa Agriculture
Development Programme (CAADP) 10 per cent target, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
IV.7 Trends in aid to agriculture: commitments, 1973-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
V.1 Global energy-related CO2 emissions by scenario, OECD and non-OECD, 2010, 2020 and 2035. . . . . 124
 Contents xxvii

V.2 Global renewable primary energy supply (direct equivalent)

versus fossil fuel and industrial CO2 emissions, 2030 and 2050. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
V.3 Income per capita, and social and economic inclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
V.4 Impact of access policies on cleaner cooking in three developing regions. . . . . . . . . . . . . . . . . . . . . . . . . 131
V.5a Additional investments in sustainable pathways, by supply, mix and e fficiency policies . . . . . . . . . . . . 139
V.5b Additional investments in sustainable pathways, by technology portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . 139
V.5c Additional investments in sustainable pathways, by region. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
V.6 Green growth diagnostic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
V.7 Impact on real GDP growth of a tax on oil and investment in education . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
V.8 Growth impact of policies aimed towards achieving the
Millennium Development Goals, selected countries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
V.9 Energy and the post-2015 vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
xxviii World Economic and Social Survey 2013

Tables
II.1 Additional public spending requirements for meeting human development targets under
two alternative financing scenarios, 2010-2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
III.1 Regional figures for share of urban population, 1975, 2000, 2012, 2025, 2050 . . . . . . . . . . . . . . . . . . . . . . . 57
III.2 Challenges to and opportunities for building sustainable cities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
III.3 Proportion of urban population lacking access to electricity and modern fuels, and proportion
using particular fuels for cooking, developing and least developed countries, circa 2003-2007. . . . . . 67
V.1 Additional investments for sustainable development, 2010-2050. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
V.2 Some guiding principles for establishing green growth strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
 Explanatory Notes xxix

Explanatory notes
The following symbols have been used in the tables throughout the report:
.. Two dots indicate that data are not available or are not separately reported.
– A dash indicates that the amount is nil or negligible.
- A hyphen indicates that the item is not applicable.
− A minus sign indicates deficit or decrease, except as indicated.
. A full stop is used to indicate decimals.
/ A slash between years indicates a crop year or financial year, for example, 2013/14.
- Use of a hyphen between years, for example, 2013-2014, signifies the full period involved, including the
beginning and end years.
Reference to “dollars” ($) indicates United States dollars, unless otherwise stated.
Reference to “billions” indicates one thousand million.
Reference to “tons” indicates metric tons, unless otherwise stated.
Annual rates of growth or change, unless otherwise stated, refer to annual compound rates.
Details and percentages in tables do not necessarily add to totals, because of rounding.

The following abbreviations have been used:

AMIS Agricultural Market Information System ILO International Labour Organization
BECCS bio-energy with carbon capture and storage IMF International Monetary Fund
BMI body mass index kg kilogram
BRT bus rapid transit kWh kilowatt-hour
CAADP Comprehensive Africa Agriculture MAMS Maquette for MDG Simulations
Development Programme NNP net national product
CCS carbon capture and storage ODA official development assistance
CERs certified emissions reductions OECD Organization for Economic Cooperation
CF Central Framework ((System of and Development
Environmental-Economic Accounting) (SEEA)) ppm parts per million
CGIAR formerly Consultative Group on International PPP purchasing power parity
Agricultural Research
PRSP poverty reduction strategy paper
CLEW climate-land-energy-water
R&D research and development
CO2 carbon dioxide
ReSAKSS Regional Strategic Analysis and Knowledge
CO2e carbon dioxide equivalent Support System
EJ exajoule SAGCOT Southern Agricultural Growth Corridor of the
FAO Food and Agriculture Organization United Republic of Tanzania
of the United Nations SEEA System of Environmental-Economic Accounting
FDI foreign direct investment SEEA-E System of Environmental-Economic Accounting
G8 Group of Eight for Energy
G20 Group of Twenty SNA System of National Accounts
GAFSP Global Agriculture and Food Security SUV sport utility vehicle
Programme tCO2 ton of carbon dioxide
GCARD Global Conference on Agricultural Research UN/DESA Department of Economic and Social Affairs
for Development of the United Nations Secretariat
GDP gross domestic product UNEP United Nations Environment Programme
GEA Global Energy Assessment UN-Habitat United Nations Human Settlements Programme
gha global hectare UNSD United Nations Statistics Division
GNH gross national happiness WFP World Food Programme
GNP gross national product WHO World Health Organization
Gt gigaton WIDER World Institute for Development Economics
ICT information and communications technologies Research (United Nations University)
IEA International Energy Agency
xxx World Economic and Social Survey 2013

The designations employed and the presentation of the material in this publication do not imply the expression of any opinion
whatsoever on the part of the United Nations Secretariat concerning the legal status of any country, territory, city or area or of its
authorities, or concerning the delimitation of its frontiers or boundaries.

The term “country” as used in the text of this report also refers, as appropriate, to territories or areas.

For analytical purposes, unless otherwise specified, the following country groupings and subgroupings have been used:

Developed economies (developed market economies): Developing economies:

Australia, Canada, European Union, Iceland, Japan, New Africa, Asia and the Pacific (excluding Australia, Japan, New
Zealand, Norway, Switzerland, United States of America. Zealand and the member States of CIS in Asia), Latin America
and the Caribbean.
Group of Eight (G8):
Subgroupings of Africa:
Canada, France, Germany, Italy, Japan, Russian Federation,
United Kingdom of Great Britain and Northern Ireland, Northern Africa:
United States of America.
Algeria, Egypt, Libya, Morocco, Tunisia.
Group of Twenty (G20):
Sub-Saharan Africa:
Argentina, Australia, Brazil, Canada, China, France, Germany,
All other African countries, except Nigeria and South
India, Indonesia, Italy, Japan, Mexico, Republic of Korea,
Africa, where indicated.
Russian Federation, Saudi Arabia, South Africa, Turkey, United
Kingdom of Great Britain and Northern Ireland, United States Subgroupings of Asia and the Pacific:
of America, European Union.
Western Asia:
European Union (EU):
Bahrain, Iraq, Israel, Jordan, Kuwait, Lebanon, Occupied
Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Palestinian Territory, Oman, Qatar, Saudi Arabia, Syrian
Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Arab Republic, Turkey, United Arab Emirates, Yemen.
Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands,
Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, South Asia:
United Kingdom of Great Britain and Northern Ireland. Bangladesh, Bhutan, India, Iran (Islamic Republic of ),
EU-15: Maldives, Nepal, Pakistan, Sri Lanka.

Austria, Belgium, Denmark, Finland, France, Germany, East Asia:

Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, All other developing economies in Asia and the Pacific.
Spain, Sweden, United Kingdom of Great Britain and
Northern Ireland. Subgroupings of Latin America and the Caribbean:
New EU member States: South America:
Bulgaria, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Argentina, Bolivia (Plurinational State of ), Brazil, Chile,
Lithuania, Malta, Poland, Romania, Slovakia, Slovenia. Colombia, Ecuador, Paraguay, Peru, Uruguay, Venezuela
(Bolivarian Republic of ).
Economies in transition:
Mexico and Central America:
South-Eastern Europe:
Costa Rica, El Salvador, Guatemala, Honduras, Mexico,
Albania, Bosnia and Herzegovina, Croatia, Montenegro, Nicaragua, Panama.
Serbia, the former Yugoslav Republic of Macedonia.
Caribbean:
Commonwealth of Independent States (CIS):
Barbados, Cuba, Dominican Republic, Guyana, Haiti,
Armenia, Azerbaijan, Belarus, Georgia,a Kazakhstan, Jamaica, Trinidad and Tobago.
Kyrgyzstan, Republic of Moldova, Russian Federation,
Tajikistan, Turkmenistan, Ukraine, Uzbekistan.

a As of 19 August 2009, Georgia officially left the Commonwealth of Independent States. However, its performance is discussed in
the context of this group of countries for reasons of geographical proximity and similarities in economic structure.
 Explanatory Notes xxxi

Least developed countries: Parties to the United Nations Framework Convention on

Climate Change:
Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina
Faso, Burundi, Cambodia, Central African Republic, Chad, Annex I parties:
Comoros, Democratic Republic of the Congo, Djibouti,
Australia, Austria, Belarus, Belgium, Bulgaria, Canada,
Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea-
Croatia, Czech Republic, Denmark, Estonia, European
Bissau, Haiti, Kiribati, Lao People’s Democratic Republic,
Union, Finland, France, Germany, Greece, Hungary,
Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania,
Iceland, Ireland, Italy, Japan, Latvia, Liechtenstein,
Mozambique, Myanmar, Nepal, Niger, Rwanda, Samoa, Sao
Lithuania, Luxembourg, Monaco, Netherlands, New
Tome and Principe, Senegal, Sierra Leone, Solomon Islands,
Zealand, Norway, Poland, Portugal, Romania, Russian
Somalia, Sudan, Timor-Leste, Togo, Tuvalu, Uganda, United
Federation, Slovakia, Slovenia, Spain, Sweden, Switzerland,
Republic of Tanzania, Vanuatu, Yemen, Zambia.
Turkey, Ukraine, United Kingdom of Great Britain and
Small island developing States and areas: Northern Ireland, United States of America.

American Samoa, Anguilla, Antigua and Barbuda, Aruba, Annex II parties:

Bahamas, Barbados, Belize, British Virgin Islands, Cape Verde,
Annex II parties are the parties included in Annex I
Commonwealth of the Northern Mariana Islands, Comoros,
that are members of the Organization for Economic
Cook Islands, Cuba, Dominica, Dominican Republic, Fiji,
Cooperation and Development but not the parties
French Polynesia, Grenada, Guam, Guinea-Bissau, Guyana,
included in Annex I that are economies in transition.
Haiti, Jamaica, Kiribati, Maldives, Marshall Islands, Mauritius,
Micronesia (Federated States of ), Montserrat, Nauru,
Netherlands Antilles, New Caledonia, Niue, Palau, Papua New
Guinea, Puerto Rico, Saint Kitts and Nevis, Saint Lucia, Saint
Vincent and the Grenadines, Samoa, Sao Tome and Principe,
Seychelles, Singapore, Solomon Islands, Suriname, Timor-
Leste, Tonga, Trinidad and Tobago, Tuvalu, United States
Virgin Islands, Vanuatu.
 Chapter I
Global trends and challenges
to sustainable development
post-2015

Summary

yy The global community has made great strides in addressing poverty, but a mere con-
tinuation of current development strategies will not suffice to achieve sustainable
development. Economic and social progress remains uneven, the global financial
crisis has revealed the fragility of progress, and accelerating environmental degrada-
tion inflicts increasing costs on societies.
yy There are a number of economic, social, technological, demographic and environ-
mental megatrends underlying these challenges—a deeper globalization, persistent
inequalities, demographic diversity and environmental degradation—to which a
sustainable development agenda will have to respond.
yy These trends influence and reinforce each other in myriad ways and pose enormous
challenges. Urbanization is proceeding rapidly in developing countries, globalization
and financialization are perpetuating inequalities, while exposing countries to great-
er risks of contagion from crises, and food and nutrition as well as energy security
is threatened by competing demands on land and water, as well as environmental
degradation.
yy Most important, environmental degradation has reached critical levels. Business as
usual is therefore not an option, and sustainable development will require trans-
formative change at the local, national and global levels.

A more challenging context for

global development
Significant progress has been made in the new millennium in achieving global develop-
ment goals. Poverty was decreasing in all regions of the world, at least until the onset of the
global financial crisis, underpinned by strong economic growth in developing countries
and emerging economies. As a result, the first target of the Millennium Development
Goals—halving the proportion of people living in extreme poverty globally—has already
been met. Improvements in school enrolment rates and health outcomes demonstrate
similar progress in the dimension of social development.
2 World Economic and Social Survey 2013

Rising inequalities, the Nonetheless, a mere continuation of current strategies will not suffice to meet
food, fuel and financial all the Millennium Development Goals by their 2015 deadline and to achieve sustainable
crises, and the breaching of
development after 2015. In important areas, development is falling short and targets will
planetary boundaries have
made clear that a mere be missed, including the reduction of hunger, vulnerable employment and maternal mor-
continuation of current tality, and improvements in the lives of slum dwellers, among others. Even where global
strategies will not suffice goals have been reached, there are wide disparities between and within countries. Thanks
to achieve sustainable in part to the remarkable growth rates in Asia, the region has made a large contribution
development after 2015
to the achievement of global goals. Other regions, and particularly the least developed
countries within them, have been less successful. Within countries, economic growth was
frequently accompanied by rising income inequality, and the very poor and those dis-
criminated against owing to their sex, age, ethnicity or disability have benefited least from
overall progress (United Nations, 2011a). Income inequality is mirrored by very unequal
social development and access to health services and education. Such intragenerational
inequalities pose an equally important challenge to sustainable development, which is
primarily associated with intergenerational equity.
The fragility of progress became apparent during the food, fuel and financial
crises in 2008 and 2009. The global recession of 2009 was triggered by a global financial
crisis engendered by the financial systems of developed countries, engulfing their finan-
cial and banking sectors. The resulting shock to economic activity passed through the
global economy quickly, with international trade, investment and other financial flows
collapsing. The recession and the slow subsequent recovery have increased unemployment
worldwide and have slowed or partly reversed the decline in poverty. The fact that the
global financial crisis coincided with a peak in food and energy prices aggravated its im-
pacts in many countries. Food prices had risen rapidly since 2003, largely driven by rising
energy prices and the increased production of biofuels, which became competitive owing
to very high oil prices. Exacerbating factors such as extreme weather events in Australia,
Ukraine and countries in other regions of the world, as well as increased speculative ac-
tivity in commodity markets, highlight the intertwined risks between the three crises
and the multidimensional nature of the challenges they posed (Headey, Malaiyandi and
Fan, 2010).
Last, accelerating environmental degradation indicates that the world is facing
a strong sustainability challenge; that is to say, there are limits to the substitutability of
certain forms of natural capital, and thus to the extent to which technologies will be
available to overcome environmental and planetary challenges in future (Ayres, 2007).
As many forms of this natural capital are absolutely essential to human survival in the
long run, its preservation is critical. A future global agenda has to address this strong
sustainability challenge and facilitate transformative change at all levels—local, national
and global.

Underlying global megatrends

These challenges to sustainable development are driven by broad underlying economic,
social, technological, demographic and environmental megatrends. Megatrends are under­
stood in this context as major shifts in economic, social and environmental conditions
which change societies and substantially impact people at all levels.
Both the progress in development that has been achieved in recent decades and
its uneven nature are tied intrinsically to changes in the global economy and globalization.
 Global trends and challenges to sustainable development post-2015 3

Many countries have benefited from access to global markets and the spread of knowledge
and technology, but others remain marginalized. Tighter trade, investment and financial
links have also increased interdependence between countries and led, particularly in combi-
nation with financialization, to greater risks of contagion in times of crisis. At the same time,
economic growth has been accompanied by rising income inequalities in many countries.
In the years ahead, extremely diverse population dynamics have the potential
to further exacerbate inequalities, both in developing and developed countries, and at
the global level. With countries at different stages of the demographic transition, further
population growth, urbanization and rapid ageing put major stresses on the national infra-
structure and health and education systems. If necessary investments are not made, such
demographic changes will also heighten the vulnerability of countries and populations to
economic, social and environmental crises.
In addition to globalization, inequalities and major demographic changes,
there is a fourth megatrend, accelerating environmental degradation, which introduces
critical challenges for sustainable development. This megatrend is driven by unsustain-
able production and consumption patterns, and already impacts development at all levels.
Extreme weather events contributed to the food crisis, and environmental problems often
affect the poor disproportionally, since they are the least well equipped to deal with them.
In the long run, a continuation of current trends and the breaching of planetary bounda-
ries in particular would undermine all efforts to achieve sustainable development.

A more integrated, but multipolar and

heterogeneous global economy

A deeper globalization
Globalization is not a new phenomenon. In the nineteenth century, the world economy
underwent its first process of globalization, driven by technological progress in the form
of lower transportation and communication costs. World trade expanded at close to
4 per cent annually on average throughout the century, much faster than in previous
centuries (O’Rourke and Williamson, 2004). In addition, capital flows boomed and mi-
gration between continents occurred on a large scale. Today’s globalization is therefore
not entirely unprecedented in terms of trade levels, but it is qualitatively different. Beyond
the mere expansion of trade and investment flows, underlying global production patterns
have changed in recent decades, in particular since the turn of the millennium, driven
by the rise of transnational corporations and global value chains. Instead of shallow inte-
gration, characterized by trade in goods and services between independent corporations
and portfolio investments, this new phase of globalization has brought deep integration,
organized by transnational corporations which link the production of goods and services
in cross-border value adding networks (Gereffi, 2005).
Assembly-oriented export production in newly industrializing economies in
East Asia marked the beginning of this geographical fragmentation of production. The
movement of labour-intensive operations of manufactures production to low-wage loca-
tions upended the traditional international division of labour, creating opportunities for
industrialization in developing countries. Successful insertion into global value chains
contributed to rapid and sustained growth in numerous countries, accounting for much of
the overall progress in the global fight against poverty.
4 World Economic and Social Survey 2013

Deepening globalization The fragmentation of production was made possible by a favourable global
is characterized by tighter political environment which gradually reduced barriers to trade and investment, and by
trade and investment
major advances in transportation and in information and communication technology.
links and geographically
fragmented production The latter in particular is widely seen as the key general-purpose technology of the glo-
processes organized by balization age, driving technological progress in a wide range of sectors (Jovanovic and
transnational corporations Rousseau, 2005). Those advances enabled corporations to manage complex global supply
chains and was thus a precondition for the outsourcing and offshoring of production tasks,
initially in manufacturing sectors such as apparel and simple electronics, but gradually in
more and more sectors including, most recently, services and knowledge work (see, for
example, Sturgeon and Florida, 2000, for the automotive industry; and Gereffi, 2005, for
an overview).
Information and communications technologies have also made the diffusion
of information easier, and have facilitated better access by developing countries to the
global knowledge pool. Because of the critical role of science and technology in addressing
the social, economic and environmental challenges faced by countries, this wider diffu-
sion is contributing to the progress of development in a wide range of areas. At the same
time, innovative activity and technology development continue to be concentrated in a
small number of advanced economies. Only very few countries such as Brazil, China and
India, have entered this segment in recent decades, because core research and develop-
ment activities are very rarely outsourced and remain overwhelmingly centred at corporate
headquarters in developed countries (Castaldi and others, 2009).
The changes in global production are reflected in changing global trade pat-
terns. Overall trade has grown at rates much faster than those of world domestic product,
and not only did developing countries expand their share in world trade, but they were
able to diversify and increasingly export manufactured products (United Nations, 2010a).
However, these patterns are far from uniform—diversification is largely limited to de-
veloping and emerging economies in Asia, whereas traditional trade patterns based on
commodity exports and imports of manufactures and capital goods prevail in Africa and,
to a lesser extent, in Latin America. The rise of China in particular has contributed to this
trend, both directly owing to China’s large demand for commodities and the traditional
sectoral patterns exhibited by rising South-South trade, and indirectly by contributing to
high commodity prices, particularly for oil and minerals (Erten and Ocampo, 2012).
The disintegration of production, and its acceleration since the turn of the mil-
lennium, is visible also in a rapid increase of trade in intermediate goods (figure I.1). As a
result, the income elasticity of trade has increased as lead firms react to changes in demand
and pass shocks on to their downstream suppliers more quickly (Milberg and Winkler,
2010), thus further increasing interdependence in the global economy. However, since their
collapse during the 2008 and 2009 crisis, trade flows have recovered but slowly, and trade
expansion is likely to remain significantly slower than before the crisis, indicating a poten-
tial weakening of globalization of trade (United Nations, 2013).
Deep globalization is also characterized by increasing foreign direct invest-
ment (FDI) and financial flows of deep globalization. FDI flows grew as a number of coun-
tries offered conducive environments for investment and served the needs of corporations
competing based on the transnationalization of production. Growth in FDI has outpaced
even the rapid growth in world trade. Global FDI inflows reached $ 1.5 trillion in 2011,
although they have yet to reach the pre-crisis peak of 2007 (United Nations Conference
on Trade and Development, 2012b). Fifty-one per cent of total FDI was destined for
 Global trends and challenges to sustainable development post-2015 5

Figure I.1
Figurenon-fuel
World I.1 World non-fuel merchandise
merchandise exports
exports by type by type
of goods, of goods, 1998-2011
1998-2011
Billions of United States dollars

Intermediate goods
14,000 Consumption goods
Capital goods
12,000

10,000

8,000

6,000

4,000

2,000

0 Source: United Nations

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011
Commodity Trade Statistics
Database (UN Comtrade).

developing countries and transition economies, which have steadily and rapidly increased
their share of overall FDI owing to their dynamic development. Yet, not all developing
countries benefit from this trend. The least developed countries in particular remain mar-
ginalized, having attracted only $15 billion, or less than 1 per cent of global FDI.

Financial globalization and financialization

Globalization has progressed furthest, perhaps, in finance, where the liberalization of
capital markets and short-term capital flows has been promoted since the 1980s, most
prominently by the International Monetary Fund (IMF). The rationale was to enable
global savings to be allocated to their most productive use, and thus to provide develop-
ing countries in particular with access to scarce savings. The actual outcome of financial
liberalization was quite different, however. The increased volatility of capital flows, global
macroeconomic imbalances, and multiple financial crises—typically followed by severe
recessions, most recently on a global level—have highlighted both the large risks and the
very uncertain gains of financial globalization for development.
Capital controls and restrictions to short-term capital flows were an essential
part of the post-war Bretton Woods regime. With the Great Depression and the financial
crisis that had preceded it in mind, policymakers agreed to restrict international capital
mobility and thus prioritize trade and production over finance and give countries greater
macroeconomic policy space. However, this essentially Keynesian vision was undermined
by the ascendancy of financial interests in key developed countries, a broader move to-
wards deregulation and liberalization, and growing trade links between countries, which
made it more difficult to administer capital controls (Rodrik, 2011).
6 World Economic and Social Survey 2013

Capital market liberalization proceeded first in developed economies and

then in developing countries, and international capital flows did increase significantly
subsequently, from an average of below 5 per cent of global gross domestic product
(GDP) between 1980 and 1999 to a peak of about 20 per cent in 2007. At the same time,
short-term flows—portfolio and bank-related investments—have become a much more
prominent part of total capital flows, particularly in the period between 2003 and 2007
(International Monetary Fund, 2012).
Financial globalization has Developing countries that opened their capital accounts and relied more
led to rapidly increasing heavily on foreign finance did not promote growth and investment, however; in fact, they
and more volatile grew more slowly than their peers (Prasad, Rajan, and Subramanian, 2007). At the same
international capital
time, the volatility of capital flows increased, their procyclical nature exacerbated macro-
flows, macroeconomic
imbalances and more economic instability, and financial crises became much more frequent. These crises gener-
frequent crises. And since ally follow a similar pattern. Capital inflows based on market optimism fuel credit bubbles,
the global financial crisis, leading to increases in the values of real estate and the currency; but over-indebtedness
cross-border financial flows soon undermines the capacity to repay. Once the bubble bursts, capital inflows stop and
have declined by more than
60 per cent
the ensuing credit crunch leads to economic contraction (Kindleberger and Aliber, 2011).
The social costs of such crises are extremely high. Laeven and Valencia (2012) find that
since the onset of the global financial crisis, the median output loss from systemic banking
crises, which often coincide with currency crises, has amounted to 25 per cent of GDP.
Financial market liberalization has also increased macroeconomic insta-
bility, at both the national and the global levels. Capital flows are procyclical and thus
exacerbate the business cycle. At the same time, they limit policymakers’ ability to use
macroeconomic policies to smooth out the business cycle (Ocampo, Spiegel and Stiglitz,
2006). Consequently, many countries have built up their international reserves to protect
themselves against the risks associated with volatile capital flows. The massive increase in
reserves held by developing and emerging countries—which amounted to $7 trillion in
2011 (United Nations, 2012a)—leads to global macroeconomic imbalances however.
Tightly related to capital market liberalization is the process of financializa-
tion. Broadly described, financialization entails the increasing role of financial motives,
actors, markets and institutions in the economy, as evidenced in the increase in profits
of financial institutions relative to non-financial corporations and the overall increase in
rentiers’ share of national income (Epstein, 2005). In the 1970s, starting in the United
States of America followed by other advanced economies, financialization was driven by
financial interests that sought profitable investments in the context of slowing economies.
It led to changes in corporate behaviour in line with principles of shareholder value and
shorter time horizons of corporations in their investment decisions, changes in financial
markets which facilitated increased indebtedness and asset-price bubbles, and changes
made in economic policy, not least of all to facilitate financial globalization (Palley, 2007).
More recently, and in parallel to the recent slowdown in trade globalization,
the global crisis may have ushered in an era of weakening financial globalization. In fact,
cross-border financial flows have declined by more than 60 per cent from their peak in
2007 (Lund and others, 2013). Financial regulation is being strengthened worldwide, both
in major developed and emerging economies and at the international level, and major
advocates of financial globalization have modified their position. Most prominently, IMF
adopted a new institutional view on capital controls, highlighting the risks associated with
rapid capital inflows and outflows, and embracing capital flow management measures
under specific circumstances (International Monetary Fund, 2012).
 Global trends and challenges to sustainable development post-2015 7

Convergence, but greater vulnerability and heterogeneity

in the global economy
Overall, globalization has provided opportunities for emerging economies and developing
countries, and in recent years their growth rates have been consistently higher than growth
rates in the developed world. There are two critical caveats with respect to this broad trend
of convergence, however. It has not made developing countries immune to cyclical shocks:
indeed, globalization has increased countries’ vulnerabilities; and it is far from uniform,
with some developing countries not only excluded from this convergence process but fall-
ing further behind. Average per capita growth also hides increasing inequalities within
countries, which are also partly related to globalization. A significant part of the global
population therefore does not benefit from convergence (Dervis, 2012).
Since the 1990s, per capita incomes in emerging economies have grown con- Deepening globalization
sistently faster than in the developed world. Since the turn of the millennium, growth in has facilitated growth in
developing countries has accelerated as well, leading an overall trend of convergence in developing and emerging
economies, but has also
the global economy (figure I.2). Convergence is partly driven by globalization, which has made national economies
facilitated access to technology and know-how through tighter trade and investment links more vulnerable to
and thus higher productivity growth in manufacturing. In fact, manufacturing sectors external shocks
have experienced an unconditional convergence in labour productivity, that is to say, a
convergence independent of geography or policies (Rodrik, 2012). Since this does not hold
for other sectors of the economy, structural transformation—a decreasing reliance on the
primary sector and a shift of resources to higher value adding manufacturing and modern
services activities—will remain a necessary condition of sustained economic growth.
As a result of rapid growth in developing and emerging economies, the world
economy is becoming more multipolar, which inevitably leads to the creation of a world that
is more multipolar politically. These changes will have to be accommodated within a global

Figure I.2
Figure I.2 Annual GDP growth per capita, high-, low- and middle-income countries,
1990-2011
Annual growth of GDP per capita, high-, low- and middle-income countries, 1990-2011
Growth of GDP per capita (percentage)

High-income countries
8 Low-income countries
Middle-income countries
6

-2

-4

-6
Source: World Bank World
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

Development Indicators.

Source: World Bank World Development Indicators.

8 World Economic and Social Survey 2013

governance regime. The expansion of global trade associated with the fragmentation of produc-
tion also adds to global carbon dioxide (CO2) emissions, with the transport sector a significant
source of those emissions. On average, internationally traded goods generate emissions that
are 50 per cent higher than those generated by locally traded goods (United Nations, 2013).
Relatedly, the vast expansion of global consumption and of changing consumption patterns
in emerging economies will add to the strong environmental sustainability challenge driven
originally by unsustainable consumption patterns in developed countries (see further below).
Economically, continued growth in emerging economies in particular can be an engine of
growth for the world economy and provides opportunities for other developing countries, but
the gravity shift to China and India, the major drivers of this process, will also change the
nature of end markets and is likely to pose new challenges for economic development.
Deepening globalization has also increased the cyclical interdependence of
national economies. Owing to tighter links, they are more vulnerable to external shocks,
and crises like the 2008-2009 global financial crisis spread quickly. Global value chains
are partly responsible for this, as demand shocks in one region are passed on much more
quickly through tightly integrated global value chains (see, for example, Cattaneo, Gereffi
and Staritz, 2010). Reductions in consumer demand in end markets are transmitted in real
time to producers, often with large and immediate effects on employment in exporting
countries (Keane, 2012).
Perhaps even more important is the fact that financial globalization has in-
creased countries’ vulnerability to financial crises, as evidenced by the frequency of fi-
nancial crises in recent years and the contagion effects arising from such crises. Many
countries have taken the lessons learned from the crisis to heart—most notably developed
economies such as the United States—and have taken steps to strengthen financial regula-
tion. Interdependence in the global economy, however, also implies that the externalities
of national economic policies are increasing and thus require better management and
coordination at the global level. Again, notable first steps in this regard have been taken
since the crisis, for example, through the establishment of the Financial Stability Board,
and through the issuance of new rules by the Basel Committee on Banking Supervision.
There are concerns not only about external shocks, but also about heterogeneity
in growth experiences, i.e., about the fact that progress is not uniform. Growth in many
countries is not sufficient to enable them to be part of the overall convergence process, or
they remain dependent on low value adding resource exports for growth. Yet, development
strategies based on industrialization and structural transformation following the example
of East Asia have become more challenging as rents for simple manufacturing and as-
sembly procedures within global value chains have eroded and as prices for manufacturing
goods typically exported by low-income countries have fallen more rapidly with the entry
of China into global markets (Kaplinsky, 2006). In future, shifting end markets will also
lead to shifting patterns of global import demand, with a heavier emphasis on demand for
commodities and raw materials as well as unprocessed goods, likely rendering upgrading
strategies within value chains more difficult (Kaplinsky and Farooki, 2010).
The 2008-2009 crisis has also accelerated the consolidation of global value
chains, which began as early as the 1990s in some sectors, but can now be observed across
sectors (Cattaneo, Gereffi and Staritz, 2010). Many lead firms used the crisis to end rela-
tions with marginal suppliers, relying on globally operating suppliers instead. This may
preclude, or at least render significantly more difficult, the future entry of new firms, in
particular those based in marginal countries, into global value chains. In combination
 Global trends and challenges to sustainable development post-2015 9

with continuing global macroeconomic imbalances and the related pressure on countries
with current-account deficits to rebalance their external positions, as well as the slowdown
in trade expansion already observed, these changes will render development strategies
based on export-led growth, so successfully implemented in many of the best performing
developing countries in recent decades, much more difficult in the years ahead.

Persistent inequalities
The heterogeneity among countries exists side by side with persistent inequalities, of which Income inequalities within
income inequality is only one, if the most visible, dimension. While global income inequal- many countries have
been increasing, while
ity has receded slightly in recent years, inequalities within many countries have been rising.
global inequality, although
These trends are complex and driven by many, often structural and country-specific factors, it has receded slightly
and they are tightly linked to social, environmental and political inequalities. Nonetheless, in recent years, remains
globalization has important direct and indirect impacts on inequality. Left unaddressed, extremely high
these inequalities threaten sustainable development prospects in multiple ways.
Owing to the convergence of mean incomes of developing and developed
economies, global income inequality has been falling in recent years, albeit to a very small
degree, and from a very high level. In the wake of the great global divergence in incomes
that started with the industrial revolution in the nineteenth century, location rather than
socioeconomic status or class is still responsible for the overwhelming share of overall
income inequality. More than two thirds of global inequality is explained by differences
in income between countries, and only one third by the distribution patterns within coun-
tries (Milanovic, 2011a).
The more recent stabilization and slight narrowing of global income inequal-
ity largely reflect economic growth in China since the 1990s, and growth in India,
other emerging economies and developing economies since the turn of the millennium
(Milanovic, 2012). At the same time, income inequalities are increasing at the national
level in most regions of the world (figure I.3; see also Vieira, 2012). While national in-
come inequalities had for the most part decreased after the Second World War, this trend
was reversed in the 1980s, when inequality started to rise sharply again, particularly in
developed and emerging economies, with the largest gains going to the top 1 per cent of
households. The extent of within-country inequalities, while growing in most countries,
varies widely between them. In several countries in Latin America, the major exceptions
to the overall trend, social programmes and improvements in labour productivity have
played a major role in reducing income inequality since 2000. Distributional diversity,
however, applies to the developed world as well as to developing countries, which suggests
that in addition to global economic forces, institutional factors play an important role in
explaining it (Palma, 2011).
Changes in the global economy—while not the only driver of trends in
inequality—play an important role in the context of many of its underlying causes. In
developed countries, the outsourcing and offshoring of jobs requiring mid-level skills—
facilitated by changes in global production patterns and technological changes—have led
to a hollowing out of labour markets from the middle and may be partly responsible for
stagnating wages for low-skilled workers (Abel and Deitz, 2012). At the same time, finan-
cialization has increased executive compensation and wages at the very top of the income
distribution (for the United States, see Piketty and Saez, 2003). A significant decline in the
share of wages in the functional income distribution, reflecting lower bargaining power
10 World Economic and Social Survey 2013

Figure I.3 Income share of the top 1 per cent for a sample of developed and
Figure I.3
developing countries, 1915-2010
Income share of the top 1 per cent for a sample of developed and d
 eveloping countries, 1915-2010
Developed countries’ income share (percentage) Developing countries’ income share (percentage)
25 France 30 China
Germany India
United Kingdom Indonesia
20 United States 25
South Africa
Japan Argentina
20
15
15
10
10
5
5

0 0

1915
1920
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
1915
1920
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
Source: World Top
Incomes Database.
of immobile labour versus mobile capital, exacerbates these trends, as capital ownership
is typically highly concentrated (United Nations Conference on Trade and Development,
2012a). For this reason, the collapse in stock prices during the global financial crisis led
to a temporary fall in the share of the top percentile in total income in the United States.
However, during the uneven recovery from 2009 to 2011, incomes in the top percentile
bounced back and grew by 11.2 per cent, while the average incomes of the bottom 99 per
cent of households fell by 0.4 per cent (Saez, 2013).
In developing countries, income inequality is often due to insufficient employ-
ment generation, if, for example, growth is based on commodity exports, as was the case
in some regions in Africa. In East and South-East Asia, structural change from a primarily
agricultural to a modern economy—as famously described by Kuznets—is an important
driver of inequality. In addition, global economic developments such as financialization
and rapidly rising capital flows, as well as a global policy agenda with very different pri-
orities, had long constrained national policymakers in their use of macroeconomic, tax
and redistributive, labour-market and other policies to directly tackle inequalities (United
Nations Conference on Trade and Development, 2012a).
Rising inequalities Not only are rising income inequalities at the national level undesirable in
undermine prospects for their own right, but they may also undermine prospects for sustained growth and broader
sustained growth and sustainable development. Empirically, higher levels of inequality are associated with a
sustainable development
by threatening economic
shorter duration of growth spells. Many developing countries have been able to initiate
and social stability and by and sustain high growth for several years, but sustaining steady growth over a longer
constraining the life choices period has proved to be much more challenging. Such longer growth spells are robustly
of individuals associated with more equality in income distribution (Berg and Ostry, 2011). Potential
reasons for this are inequality’s negative impact on the composition of aggregate demand,
investments in social services and education, and sociopolitical and economic stability.
In terms of social development, large inequalities constrain life choices for
individuals and perpetuate unequal economic and social opportunities, i.e., inequality of
outcome translates into inequality of opportunity. Several studies have emphasized that
increasing inequalities are detrimental to child development. Beyond the psychosocial
 Global trends and challenges to sustainable development post-2015 11

and cognitive consequences for children (Hoff and Pandey, 2004), persistent inequalities
increase the chances of lower development outcomes in health, including under-nutrition
and stunting, and in education, including in school enrolment and learning outcomes.
These inequalities may solidify over time, as the political influence of wealthier groups
increases, leading to institutional arrangements that favour their interests (World Bank,
2005). Such economic and social inequalities are strongly intertwined with and often ex-
acerbated by horizontal inequalities, i.e., inequalities based on disability, gender, ethnicity,
caste or other hereditary characteristics. Conversely, in more equal societies, better social
outcomes can be expected: people are more likely to live longer and to achieve higher
grades at school, and less likely to suffer from obesity and violence (Pickett and Wilkinson,
2009). For instance, there is evidence that the proportion of the population with obesity
is higher in developed countries with higher income inequality (Pickett and others, 2005).
Last, income inequality can threaten economic stability (see, for example,
Rajan, 2010; and Stiglitz, 2012). In the United States, stagnating real wages for the middle
class lowered the purchasing power of households. Low interest rate policies were intro-
duced to spur consumption, which contributed to the mounting of household debt beyond
sustainable levels (Rajan, 2010). The increase in debt in turn generated profitable activities
in the financial sector, widening wealth and income gaps, while contributing to asset-price
bubbles and ultimately to the financial crisis.

Demographic changes
The global population reached 7 billion in 2011 and will continue to grow, albeit at a
decelerating rate, to reach a projected 9 billion in 2050 (United Nations, Department of
Economic and Social Affairs, Population Division, 2011). Beyond aggregate global popu-
lation growth, demographic development is characterized by heterogeneity, as countries
are at different stages of their demographic transition. While global population growth
is slowing, it is still high in some developing countries, and while the world population
as a whole is ageing rapidly, some countries are witnessing an increase in the proportion
of youth in their overall population. Such diversity, combined with persistent inequali-
ties, in turn creates migratory pressures both within countries and internationally. These
demographic trends pose major challenges for future development strategies at all levels:
local development will be shaped by further urbanization, national development strategies
will have to adapt to evolving demographic structures, and migratory pressures will have
to be addressed at the global level.
Population dynamics are driven by fertility rates and mortality rates—changes
in which are often described as jointly constituting the demographic transition—and mi-
gration patterns. Historical patterns in developed countries suggest a demographic transi-
tion from an initial state of high fertility and high mortality to a state of low fertility and
low mortality, where mortality typically declines first followed at a later stage by a more
abrupt decline in fertility. At the global level, fertility rates have long been falling from
their peak and the global fertility rate currently stands at 2.52 children per woman. It is ex-
pected to fall further, to 2.17 children per woman, in 2045-2050. However, these averages
mask great heterogeneity between countries. Fertility is below replacement level in coun-
tries that account for almost half of the global population, namely, most developed coun-
tries, but also China. It has fallen rapidly in many developing countries as well, whereas it
remains at 4.41 for least developed countries, and is projected to stay significantly above
12 World Economic and Social Survey 2013

replacement level in coming decades (ibid.). The empowerment of women, better access to
birth control and the postponement of marriage are immediate drivers of fertility declines,
but fertility rates are also dependent on economic development, mortality declines and
improvements in education levels.
While mortality is declining Owing to improvements in nutrition and public health and social development
throughout the world, more broadly, mortality is declining throughout the world. Life expectancy at birth is
fertility rates remain high
currently at 67.9 years, and is expected to increase to 75.6 years by 2045-2050, based on
for some countries, notably
least developed countries, increases in all regions and development groups. Even though mortality trends have been
and as a result, future more uniform, there is regional diversity nonetheless, with the impact of HIV/AIDS on
population growth will be life expectancy in sub-Saharan Africa particularly visible.
extremely concentrated Migration is the third driver of population dynamics. Net migration from
geographically
less developed to more developed regions has been increasing steadily from 1960 onward.
Between 2000 and 2010, developed regions attracted 3.4 million migrants annually on
average. While these flows dominate global migration patterns, migration between de-
veloping countries is also significant, and several of them have attracted migrants in large
numbers, for example, as guest workers (in the Middle East) and as refugees (in Africa).
Looking forward, migration patterns are more difficult to predict, as they are influenced
by a complex interplay of economic, social, demographic, environmental and political
factors; but overall migration from less to more developed regions is projected to continue,
albeit at a slower pace, in the decades ahead (United Nations, Department of Economic
and Social Affairs, Population Division, 2011).
These demographic drivers lead to four major global population trends: the
world population will continue to grow; it will grow at a much slower pace than previ-
ously; it will become older; and it will be increasingly urban (Cohen, 2010). These global
trends mask large underlying heterogeneity between countries, and they pose important
challenges to sustainable development, both globally and in specific regions and countries.
With regard to population growth, it reached its peak between 1965 and 1970, and has
decelerated ever since. This trend will continue, and by 2050 population in developed
countries is expected to almost stagnate, and population growth in developing countries
other than least developed countries will be 0.50 per cent annually, while the popula-
tion of the least developed countries will grow at the rate of 1.42 per cent annually, sig-
nificantly below today’s rate, but still high enough to enable populations to double every
49 years (United Nations, Department of Economic and Social Affairs, Population
Division, 2011; see also figure I.4).
This diversity implies that future increases in world population will be
highly concentrated geographically. Only eight countries—the Democratic Republic of
the Congo, Ethiopia, India, Nigeria, Pakistan, the Philippines, the United Republic of
Tanzania, and the United States—will account for half of the projected global population
increase. More worrisome is the fact that rapid population growth continues in countries
that are the least well equipped to provide the necessary investments to deal with larger
populations. Populations are expected to more than double in the least developed countries
between now and 2050, and short of major development progress in these countries, this is
likely to challenge their sustainable development prospects in a number of ways. A vicious
circle of poverty, lack of education, ill health, high fertility and high infant mortality can
perpetuate inequalities. Breaking it will require further investments in health and educa-
tion systems, as well as better access to reproductive health services and the protection of
women’s reproductive rights. At the same time, these investments have to be complemented
 Global trends and challenges to sustainable development post-2015 13

by expanding productive employment opportunities, as a growing number of young people

enter labour markets. Last, population growth, in particular in combination with climate
change, can add to local environmental stresses and resource and land scarcity.
Owing to the decline in fertility and mortality rates, the global population Population ageing will
will also become older at an accelerating pace (Lutz, Sanderson and Scherbov, 2008). The lead to sharp increases
in dependency ratios,
share of persons aged 60 years or over will increase to 22 per cent in 2050 globally, up from
while global disparities
11.2 per cent in 2011 and from only 8 per cent in 1950. However, countries are at very in population dynamics
different stages in their demographic transition. Population ageing is most advanced in and persistent income
developed countries, leading to sharp increases in dependency ratios and putting a strain disparities will increase
on those countries’ health and pension systems. Developing countries are younger on migratory pressures at
the global level
average, but their populations are growing older as well. Critically, the ageing process is
projected to occur at a much higher speed than was the case in developed countries, while
family structures undergo major changes and family support systems consequently play
a smaller role. If basic pension systems are lacking, a growing share of older persons will
therefore be at risk of falling into poverty.
On the other hand, because of their continuously high fertility rates, the least
developed countries will continue to see the number of youth and adolescents rising. A
growing share of young people presents opportunities for reaping a demographic dividend,
if a demographic transition occurs and fertility rates and dependency ratios fall, which,
at this point, is projected to happen in least developed countries in Asia (United Nations
Population Fund, 2011). However, this dividend will pay out only if those economies can
create employment opportunities, which will be a major challenge for least developed
countries in the decades ahead. Such disparities in international population dynamics, in
combination with existing income disparities, are also contributing to continued migratory
pressures at the global level. If addressed in a coherent manner, migration can be beneficial
for both countries of origin and countries of destination, by alleviating—although by
no means eliminating—problems arising from demographic trends, and contributing to

Figure I.4
Figure I.4population
Projected Projected population by development
by development region,
region, medium medium
variant, variant, 1950-2100
1950-2050
Population (billions)

9 More developed regions

Less developed regions
8 Least developed countries

1
Source: United Nations,
0 Department of Economic and
Social Affairs, Population
1950

1960

1970

1980

1990

2000

2010

2020

2030

2040

2050

Division (2011).

Source: Population Division, UN/DESA (2011).

14 World Economic and Social Survey 2013

transfers of knowledge and resources. Yet, at this point, there are no adequate mechanisms
at the global level for addressing these concerns.
As noted above, the fourth major trend is increasing urbanization. Already,
more than half of the world’s population live in towns and cities, and most future popula-
tion growth will occur in the urban areas of developing countries (figure I.5). In the least
developed countries, the rate of growth in urban areas is 4 per cent per year, mostly driven
by rural-urban migration in search of employment (United Nations Population Fund,
2011). Many of these migrants live in informal settlements and urban slums where they
are exposed to environmental hazards and increased health risks. Climate change can fur-
ther increase these risks, as many cities are in locations particularly exposed to its effects
(Satterthwaite, 2009). On the other hand, urbanization offers opportunities to provide
better access to services and employment at lower cost and with a lower environmental
impact. While building the infrastructure that would allow those opportunities to be
realized entails huge investment and planning needs, the reality of continued population
growth will render such an undertaking critical to any sustainable development strategy.

Environmental degradation
While an unusually stable global environment has been the precondition for unprec-
edented human development over the last ten thousand years, this stability is now under
threat from human activity. Most critically, energy consumption has skyrocketed owing to
rapid population and economic growth, resulting in unprecedented concentrations of CO2
in the atmosphere and anthropogenic climate change. If greenhouse gas emissions, global

Figure I.5
Figureand
Urban I.5 Urban and rural population
rural population growth,
growth, high-, low-high-, low- and middle-income
and middle-income countries, countries,
1950-1955 to 2045-2050
1950-1955 to 2045-2050
Millions of persons
Population growth (millions)

450
400
350
300
250
200
150
100
50
0
-50 Urban, middle- and low-income countries
-100 Urban, high-income countries
-150 Rural, all countries
1950-1955
1955-1960
1960-1965
1965-1970
1970-1975
1975-1980
1980-1985
1985-1990
1990-1995
1995-2000
2000-2005
2005-2010
2010-2015
2015-2020
2020-2025
2025-2030
2030-2035
2035-2040
2040-2045
2045-2050

Source: Population
Division, UN/DESA.

Source: Population Division, UN/DESA (2012).

 Global trends and challenges to sustainable development post-2015 15

resource consumption and habitat transformation continue at or above current rates, a state
shift in the Earth’s biosphere is likely (Barnosky and others, 2012), irreversibly changing
the environmental conditions so favourable to human development in recent millenniums.
The environmental impact of human activity and the strong sustainability
challenge that it poses are tightly related to the megatrends identified above. To decom-
pose their overall effects and shed more light on the many interlinkages, it is useful to
draw on the ImPACT identity, which relates demographic, socioeconomic and technologi-
cal changes to their environmental impact. More specifically, ImPACT specifies that the
product of total population (P), world product per person or affluence (A), the intensity
of use of GDP or consumption patterns (C) and the efficiency of producers determined
by technology (T) together determine overall environmental impact (Im) (Waggoner
and Ausubel, 2002).1 These forces influence each other in important and multiple ways.
Population dynamics impact on per capita income and vice versa, income levels affect
consumption patterns and efficiency in production, and environmental changes in turn
exert an impact on economies, to give just a few examples.
Within this framework, the contribution of the megatrends to environmental The stability of the global
degradation can be delineated. Population dynamics determine the overall number of environment is under
threat from human
persons whose material needs have to be met, both at the local and national levels, and at
activity, owing largely to
the global level. Diverse demographic trends present highly diverse challenges to sustain- unsustainable consumption
able development at the local and national levels. Globally, however, population growth is patterns that reflect
slowing. More important, population growth is concentrated in countries whose contribu- extreme inequalities
tion to global environmental challenges is comparatively small.
Economic growth lies at the heart of the global development agenda, and
the persistence of large unmet material needs implies that sustainable development re-
quires further increases in income and affluence for many. At the same time, humanity’s
overall demand for natural resources already exceeds Earth’s bio-capacity (WWF, 2012).
Contributions to this excessive environmental footprint are extremely uneven, however:
the global inequalities in incomes and wealth described above translate directly into starkly
differing environmental impacts (see chap. II).
The impact of per capita income on the environment is mediated by the inten-
sity of GDP use, which is a reflection of consumption patterns, and by the efficiency of
production of goods, or technology. Consumption patterns and technological progress are
sometimes called sustainability levers, as they can mitigate the environmental impact of
income growth (Waggoner and Ausubel, 2002). Growth itself can be a driver of such tech-
nological progress, of structural change entailing movement away from material-intensive
industries towards services, and of changes in consumer preferences. An environmental
Kuznets curve hypothesis suggests that for these reasons, resource use would increase in
the early stages of development, but fall in later stages (Rothman, 1998). However, there
is no evidence of such an absolute decoupling of growth in resource use from economic
growth at the global level, and only very limited evidence for relative decoupling, where
resource use grows more slowly than the economy. Most importantly, global CO2 emis-
sions have grown as fast as or faster than global GDP since the turn of the millennium, as
large emerging economics industrialize (see below and chap. II).

1 The well-known Kaya identity—expressing total global CO2 emissions as a product of total
population, GDP per capita, energy consumption per gross world product, and global CO2
emissions per global energy consumption—is the basis of a specific exercise in decomposing
overall environmental impact—in this case global emissions—into contributing driving factors P,
A, C and T.
16 World Economic and Social Survey 2013

Threats to global ecosystems

In a number of areas, damage to the global environment is reaching critical levels and
threatens to lead to irreversible changes in global ecosystems. Rockstroem and others
(2009) have identified interlinked planetary boundaries, and found that in some areas, in-
cluding most prominently climate change, boundaries have already been exceeded. There
is also strong evidence for tipping points to exist for ocean acidification, the phosphorous
cycle, and stratospheric ozone depletion, while in other areas, the impacts of environmen-
tal degradation may be limited to local and regional ecosystems (Nordhaus and others,
2012). Overwhelmingly, these changes are driven by the reliance on fossil fuels to power
economic growth, and by industrialized forms of agriculture, necessary to feed a growing
and increasingly wealthy global population.
Damage to the global The overarching environmental challenge is anthropogenic climate change.
environment is reaching The increased concentration of greenhouse gases in the atmosphere—most importantly,
critical levels and threatens
CO2 —is leading to a warming of the planet. The atmospheric CO2 concentration has
to lead to irreversible
changes in global increased from 260-280 parts per million (ppm) in pre-industrial times to 391 ppm in
ecosystems. Most visibly September 2012, and global mean warming is already 0.8º C above pre-industrial lev-
in climate change, critical els (World Bank, 2012a). Projections of future global warming depend on assumptions
thresholds have already regarding future development pathways and demographic, economic and technological
been exceeded
developments, and thus vary widely, but further warming is predicted in all scenarios. The
business-as-usual scenario produced by the Intergovernmental Panel on Climate Change
(2007a) arrives at a best estimate of a 4 º C increase of global average surface temperature
in 2100 as compared with the period 1980-1999.
There is also a strong scientific consensus that global warming is induced by hu-
man behaviour, predominantly by fossil fuel use and, to a smaller extent, by changes in land
use and deforestation. The extent of future global warming will therefore primarily depend
on successfully using the sustainability levers by reducing the energy intensity of GDP
growth and the carbon intensity of energy, assuming that GDP per capita and population
continue to grow. However, current trends are not favourable. While the carbon intensity
of global growth decreased and thus slowed down the overall growth in CO2 emissions up
until 2000, emission growth has accelerated in the new millennium because of a reduc-
tion—and, partly, even a cessation—in the long-term decreasing trends of carbon intensity
of energy and energy intensity of GDP, largely owing to the high energy requirements of
intensive growth in developing and emerging economies (Raupach and others, 2007).
This challenge, in its starkness and immediacy, clearly requires a global re-
sponse. Rockstroem and others (2009) propose a CO2 concentration boundary in the
atmosphere of 350 ppm, which has already been breached. Yet, reaching agreement on
this global response entails addressing difficult equity questions, as contributions to global
emissions have varied widely historically and continue to do so. While developed countries
are responsible for almost 60 per cent of cumulative emissions and therefore bear the brunt
of the blame historically, they now contribute little to emissions growth, which is driven by
China, India and other developing countries (Raupach and others, 2007). In fact, China
is now the single largest contributor to global CO2 emissions, having emitted 9.7 billion
tons in 2011, representing 29 per cent of all emissions (Olivier, Janssens-Maenhout and
Peters, 2012). At the same time, the stabilization of emissions in developed countries can
be explained in part by growing imports of emissions-intensive products from developing
countries. If these emissions transfers are taken into account, developed countries have
not been able to stabilize their contribution to global emissions (figure I.6). The picture is
 Global trends and challenges to sustainable development post-2015 17

further complicated by stark differences in per capita emissions. While per capita emissions
in the United States are about five times the global average, per capita emissions in least
developed countries are a mere tenth of the global average (Raupach and others, 2007).
Climate change poses numerous and stark challenges for sustainable develop-
ment, and its effects will be felt in all regions of the globe, although the intensity of
exposure will vary. Degree of vulnerability will vary even more, with developing countries
and the poor, which have contributed the least to global warming, likely to suffer the most.
Coastal communities, notably in small islands and megadeltas, mountain settlements
and urban communities in megacities of developing countries are particularly vulnerable
(Intergovernmental Panel on Climate Change, 2012a). Agriculture will also be negatively
impacted by the increasing frequency of extreme weather events such as heatwaves and
droughts, and the intensification of the water cycle, further intensifying aridity of already
dry zones and thus reducing the amount of arable land. Growing average temperatures
and changes in precipitation trends are already having a significant negative impact on
yields of global maize and wheat crops (Lobell, Schlenker and Costa-Roberts, 2011).
Arguably even more important in the functioning of the Earth system, albeit
less visibly, are the world’s oceans. They, too, are dramatically affected by increased CO2
emissions, which lead, through the effects of warming and thermal expansion, to a rise in
sea levels, as well as to ocean acidification. The latter would, if current trends continued,
halt or even reverse coral reef growth, undermining marine ecosystems, and, in combina-
tion with sea-level rises, would endanger coastal regions worldwide (World Bank, 2012a).
Climate change is also exacerbating biodiversity loss. Biodiversity is critical
for the resilience of ecosystems and thus important for the provision of often-irreplaceable
ecosystem services, encompassing, inter alia, food, water and cultural services (Steffen and

Figure
Figure I.6
I.6 CO2 emissions of developed and developing countries, as allocated to
CO emissions
production
2
of consumption
and developed and(production
developingplus
countries, as allocated
net exports), to production
1990-2010
and consumption (production plus net exports), 1990-2010
CO2 emissions (petagrams of carbon)

Developed: production
5.0
Developed: consumption
Developing: production
4.5 Developing: consumption

4.0

3.5

3.0

2.5

2.0
Source: Peters and others
1990

1995

2000

2005

2010

(2012).
Source: Peters and others (2012).
18 World Economic and Social Survey 2013

others, 2011). While current losses in biodiversity are mostly caused by habitat destruction,
climate change could soon become an even bigger threat to the survival of species and is
expected to accelerate the overall trend in biodiversity loss (Bellard and others, 2012).
Causal chains are complex and multiple, and include the increase in average temperatures
and changes in precipitation patterns, the higher frequency of extreme weather events such
as droughts and flooding, ocean acidification and further land-use changes.
The expansion and modernization of agriculture are largely responsible for
interference with the planetary nitrogen and phosphorus cycle, and contribute to global
land-use change. Fertilizer use, a major driver of the green revolution in agriculture, has
increased by 700 per cent since 1960 (Foley and others, 2005). Fertilizer production in-
volves the conversion of nitrogen from the atmosphere into reactive forms through which
it becomes usable nutrient for plants. This has allowed for the remarkable expansion of
agriculture, but at the same time it has led to the widespread dispersion and accumula-
tion of reactive nitrogen in the environment. The same is true for phosphorus, which is
mined from rock and also used in fertilizers. The excess concentration of nitrogen and
phosphorus degrades water quality and threatens biodiversity and thus the resilience of
marine ecosystems. Increasing nitrogen concentrations also contribute to acidification of
rivers and streams, to stratospheric ozone depletion and to climate change (Galloway and
others, 2003). Land-use change, which is driven not only by agriculture but also by the
expansion of urban areas, further contributes to change in the global and regional climates
and to biodiversity loss.
Once certain thresholds Most worrisome are the substantial risks of large-scale non-linear impacts
have been crossed, there of climate change and the breaching of other planetary boundaries. Once certain en-
are substantial risks of vironmental thresholds are crossed, biological changes might interact in multiple ways,
large-scale non-linear
through feedback mechanisms which are not yet fully understood, and move the planet’s
impacts, which could
irreversibly alter the state biosphere irreversibly into a different state. Such state shifts have occurred multiple times
of the planet’s biosphere in the Earth’s history, most recently about thirteen thousand to eleven thousand years ago,
when the planet transitioned from its last glacial into the present interglacial condition,
or the Holocene, characterized by exceptionally benign conditions for human develop-
ment. Planetary state shifts are irreversible, and cause dramatic changes in the global,
regional and local assemblage of species (Barnosky and others, 2012). Some of the better-
understood potential feedback mechanisms encompass a rapid loss in rainforest coverage
and dieback, of the Amazon rainforest in particular; disruptions in the ocean ecosystem;
abrupt loss of Arctic summer sea-ice; irreversible meltdown of the Greenland ice sheet;
disintegration of the west Antarctic ice sheet; and melting of permafrost in the northern
hemisphere (Lenton and Ciscar, 2012).

A strong sustainability challenge?

Climate change also puts pressure on natural resources that are essential for sustaining hu-
man civilization. In the past, resource scarcity was often presented as a critical challenge,
but for much of the twentieth century, resource prices actually fell. The combination of
rapid economic expansion, continued population growth and a changing climate raises the
spectre of resource scarcities. In the medium and long term, it may lead to a strong sus-
tainability challenge. There is significant scope for substitution in many areas, yet certain
forms of natural capital including the ecological services they provide cannot be replaced
by man-made capital. Their exploitation has thus to be limited so as to preserve the overall
capacity of ecosystems to provide those services (Ayres, 2007).
 Global trends and challenges to sustainable development post-2015 19

Land, water and energy in particular are critical resources for humanity, and
their availability and use are tightly interconnected, with multiple feedback channels
between them. All of them have strong links to agriculture and food production. Large
unmet needs at the global level require and will inevitably lead to a further expansion in
their use and exploitation. Combined with the additional impact of climate change, this
expansion may very well lead to much tighter supplies, and thus to price volatilities and
sustained price increases. If scarcities arise and if limits to substitutability are reached,
distributional conflicts will have to be addressed at the national and global levels, as well
as with respect to purposes of use.
The common drivers of resource use are population growth and economic Economic growth and
expansion and the associated lifestyle changes. The global population will continue to changes in consumption
and urbanization patterns
expand, but population growth will take place largely in the poorest countries, adding
are the main drivers of
comparatively small additional pressure at the global level. Resource use is strongly cor- rising global resource
related with income, however. Currently, per capita material and energy use in developed demand, which— in
countries is higher than in developing countries by a factor of 5-10. Population density combination with climate
also appears to be a significant determinant, with densely populated areas needing fewer change—could lead to
increasing pressure on
material resources to achieve the same standard of living (Krausmann and others, 2009).
arable land and water
For these reasons, the major drivers of global resource demand in the decades ahead will supplies
be economic growth and changes in consumption and urbanization patterns.
Competing demands for land stem from increasing global demand for food
and feed, for livestock in particular, increasing biofuel production, and the expansion of
cities, and from the need to protect forests so as to meet the demand for fibre, as well as
the need for carbon sequestration (Evans, 2010). Climate change may further reduce the
amount of arable land, particularly in low-lying regions susceptible to flooding (World
Bank, 2012a). Increasing pressure on land is already occurring worldwide, as evidenced by
the dramatic increase in land deals. The Global Commercial Pressures on Land Research
Project estimates that 203 million hectares of farmland worldwide have been sold or leased
since 2001, with the pace of acquisitions accelerating markedly since 2008. Africa is the
biggest target for these land deals, accounting for reported sales of 134 million hectares.
(Anseeuw and others, 2012; see also chapter IV).
Stresses in water supplies arise from the increase in consumptive use and pollu-
tion of freshwater, for which agriculture is overwhelmingly responsible. The consumption
of agricultural products accounts for 92 per cent of the global freshwater footprint, an
indicator for humans’ appropriation of freshwater resources (Hoekstra and Mekonnen,
2012). Different commodities and types of food in particular differ dramatically in their
water intensity; therefore, going forward, changes in food consumption patterns will have
a major impact on global water stress.
In addition, energy production is likely to become thirstier in coming years,
as biofuels become a more prominent part of the energy mix. The International Energy
Agency (2012) estimates that water consumption for energy production will increase by
85 per cent between now and 2035. Overall, global energy demand is projected to in-
crease by about one third in this time period. While technological advances are unlocking
previously inaccessible fossil fuels for extraction, their exploitation is at odds with global
emissions reduction goals. In fact, only a third of proved reserves of fossil fuels can be con-
sumed by 2050, if CO2 concentration in the atmosphere is to be limited to 450 ppm (ibid.).
All three factors—land, water and energy—have a direct impact on agricul-
ture and food production. Food prices have already increased and become more volatile
20 World Economic and Social Survey 2013

in recent years, partly driven by higher prices and tighter supplies of those factors. By
2050, global food production will have to further expand by 70 per cent, in order to feed
a growing world population and simultaneously address existing malnutrition and hunger
(Food and Agriculture Organization of the United Nations, 2011a). Competing demands
for land, water and energy, and the impact of climate change, are exacerbating the scale
of this challenge. At the same time, the expansion of food production has to be achieved
in an environmentally sustainable way, so as not to contribute to further degradation of
the environment. This will entail dramatic improvements in food production, processsing,
and distribution (Godfray and others, 2010).
The implications of resource scarcities are manifold. Increasing prices and
price volatility will not only heighten the vulnerability of poor and net food consuming
households, but also raise issues of food and energy security for countries, and globally as
well. Poor households are particularly vulnerable to rising food prices, at least in the short
run, as they spend a much larger proportion of their total income on food. For this reason,
they are also less well equipped to deal with price volatility and sudden price spikes, which,
by possibly requiring them to sell assets, can exert permanent effects (Evans, 2010).
At the national level, higher food and energy prices dampen growth prospects
for food-deficit countries and net energy importing countries. Globally, higher expendi-
ture in resource-exporting countries is unlikely to compensate for the fall in aggregate
demand in importing countries (Dobbs and others, 2011a). At the same time, tighter trade
links and lower buffers associated with more integrated production patterns cause local
or regional shocks triggered by resource scarcities to reverberate more quickly in other
regions of the world. Lastly, the prospect of scarcity could also increase concerns about the
security of supply of food, energy and water and lead to more “resource nationalism”. The
recent spike in cross-border land acquisition can be interpreted in this light, as can export
restrictions on crops or mineral resources, which have increased in recent years (ibid.).
Huge investments will be To address these issues, huge investments will be necessary to increase supply
necessary to increase the in an environmentally sustainable manner. Securing long-term financing at an adequate
food and energy supply
in an environmentally scale to finance these investments will be a major challenge. Yet, expansions of supply,
sustainable manner technological progress and efficiency gains at all levels may not be sufficient. In this case,
distributional questions will inevitably arise. Access to resources is already extremely un-
equal, even in an age of relative plenty, as evidenced by the large number of people who go
hungry or remain without access to modern forms of energy. With scarcity, distributional
conflicts over access to natural resources will become much more pressing, both within
and between countries (Evans, 2011).

Sustainable development in
a more interdependent world
Achieving sustainable development post-2015 will entail progress in its four dimensions—
inclusive economic development, inclusive social development, environmental sustainabi­
lity and effective governance and peace and security (United Nations System Task Team
on the Post-2015 UN Development Agenda, 2012). The megatrends discussed above raise
multiple challenges which threaten our ability to achieve such progress in the decades
ahead. They also reinforce each other in myriad ways, and therefore have to be addressed
 Global trends and challenges to sustainable development post-2015 21

in a broad and holistic manner, by achieving transformative change in production and

consumption patterns, natural resource management, and mechanisms of governance.

Mutually reinforcing trends and challenges

Global socioeconomic, demographic and environmental megatrends have increased in-
terdependence among countries, but without any commensurate strengthening of global
governance. As a result, global macroeconomic imbalances, migratory pressures and
environmental challenges are insufficiently addressed, and crises occur with increasing
frequency. At the same time, countries with growing exposure and interlinkages become
more vulnerable to such external shocks, and crises spread more quickly, threatening
development progress.
At the national and subnational levels, these tighter links have facilitated socio- Megatrends have increased
economic progress, but not everybody is benefiting to the same degree. Rather, inequali- interdependence among
countries without
ties both within and between countries persist. While growth has accelerated in many any commensurate
developing countries, often it has been non-inclusive, failing to create sufficient employ- strengthening of global
ment opportunities and exacerbating inequalities. The consolidation of value chains and governance, while
the related deceleration of trade growth may render the implementation of export-based heterogeneity has
growth strategies even more difficult in the years ahead, at the same time as demographic increased both within
and between countries
deve­lopments make accelerated employment generation an imperative in countries with
large youth cohorts. Population dynamics will also impose additional stresses on local
governments and rapidly growing cities and national health and education systems. Rapid
ageing in numerous countries, in particular, will require further investments in social
protection systems. The persistence of inequalities, whether in incomes, or in access to
services, decent jobs, land or technology, also hints at their entrenched structural causes.
Discrimination and exclusion, based on gender, age, disability or ethnicity, have to be tack-
led directly in order that greater inclusiveness and transformative change may be achieved.
These challenges are exacerbated in multiple ways by accelerating environmen-
tal degradation. The poor are most vulnerable to environmental hazards and, owing to the
unequal distribution of assets, will also suffer the most from resource scarcities. In terms
of the medium and long run, threats to the stability of the global climate overshadow
all other challenges, as they would fundamentally undermine the preconditions for
human development.

Strategies for sustainable development

World Economic and Social Survey 2013 discusses the changes required in local, national
and global policies to achieve sustainable development post-2015. The transformative
change necessary to address the challenges set out above will be driven mainly by ac-
tors at the local and national levels. Coherence between local and national strategies will
therefore remain critical. Policy decisions in one country have regional and often global
repercussions, but currently such externalities—be they positive or negative—are not
taken sufficiently into account in decision-making processes.
Coherence in national development strategies implies most fundamentally
that socioeconomic development strategies aim to avoid further environmental distress.
Developed countries in particular have to address unsustainable consumption and pro-
duction patterns and their continuously rising environmental impact, while emerging and
22 World Economic and Social Survey 2013

developing economies need to pursue the goal of greening their catch-up growth. At the
global level, the human development agenda and the goal of environmental protection
have to be jointly pursued. Developed countries in particular would make moves towards
sustainable production and consumption, while developing countries would offer greater
cooperation in meeting climate and other global challenges. Such a global consensus on
sustainable development will be based on solidarity, with human development and environ-
mental protection as integrated and universal goals for all countries (chap. II).
Meanwhile, many specific measures will be designed and implemented at the
local level and in towns and cities in particular (chap. III). Urbanization offers the oppor-
tunity to achieve socioeconomic progress in a more environmentally sustainable manner;
but for that opportunity not to be wasted, enormous investments will be necessary.
Many of the major trends and challenges reinforce each other, as was starkly
revealed by the 2008-2009 global food, fuel and financial crises. Therefore, policy coherence
between areas is equally important. The availability and use of land, water, and energy, in
particular, are tightly interconnected. They all impact on agriculture and food production,
and that impact, in combination with the additional impact of climate change, will require
a rethinking of food and nutrition security strategies (chap. IV). Achieving food security
while minimizing the environmental impact will require increasing agricultural productiv-
ity, particularly in developing countries. At the same time, reductions in food waste and less
resource-intensive diets could make a remarkable contribution to food and nutrition security.
A transformation of the energy system will be necessary to achieve near uni-
versal access to energy in an environmentally sustainable manner (chap. V). Current emis-
sions trends of greenhouse gases will likely lead to further increases in global temperatures,
with potentially catastrophic consequences. To avert further warming, major investments
in energy efficiency are critical, while industrial policies and technological innovation,
transfer and adaptation can support a low-carbon inclusive growth path to facilitate a
global energy transformation that is compatible with economic and social inclusion in
developing countries.
To achieve this energy transformation together with food and nutrition se-
curity, sustainability of cities and other development goals after 2015, large-scale invest-
ments will be needed. Such investments will require sufficient levels of supply of long-term
financing, and they will have to be carried out both by public actors through increased
public expenditure and by the private sector, which will depend critically on creating the
right incentives for investments in sustainable development.
 Chapter II
Strategies for development
and transformation

Summary
yy While technology will play an important role in the transition to sustainable con-
sumption, conscious efforts will still have to be made to move away from more
resource-intensive to less resource-intensive consumption, from a private to a public
mode of consumption, from use of non-biodegradable to use of natural and biode-
gradable material, and from unequal to more equitable consumption.
yy Sustainable and equitable consumption patterns, with appropriate reorganization of
the economy and society, including a redefinition of output and the sharing of pro-
ductivity gains, can ensure income and employment and a better quality of life for all.
yy Human development will remain the main focus of developing countries post-2015.
In this regard, the transition of developed countries to equitable and sustainable
consumption will make it easier for developing countries to pursue their human
development goals in a more environmentally sustainable way.
yy Some developing countries have been implementing initiatives directed towards
sustainability that, so far, are more advanced than those of developed countries,
which suggests that developing countries can provide real leadership in the transi-
tion to sustainability.

Process tracks of implementation of Agenda 21

and its consequences
As the period for the Millennium Development Goals expires in 2015, the world communi-
ty faces the challenge of implementing strategies to address the concerns that have become
more global and more pressing. The international community faced a similar situation
when it gathered at the United Nations Conference on Environment and Development,
held in Rio de Janeiro, Brazil, in June 1992. One outcome of the Conference was Agenda
21 (United Nations, 1993), which constituted a comprehensive and integrated programme
encompassing all three dimensions of sustainable development.
24 World Economic and Social Survey 2013

Implementation of The actual implementation of Agenda 21, proceeded, however, along different
Agenda 21 proceeded tracks (figure II.1). On the one hand, during the 1990s, some of the concerns regarding
along different tracks economic and social development took the form of advocacy for “human development”,
which crystallized in the Millennium Development Goals through the adoption of the
United Nations Ministerial Declaration1 (Nussbaum, 2011; Sen, 1999). On the other
hand, concerns regarding the environment (global warming, for example) were reflected
in the United Nations Framework Convention on Climate Change, 2 which was opened
for signature at the 1992 Rio Conference. This was followed by the adoption, in 1977, of
the Kyoto Protocol to the United Nations Framework Convention on Climate Change, 3
by the Conference of the Parties to the Convention at its third session. Another response to
environment-related concerns was the Convention on Biological Diversity,4 which was also
opened for signature at the Rio Conference. Yet another example of global environmental
protection effort is the United Nations Convention to Combat Desertification. Also, the
United Nations Environment Programme (UNEP) has been working on environmental
issues since 1972.
The Millennium Development Goals focused on some aspects of economic and
social deve­lopment, which are both dimensions of sustainable development.5 However,
they were weak on environ­mental protection.6
The above-mentioned separate tracks of the implementation process of
Agenda 21 were also associated with very different domain configurations. For example,
the domain of action of the Millennium Development Goals was confined to develop-
ing countries. By contrast, the Kyoto Protocol, following principle 7 on common but
differentiated responsibilities of the Rio Declaration on Environment and Development
(United Nations, 1993), required only developed countries to undertake greenhouse gas
emissions reduction targets, while exempting developing countries from the requirement
of undertaking such targets.

1 See General Assembly resolution 55/2.

2 United Nations, Treaty Series, vol. 1771, No. 30822.

3 Ibid., vol. 2303, No. 30822. In fact, the Kyoto Protocol may be regarded as having set out the first
major sustainable development goal, not counting that contained in the 1987 Montreal Protocol
on Substances that Deplete the Ozone Layer (United Nations, Treaty Series, vol. 1522, No. 26369).

4 United Nations, Treaty Series; vol. 1760, No. 30619.

5 It should be noted that the Millennium Development Goals did not exhaust the United Nations
development goals, which have a broader range. The latter, often referred to as constituting
the United Nations development agenda (United Nations, 2007) or the internationally agreed
development goals, represent all of the development goals adopted at various international
conferences held under the auspices of the United Nations. Also, economic development goals
are not explicitly encompassed by the Millennium Development Goals. Instead, they are implicit,
in the sense that achievement of the Millennium Development Goals would require an increase in
per capita income, the traditional indicator of economic development. However, since an increase
in per capita income is not sufficient for poverty reduction and other social goals, the Millennium
Development Goals have focused directly on those goals, omitting conventional indicators of
economic development.

6 The Millennium Development Goal directly related to the environment is Goal 7, which focused
originally on reduction of slums and greater access to clean drinking water. Later on, biodiversity
protection targets, among others, were added. However, these targets did not achieve prominence
and were not pursued vigorously within the Millennium Development Goals framework. For
example, although the expanded list of Goal 7 targets included a carbon dioxide (CO2) emissions
reduction, the main international effort to reduce CO2 proceeded under the auspices of the United
Nations Framework Convention on Climate Change.
 Strategies for development and transformation 25

Figure II.1 Bifurcation of the implementation process of Agenda 21

Figure
and itsII.1
consequences
Different tracks of the implementation process of Agenda 21 and the consequences

Economic development

Human development: Poverty

Millennium eradication
Development worries
Goals
Sustainable
development Social
development

Environmental United Nations Framework Climate change

protection Convention on Climate Change mitigation
Convention on Biological Diversity impasse Source: UN/DESA,
Development Policy and
Analysis Division.

Source: UN/DESA, Development Policy and Analysis Division.

The impasse with regard to climate change mitigation

The eighteenth session of the Conference of the Parties to the United Nations Framework
Convention on Climate Change held in Doha in November and December 2012 again
illustrated that climate change mitigation efforts are insufficient to achieve the goal of hold-
ing the global temperature increase below 2º Celsius above the pre-industrial level. In Doha,
countries agreed and launched the second commitment period for the Kyoto Protocol that
was to commence from 1 January 2013 and end on 31 December 2020. However, several
countries that had ratified the Kyoto Protocol for its first commitment period withdrew
from it and decided not to join the second commitment period. The remaining states parties
to the protocol with obligations to reduce greenhouse gas emissions currently account for
only 15 per cent of global emissions (Toye, 2012).
Second, the greenhouse gas reduction goals set out in the Kyoto Protocol re-
main largely unachieved. If the economies in transition are not taken into account, most
of the developed countries (Annex B to the Protocol) have failed to achieve their reduction
targets. Countries that apparently have achieved their targets have often done so mainly
through offshoring greenhouse gas-intensive production operations to developing coun-
tries (chap. I; Li and Hewitt, 2008; Peters and Hertwich, 2008). Meanwhile, since produc-
tion technologies in developing countries are generally more greenhouse gas-intensive,
offshoring has led to an increase rather than a decrease in the total (global) volume of
emissions, thus frustrating the very purpose of the Protocol.
Third, although countries agreed to continue the Kyoto Protocol via the sec-
ond commitment period through 2020, the post-2020 comprehensive regime, which is to
be universal and applicable to all countries, is yet to be negotiated and concluded by 2015.7
7 See, FCCC/KP/CMP/2012/13/Add.1, decision 1/CMP.8.
26 World Economic and Social Survey 2013

Worries regarding poverty eradication and other human

development goals
Worries regarding poverty eradication emanate from the weaknesses with respect to
poverty reduction achievement so far. First, although the world as a whole is on track
towards achieving Millennium Development Goal 1, this has been largely due to China,
which succeeded in raising about 600 million people out of poverty. By contrast, South
Asia and sub-Saharan Africa have been less successful, and the absolute number of the
poor in these regions has in fact increased. Chen and Ravallion (2010) indicate that
“the developing world is poorer than we thought”, reporting that the number of poor in
2005 was 1.4 billion (using $1.25/day as the poverty line). They further indicate that if
the higher, $2/day definition is used, the number of the poor in developing countries in
2005 increased to 2.6 billion (representing 47.6 per cent or almost half, of the developing
world’s population).
Second, those who have risen above the poverty level still remain very close to
it, so that negative shocks can easily wipe out the poverty reduction gains, which was what
occurred during the recent food price spike.
Third, despite progress, the overall rate of poverty reduction is proving too
slow to be satisfactory. For example, recent calculations by Woodward (2013) show that
based on the average growth rate of income of the lowest decile of population during
1993-2008 (leaving out China), eradication of poverty, as measured by the $1.25/day line,
would require another century; and it will take even longer if a higher income threshold
(such as $5/day) is used (figure II.2). It is difficult to see how the world can wait that long
to eradicate poverty without meanwhile becoming embroiled in major social conflicts,
both internal and external.
Relying on the poverty reduction trends that held during 1990-2010, Ravallion
(2012) suggests that an “optimistic” target would be to reduce the poverty rate (poverty
line of $1.25/day) to 9 per cent in the next 10 years. Woodward (2013), however, points
out that progress in poverty reduction during that period was dominated by China’s ex-
ceptional performance, and that it is difficult to believe that this record can be replicated
with China largely out of the world poverty picture post-2015. It is therefore not by chance
that Ravallion himself deems this target “optimistic”.
Meanwhile, projections (see discussion below) show that decreasing marginal
returns to additional public interventions over time increase the marginal costs of achiev-
ing the Millennium Development Goals. In addition, there are concerns with regard to
quality. For example, while progress has been made in school enrolment rates (goal 2),
concerns remain regarding the quality of schooling. Thus, significant human development
challenges persist.
More importantly, the current course of the human development effort ap-
pears to be on a collision course with the environment protection goal. The reduction in
forest cover, biodiversity, stock of various mineral and other natural resources, etc., and
the huge increase in various types of waste (including non-biodegradable plastic waste)
have also been unintended consequences of the current type of human development effort.
Thus, proceeding along different tracks to implement Agenda 21 has also led
to problems with regard to both human development and environ­­mental protection.
 Strategies for development and transformation 27

Figure
FigureII.2
II.2 Income of the poorest decile, World (excluding China), 2000-2250
Income of the poorest decile, World (excluding China), 2000-2250
Dollars per day (2005 purchasing power parity)
Source: Woodward (2013).
Note: The graph shows a
projection of incomes for the
25 lowest decile of the world
population excluding China,
based on extrapolation
20 of the trend of mean per
Upper limit of range capita income in this decile
of incomes between 1993 and 2005.
The upper limit of the range
15 of incomes is the income
marking the division between
Mean income for the decile the 9th and 10th deciles
($0.85 per day in 2005). The
10 lower limit is a conservative
(high) estimate of the lower
$5.00-a-day poverty line Range of incomes band, set at half the mean
income for the tenth decile
5
Lower limit ($0.30 per day in 2005) and
$1.25-a-day poverty line of range of corresponding with the
incomes upper bound of the
0 100th percentile.
2000 2050 2100 2150 2200 2250

Source: Woodward (2013).

Millennium Development Goals and

Sustainable Development Goals
Discussions on the Millennium Development Goals track have been prompted by the Discussions on the
impending expiry of the Millennium Development Goals deadline in 2015. A large litera- Millennium Development
Goals and the Sustainable
ture—including AIV (2011), Institute of Development Studies (2010), Kenny and Sumner
Development Goals reflect
(2011), Melamed (2012), Vandemoortele (2012) and World Vision (2011)—has emerged different tracks of the
concerning this track. The report of the United Nations System Task Team on the Post- Agenda 21 implementation
2015 UN Development Agenda (2012) carries forward this discussion. process, but the two sets of
goals need to be integrated
The other track is represented by the outcome document of the United Nations
Conference on Sustainable Development entitled “The future we want”,8 pursuant to which
a process of formulation of sustainable development goals was initiated. This has led to
the establishment of the Open Working Group of the General Assembly on Sustainable
Development Goals (see Assembly decision 67/555 of 22 January 2013).
These two tracks often present two different perspectives. Some of the pub-
lications associated with the Millennium Development Goals track were written before
the Conference and hence did not consider the concept and the process of formulation
of Sustainable Development Goals. They generally continued to assign environmental
goals a rather limited role in the post-2015 extension of the Millennium Development
Goals, similar to what has been the case in the context of the existing Millennium
Develop­­­­­­ment Goals.
­8 General Assembly resolution 66/288, annex.
28 World Economic and Social Survey 2013

There is a view that these two tracks, under which discussion is proceeding,
need to converge so that the international community can emerge with one integrated
set of goals. This conviction was reflected by the call, in the report of the United Nations
System Task Team on the Post-2015 UN Development Agenda (2012), for a rebalancing
of the post‑2015 agenda by giving more importance to the goal of environmental protec-
tion (and to peace, security and governance issues). Similar feelings were reflected in the
recommendation of the inter-agency technical support team of the Open Working Group
that technical input be sought from the Task Team.

Means of achieving an integrated

post-2015 agenda

Causes of the climate change mitigation impasse

It is well known that one reason for the climate change mitigation impasse is the demand
by some developed countries that large, fast-growing developing countries, such as China,
India, Brazil, and South Africa, also accept greenhouse gas emissions reduction goals.
Those developed countries argue that developing countries as a whole currently produce
more greenhouse gas emissions than developed countries (chap. I) and that large, fast-
growing developing countries have now become major emitters of greenhouse gases. As a
result, effective climate change mitigation is no longer possible without the agreement of
those developing countries to reduce the growth of their greenhouse gas emissions.
In response, developing countries point out that their per capita greenhouse
gas emissions are still very low and of recent origin. By contrast, developed countries have
been emitting at a high per capita level for several centuries (Raupach and others, 2007).
Accordingly, it is unfair to impose restrictions on developing countries’ greenhouse gas
emissions, which need to increase as these countries try to reduce poverty and raise the
material standard of living of their populations. Reconciling these two opposing view-
points has so far proved difficult.

Causes of human development concerns

One main reason for the concerns regarding poverty eradication is unequal distribution of
wealth and income (figure II.3). Within-country inequality has generally increased across
the world in recent decades (United States of America, Congress of the United States,
Congressional Budget Office, 2011; Galbraith, 2012; Milanovic, 2012; Stiglitz, 2012;
Wilkinson, 2005; Wilkinson and Pickett, 2008). Owing to this inequality, the elasticity
of poverty reduction with respect to increases in total or average income (of the country) is
very low. For small improvements in poverty, large increases in the income of people in up-
per income groups are necessary. According to Simms, Johnson and Chowla (2010, p. 18)
and Woodward and Simms (2006, pp. 16-17), of every $100 worth of growth in world
per capita income, the poor received only $2.20, during 1981-1990. This figure decreased
to $0.60 during 1990-2001, because in the meantime, inequality had increased and the
poor’s share of income decreased further (figure II.4). As a result, to reduce poverty by $1,
it was necessary to raise global production and consumption by $166 during the latter
 Strategies for development and transformation 29

Figure
Figure II.3
II.3 Distribution of the global absolute gains in income, 1988-2008:
Distribution of global
more than half absolute
of those gains to
gains went in income, 1988-2008:
the top 5 per cent more than half of those
gains went to the top 5 per cent
Distribution (percentage) of gain

30
27
25
25

20

15

10
10

5 5
5 3 4 4
2 3 3
1 2 2 1
0 1 1 1 1
0
0 Source: Milanovic (2012).
5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
95
99
100
Ventile/percentile of global income distribution

Source: Based on Branko Milanovic, Global income inequality by the numbers: in history and now--an overview,
World Bank Working Paper No. 6259, November 2012, Washington, D.C.

Figure
Figure II.4
II.4 Share of the poor in per capita growth, 1981-2001
Share of the poor in per capita growth, 1981-2008
Percentage

4.5 1981-1990

4.0 1990-1999
1999-2008
3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0 Source: Woodward (2013).

$1.25 per day $2 per day

Source: Woodward (2013).

 30 World Economic and Social Survey 2013

decade. Furthermore, the fact that poverty is now concentrated in middle-income coun-
tries, instead of low-income ones, also shows the limits of the current approach to reducing
poverty (through raising total and average output).
The low elasticity of poverty reduction is problematic from another angle. It ex-
acerbates the current conflict between the human development (e.g., poverty reduction) goal
and the environmental protection goal. According to Simms, Johnson and Chowla (2010),
human beings are already consuming nature’s services 44 per cent faster than nature can
regenerate (to replenish resources consumed) and reabsorb (the waste generated). Ironically,
the poor suffer the most from the environmental stress resulting from this process.
The climate change impasse, the continuing challenge of human develop-
ment and the tension between current human development and environmental protection
efforts all demonstrate the pressing need for the integration of human development and
environmental protection goals in the post-2015 agenda.

Towards reintegration of human development

and environment protection goals
Integration of the The process may start with the movement of developed countries towards sustainable
Millennium Development consumption with equitable distribution (figure II.5, step (a)).9 How to determine what
Goals and the Sustainable constitutes sustainable consumption is an issue, and there is no consensus criterion in
Development Goals
is possible through a
this regard. However, given that, of current challenges, climate change has emerged as
consensus under which the most destabilizing, one may use per capita greenhouse gas emissions as the criterion
developed countries would of sustainability. This criterion is objective and has been well accepted as a relatively ac-
genuinely move towards curate measure.
sustainable consumption Pre-industrial data suggest that the atmosphere’s sustainable CO2 absorption
and developing countries
capacity (i.e., the absorption that does not cause a rise in CO2 concentration) is about
would assume a more
proactive role in dealing 5 gigatons. According to the United Nations Population Division projection (medium-
with global environmental fertility variant), the world population will stabilize at about 10 billion by 2080 (United
problems Nations, Department of Economic and Social Affairs, Population Division, 2011). This
suggests a little over 0.5 ton of CO2 (tCO2) as the sustainable level of annual per capita
emissions. However, expecting the per capita greenhouse gas emissions level to be brought
down to about 0.5 tCO2 may appear unrealistic at this stage. Therefore, some scholars,
based on the generally accepted goal of 450 ppm (parts per million) (instead of the pre-
industrial level of about 270 ppm), have put forward 3 tCO2 as the per capita annual
emissions level that needs to be achieved by 2050, assuming that the population will have
reached 9 billion in that year.
These sustainable levels of greenhouse gas emissions may be contrasted with
the current per capita emissions level of the United States (about 19 tCO2) and of most
other developed countries (about 10 tCO2). The differences illustrate the enormity of the
challenge faced by developed countries in climbing down to sustainable levels of CO2
emission. Yet, this is a challenge that needs to be accepted, if sustainability is to be attained
(figure II.5, step (b)).
Another often-suggested criterion of sustainability relies on the concept of the
ecological footprint, which measures the biological space (expressed in terms of area) re-
quired to produce the resources that a person consumes and to absorb the waste that his
9 See Islam (2012) for details.
 Strategies for development and transformation 31

Figure II.5 Integrating the Millennium Development Goals and Sustainable

Development
Figure II.5 Goals: means of integrating human development and
environmental
Framework protectionhuman
for integrating goals and making them
development universal
and environmental protection goals
and making them universal

(h)
Sustainable
greenhouse gas
emissions levels (g)
(b) emerge as a Developing
Developed universal goal countries agree
countries move to sustainable
towards greenhouse gas
sustainable emissions levels
greenhouse with scope for
gas emissions overshooting for
a certain period

(a) (f)
Developed (e) Developing
countries New “aspiration countries adopt
move towards model” emerges sustainable
sustainable consumption as
consumption an aspiration model

(i)
(c)
Developing
Developed
countries adopt
countries
more sustainable
accept human
human
(re) development
(d) development
goals
Human strategies
development
goals become
universal Source: UN/DESA,
Development Policy and
Analysis Division.

Source: UN/DESA, Development Policy and Analysis Division.

or her consumption generates (Global Footprint Network, 2010; Rees, 1992; Wackernagel,
1994). According to this measure, the bio-capacity of the earth is limited to 11.5 billion
hectares of biologically productive space (Woodward and Simms, 2006, p. 3). With the
current population standing at 6.4 billion, this implies only 1.8 hectares (often referred to as
global hectares (gha)) of “environmental space” per person. Yet, the ecological footprint (also
measured in gha) per person has already exceeded this limit and continues to increase.10
There is an enormous difference between the ecological footprints of developed
10 Put in another way, humanity’s total ecological footprint for 2007, for example, was equivalent to
1.5 planet Earths, implying that humanity uses ecological services 1.5 times as quickly as the Earth
can renew them. See the Global Footprint Network website (http://www.footprintnetwork.org/
en/index.php/GFN/page/data_sources/).
32 World Economic and Social Survey 2013

and developing countries (figure II.6). The average ecological footprint (per person) in
Europe in 2007 was 4.7 gha, compared with an actual availability of 2.9 gha, implying
that people in Europe are using up bio-space of other parts of the world. The same is true
for the United States, where the average ecological footprint is 8 gha, compared with avail-
able bio-capacity of 3.9 gha. In comparison, the average ecological footprint in developing
countries is 1.8 gha, which is equal to the global average (Woodward and Simms, 2006,
p. 3; Global Footprint Network, 2010).
Furthermore, the ecological footprint in developed countries seems to be rising
at a faster pace than in developing countries. For example, the ecological footprint in
developed countries increased from 3.8 global hectares in 1961 to 5.3 global hectares in
2007, representing an overall increase of 39 per cent. By contrast, the per capita ecological
footprint in developing countries increased from 1.4 global hectares in 1961 to 1.8 global
hectares in 2007, representing an increase of 28 per cent (Woodward and Simms, 2006,
p. 3, and global Footprint Network, 2010).11
Compared with the greenhouse gas criterion, the ecological footprint criterion
of sustainability has both advantages and disadvantages. One advantage is that it is more
comprehensive, reflecting a wider range of impacts of humans on the environment. The
disadvantage is that it is less precisely measured and hence is subject to disputes (Toye,
2012). In contrast, the greenhouse gas criterion is more narrowly focused, but more ac-
curately measured and hence less controversial.

FigureII.6
Figure II.6 Average ecological footprint per person in developed and
developing countries,
Average ecological 1961per
footprint andperson
2007 in developed and developing countries,
1961 and 2007
Global hectares

Developed countries
8 Developing countries

2
Source: Woodward and
Simms (2006); Global
Footprint Network, “Ecological
Footprint Atlas” (Oakland,
California, 13 October 2010). 0
1961 2007

Source: Woodward and Simms (2006), and Ecological Footprint Atlas 2010, Global Footprint Network.
11 In fact, between 1981 and 2001, the ecological footprint per person in developing countries
actually decreased (Woodward and Simms, 2006, p. 3).
 Strategies for development and transformation 33

However, both the greenhouse gas criterion and the ecological footprint cri-
terion reflect the same facts. First, the impact of human activities has already exceeded
the capacity of the Earth to absorb it. Second, this breach has been due mainly to un-
sustainable consumption in developed countries. Third, as developing countries try to
emulate the consumption patterns and levels of developed countries, the breaches in the
Earth’s planetary boundaries are becoming larger. For example, under current produc-
tion technology, if the whole world wanted to consume at the 2001 level of the United
States, resources equivalent to that of 15 planets like the Earth would be required (Simms,
Johnson and Chowla, 2010, p. 5).
Thus, genuine movement by developed countries towards sustainable consump-
tion will require sweeping changes in these countries. Until now, human development
has generally been understood to consist in reduction of poverty, mortality rates, gender
disparities in education, etc. The concept has therefore been perceived to be relevant to de-
veloping countries only. However, a shift towards sustainable and equitable consumption
will require significant changes in lifestyles and reorganization of the economy and society
in developed countries too. Taken together, these changes will make up another phase of
human development (figure II.5, step (c)). Understood in this way, human development
will become a universal goal, instead of something applicable to developing countries only
(figure II.5, step (d)).
Meanwhile, genuine moves towards sustainable and equitable consump-
tion by developed countries may give rise to a new “aspiration model” for developing
countries (figure II.5, step (e)), invoking a reciprocal response from the latter (figure II.5,
step (f)). With regard to climate change, the new context may make it possible for develop-
ing countries to accept sustainable greenhouse gas emissions levels as the ultimate goal,
with the scope for overshooting those levels for a while (figure II.5, step (g)). It may be
expected that the overshooting will not be as large in extent or for as long a period as
has been the case for currently developed countries. Thus, sustainable greenhouse gas
emissions levels may become a universal goal shared by both developed and developing
countries (figure II.5, step (h)). A similar process may unfold with regard to other envi-
ronmental goals.
On the human development side, the conventional goals of reduction of pover-
ty, mortality, gender disparity, etc., will continue to be very much a part of the agenda for
developing countries. However, these goals would now be pursued in a more sustainable
way (figure II.5, step (i)). To the extent that the new aspiration model promotes equitable
distribution in developing countries, it will become easier to achieve poverty reduction
and other human development goals.
Overall, figure II.5 presents a framework within which both human develop-
ment and environmental protection can become universal goals and be integrated, ending
the current separation between their domains of application. This framework can provide
the basis for the post-2015 agenda.
The ideas and the causal linkages presented in figure II.5 are abstract and very
general. It is necessary to make them more concrete. By considering in some detail the
changes that are necessary in developed and developing countries in order for the proposed
framework to be effective, the next two sections attempt to provide that concreteness.
34 World Economic and Social Survey 2013

Strategies for transformation in

developed countries

Role of technology in ensuring sustainability

While technology has a The fact that the consumption pattern in developed countries is unsustainable has been
key role to play in transiting
known for quite some time. However, efforts to move away from this unsustainable pat-
to sustainable consumption,
developed countries need tern have so far focused mainly on technology.
to make conscious shifts The technological route to sustainability was supported by the concept of
from material to non- “decoupling” of economic growth from resource requirements (Pearce, Markandya
material consumption, and Barbier, 1989; Ocampo, 2009). The concept has in turn been interpreted in two
from a private to a public
ways. “Relative decoupling” implies an increase in output with a “less than proportion-
mode of consumption, from
one-time to multiple use of ate” increase in the inputs required. “Absolute decoupling” implies an increase in output
products, and from use of with “no” increase in inputs required. While there has been some progress in achieving
non-biodegradable to use of relative decoupling, there is no evidence to support absolute decoupling (United Nations,
biodegradable material 2011b). The aggregate volume of both resources used and waste generated continues to
rise (Meadows and others, 1972; Meadows, Randers and Meadows, 2002; Turner, 2008).
The evidence, however, does not suggest that the importance of technology is
to be discounted. Earlier predictions of resource exhaustion have been invalidated by tech-
nological progress; and the advent of new technologies can serve as a “game changer” in
future, too. For example, breakthroughs in hydrogen fuel technology and in technologies
allowing extraction of carbon from the atmosphere to produce fuel can greatly reduce the
greenhouse gas content of consumption. However, simply waiting for such technologies
to arrive on the scene cannot be deemed a strategy (Brookes, 1990; Huesemann, 2003,
2004; Stern, 2007; United Nations, 2009). More importantly, the pace of development
and adoption of new technologies depend on societal demand. Once the society decides
on the kind of transformations that it wants to achieve, necessary technologies can develop
in response to the demand. On the other hand, without such societal demand, even tech-
nologies feasible in principle may remain undeveloped and unused (Jackson, 2010). It is
therefore important to ascertain the ways in which consumption patterns need to change
in order to achieve sustainability.

Shifts in consumption patterns

It may be anticipated that necessary changes in consumption patterns would move in some
general directions.12 One desirable change would entail movement away from material
towards non-material consumption. For example, reading e-books may be less greenhouse
gas-intensive than cutting down forests and filling up wetlands in order to construct large
houses, and commuting to work in sport utility vehicles (SUVs). It is instructive to note
that some shift towards non-material consumption is occurring even within the current
order of things, owing to the impact of Internet-based communications technology and as
a result of increased awareness of the environmental impact of human activities. However,
it is necessary to accelerate this shift through implementation of policies.

12 It should be noted in this regard that considerable variations across countries need to be accepted,
as a reflection of their different physical and social conditions.
 Strategies for development and transformation 35

Another desirable change would entail movement away from private to public
modes of consumption. For example, use of public modes of transportation is less greenhouse
gas-intensive than use of private cars. Similarly, use of a community pool is less energy- and
resource-intensive than use by individual families of the private pool in their backyard.
Movement in a third direction of desirable change would consist in the reversal
of the “one time use” mode of consumption. While this mode of consumption has its
usefulness in certain spheres, such as health care, questions of overuse may be raised even
here. In most other spheres, utilization of this mode of consumption is often unjustifiable,
as it leads to overuse of resources and over-generation of waste.
A fourth direction of desirable change would entail discouraging development
of spurious new models of essentially the same product, leading to unwarranted obsoles-
cence of products and hence to wastage of resources and to generation of excessive waste.
Another important direction of desirable change would require movement
away from non-biodegradable materials to either natural or biodegradable materials.
While much of the discussion of sustainability focuses on greenhouse gas emissions, the
threat posed to the environment by increased use of non-biodegradable plastic materials
also deserves attention. As figure II.7 demonstrates, while the weight per unit GDP of
conventional materials such as steel, timber and paper has decreased, that of plastic has
increased sharply. Easy availability of plastic has been one reason for the spread of the one
time use mode of consumption and also for the “spurious new models” phenomenon.
Most of the plastics in use are non-biodegradable. Even the ones that purport
to be biodegradable will take centuries to decompose and be absorbed by the Earth’s
natural elements. Until then, plastic wastes will exert their harmful physical and toxic

Figure
FigureII.7
II.7 Increased share of plastic in gross domestic product, 1900-2000
Increased share of plastic in gross domestic product, 1900-2000
Kilograms per dollar of GDP (indexed to 1940)
100
Plastic

10
Aluminum

Potash
Phosphate
1
Paper
Timber
Lead

Copper Steel
0.1

0.01
Source: United Nations
2000
1900

1905
1910
1915
1920
1925
1930
1935
1940

1945
1950

1960
1965

1970
1975

1980
1985

1990
1995
1955

(2011b).

Source: United Nations (2011).

36 World Economic and Social Survey 2013

chemical influence on the Earth’s soil and water (Kaeb, 2011). Plastic waste has become
a serious threat to inland water bodies, such as rivers and lakes, and even to the oceans
and marine environment. Hence, substitution of plastic by natural fibre and production
and use of rapidly decomposing plastic (in cases where natural substitutes are not avail-
able) would represent an important direction of change in consumption and production
practices post‑2015.
The above discussion of desirable directions of change in consumption pat-
terns is certainly not exhaustive. However, the general idea is clear: the changes have to
be such that fewer resources are required and less waste is generated. The question is how
such changes can be brought about.

Means of bringing about shifts in consumption patterns

Means of bringing about In a market economy, prices can play an important role in moving consumption towards
desirable changes in sustainability. It is well known that in the presence of externalities, market prices do not
consumption include
price corrections, taxes,
ensure efficient resource allocation and need to be corrected so as to internalize the exter-
subsidies, environmental- nalities. Thus, commodities and services involving high levels of greenhouse gas emissions
economic accounting, and need to be priced in such a way as to reflect the cost they impose through climate change.
emphasis on the strong Similarly, products and services having a high plastic content need to be priced so as to
concept of sustainability reflect the cost that the disposal of plastic waste imposes on the environment. In most
cases, necessary price corrections will have to take the form of taxes and subsidies.
There is strong evidence of the influence of price corrections on consump-
tion behaviour. For example, high gasoline taxes in European countries and Japan have
played a role in creating an environment where urbanization is more compact and public
transportation is more important than in the United States, for example, and, currently,
in China.
The necessity and importance of price correction are generally not denied.
The challenge lies in determining which prices are to be changed and by how much,
and in making these changes politically feasible. This in turn requires calculation of the
damages and benefits from a particular product or activity to nature and society that are
not captured by market prices. Environmental accounting therefore becomes important
(Burritt, Hahn and Schaltegger, 2002; Nordhaus and Kokkelenburg, 1999; Owen, 2008;
Pemberton and Ulph, 2000; Schaltegger and Burritt, 2000).

Environmental accounting
The report of the World Commission on Environment and Development (the Brundtland
Commission) entitled Our Common Future (1987), had defined sustainable development
as the process that “meets the needs of the present generation without compromising
the ability of future generations to meet their own needs” (World Commission on
Environment and Development, 1987). The concept inherent in this definition led to
two versions of sustainability: “strong sustainability”, which does not allow substitut-
ability between natural capital and produced capital (either physical or human), and
“weak sustainability”, which allows such substitutability. In either case, proper account-
ing (quantification and valuation) of natural capital and the services that it provides is
 Strategies for development and transformation 37

a precondition for determining whether sustainability is ensured. The United Nations

Environment Programme (UNEP) (2010a; 2011) has rightly noted that the world’s natu-
ral capital “deserves a seat at the table”.
Preservation of capital for future generations also requires paying more at-
tention to depreciation, in particular of natural capital (Kates, Parris and Leiserowitz,
2005). In fact, economists have shown that net concepts of output, such as net national
product (NNP), are better measures of welfare than the corresponding gross measures,
such as gross national product (GNP) (Asheim and Weitzman, 2001; Dasgupta, 1994;
Dasgupta, Kristrom and Maler, 1997; Weitzman, 1976, 2000, 2003). One reason for the
lesser prominence of the net measures of output, despite their theoretical optimality, is the
difficulties encountered in the computation of depreciation (Hartwick, 1990; Weitzman,
1997). These difficulties are more salient in the case of natural capital, which itself has yet
to be properly quantified and valuated (United Nations Environment Programme, 2005).
Fortunately, considerable progress has been made in this regard by the United
Nations Statistics Division (UNSD), the Division for Sustainable Development of the
United Nations Secretariat, UNEP and other organizations, and individual scholars.
Through its System of Environmental-Economic Accounting (SEEA) project, UNSD
has formulated guidelines for the quantification and valuation of natural capital and the
various non-marketed services that it offers (box II.1). An important post-2015 goal may
be to implement those guidelines and to make an estimation of natural capital and its
depreciation part of national income accounts.
The fact that, initially, many difficulties and disagreements will remain with
respect to the estimation of natural capital and its non-marketed services, is one reason
why the concept of strong sustainability needs to be upheld. Otherwise, natural capital
will quite possibly be underestimated and the decrease in natural capital will appear to be
more than compensated by growth in produced capital. It is therefore important, within
the context of encouraging implementation of environmental-economic accounting, that
such undesirable unintended consequences be prevented.

Shifts in consumption and quality of life

There is concern that efforts to make consumption sustainable will lead to a decline in the It is sustainable
quality of life. However, recent research indicates that the opposite may be true. Surveys consumption, instead of
of citizens of developed countries show that life satisfaction does not necessarily increase a relentlessly increasing
material consumption,
with increase in material consumption and that the non-material aspects of life, such as that can ensure greater life
family and community relationships, play a more important role in ensuring subjective satisfaction and, through a
well-being (figure II.8). Since the relentless drive to increase production and consumption redefinition of output and
of material goods has affected family and community relationships adversely, the increase the sharing of profit and
employment, can promote
in material consumption has failed to increase life satisfaction and instead, has resulted in greater stability of the
a “social recession” (Thompson and others, 2009). economy and society
Thus, shifts away from material to non-material, from private to public, and
from unequal to more equitable consumption, may actually improve the quality of and
satisfaction with life and provide a win-win solution to problems of both environmental
unsustainability and social recession (Lyubormirsky, Sheldon and Schkade, 2005).
38 World Economic and Social Survey 2013

Figure
FigureII.8
II.8 Factors influencing subjective well-being
Factors influencing subjective well-being

Community and friends Work fulfilment

(5 per cent) (2 per cent)
Don't know/other
Religious/spiritual life (1 per cent)
(6 per cent)

Money and
financial situation
(7 per cent)

Partner/spouse
A nice place and family
to live relationships
(8 per cent) (47 per cent)

Health
(24 per cent)
Source: Jackson (2009).

Source: Jackson (2009).

Shifts in consumption patterns and the implications for
employment and income
Concerns remain, however, with regard to the impact of the transformation proposed
above on the economic growth, employment and income of populations. Some scholars
have coined the expression “growth dilemma” to capture these concerns (Jackson, 2009).
This expression encapsulates the fact that, on the one hand, relentlessly increasing output
and consumption is not environmentally sustainable and that, on the other hand, without
growth, employment and income are likely to suffer and thus prove socially unsustainable.
Active research is under way on this issue (Simms, Johnson and Chowla, 2010; Jackson,
2009. However, several observations can already be made.
First, as the “transformation” of consumption is not the same as its “reduction”,
the focus needs to be on the “pattern” of consumption and not necessarily on its “level”.
Accordingly, the move towards sustainable consumption may not necessary imply a fall in
income and employment even in a conventional setting, which is not, however, to ignore
the fact that there are limits to material consumption arising from the very real physical
limitations of human beings. For example, there is a limit to the amount of food a person
can consume, the number of items of clothes he or she can wear, and the amount of dwell-
ing space he or she can effectively use. Beyond a certain point, an increase in consumption
along these lines may prove unnecessary or even harmful. Non-material consumption has
its limits as well, inasmuch as there are only 24 hours in a day. The number of e-books
that a person can read, the number of films downloaded from the Internet he or she can
 Strategies for development and transformation 39

view and the amount of time he or she can spend with family and friends are all limited.
Thus, the issue of reorganization of the economy and society to deal with a situation where
relentless quantitative growth of consumption is no longer desirable cannot be entirely
sidestepped (Daly, 1991, 1996; Patel, 2010).
Second, the above considerations also point to the fact that the current meas-
ures of output and income are not absolutes but rather social constructs of somewhat
recent origin. As they reflect a particular arrangement of the economy and society, it is
quite possible that those measures will be modified in the light of changing contexts and
demands (Layard, 2005; Stiglitz, Sen and Fitoussi, 2010).13
Third, it may be noted that a shift of consumption towards non-material items
may be complementary to an increase in productivity, because non-material consumption
may require more leisure time.
The answer to the question of the potential impact of proposed changes in
consumption on income and employment may therefore depend to a great extent on how
distribution and the organization of the economy and society are carried out. If produc-
tivity gains are shared widely, people may experience an increase in leisure time (to be
devoted to non-material consumption, and family, friends, community and society) with-
out suffering from a diminished income or unemployment. Thus, institutional changes
facilitating sharing of employment and profit may be helpful in this regard. Weitzman
(1984; 1985) and others have created models showing that a shared economy (where
workers share profits of enterprises) produces better outcomes with regard to both employ-
ment and productivity. Many business leaders are calling for a move away from profit and
towards making “three P” (namely, people, planet and profit) the driving force behind
business activities (Rahman, 2012). There is also a rising call for “social business”, under
which entrepreneurs will be motivated by the desire to earn social recognition rather than
private profit (Yunus, 2007; 2010). Implementing some of these concepts might be part of
the post‑2015 agenda. Strengthened political egalitarianism may be helpful in achieving
wider distribution of productivity gains and in facilitating the move towards more socially
motivated business operations.
Finally, it may be noted, in this connection, that transition to sustainable
development will require development and diffusion of many new technologies, and that
developed countries can provide leadership in this regard. Thus, the transition to sustain-
able consumption may lead to the expansion of employment and income even within the
traditional framework.
Having examined the broad directions of transformation necessary in devel-
oped countries for sustainability, we now turn to a discussion of the directions of changes
necessary for sustainability in developing countries.

13 In fact, some shifts from work and time devoted to the market to work and time devoted to non-
market pursuits (family, community and society) can be helpful in improving life satisfaction.
Devotion of more time to non-market activities may not imply unemployment per se but rather a
more satisfying use of time. Redefining GDP to include non-marketed output with imputed values
may ensure that the shifts mentioned above do not appear to signal a fall in a nation’s output level
(see below).
40 World Economic and Social Survey 2013

Box II.1
System of Environmental-Economic Accounting 2012*
The United Nations The System of Environmental-Economic Accounting 2012 (SEEA) provides a measurement framework
Statistics Division has within which to integrate environmental data in physical and monetary terms with economic data.
developed a System of SEEA organizes environmental information adopting a systems approach to stocks and flows, us-
Environmental-Economic ing definitions and classifications that are consistent with those of the System of National Accounts
Accounting (SEEA), which (SNA).a The strength of the framework lies in the derivation of high-quality aggregates, which are
helps to reveal connections comparable across countries, consistent over time and go beyond gross domestic product (GDP).
between the environment The System of Environmental-Economic Accounting 2012 Central Framework b (SEEA Central
and the economy. The Framework (CF)) provides the statistical framework for categorizing and analysing stocks of indi-
SEEA Central Framework vidual environmental assets such as water, mineral and energy resources, timber, fish, land and soil,
is ready for use by all the flows of resources into the economy, the exchanges of products within the economy and the
countries. SEEA has now return of residuals from the economy. At its forty-third session in 2012, the Statistical Commission
been extended to include adopted the SEEA Central Framework as the initial version of the international statistical standard for
Experimental Ecosystem environmental-economic
Box II.2 accounts, on a par with the SNA, and encouraged a flexible and modular
approach c
Accounting Figure 2 Regional and depending
to its implementation, on country priorities
global CO2-emissions and policy
per capita, from demands.
the production
and consumption perspectives, based on data compiled for 27 European Union
Regional
countriesand global CO2 emissions per capita, from the production and consumption
in 2006
perspectives, based on data compiled for 27 European countries in 2006
Tons of CO2 per capita

12

10 Direct by private
households
*  Prepared by the United
Nations Statistics Division.
**  Available from 8
http://unstats.un.org. Domestic
a  System of National industries
Accounts 2008 (United Consumption Final use
6
Nations publication, expenditure in region
Sales No. E.08.XVII.29).
b  United Nations
4
publication, forthcoming.
The pre-edited text, issued as
a white-cover publication.** Imports
Capital formation
c See Official Records of the 2
Economic and Social Council, Direct by private
2012, Supplement No. 4 Exports households
(E/2012/24), chap. I, sect. B, 0
decision 43/105. See also Consumption Production
the background document,
Source: Eurostat.
entitled “Implementation
strategy for the System of Source: Eurostat.
Environmental-Economic SEEA Applications and Extensions describes many indicators that may be generated
Accounting (SEEA)”.** through use of the SEEA Central Framework.d For example, the SEEA Central Framework may be used
d  See the background to calculate environmental efficiency (e.g., tons of CO2 generated per unit of GDP) and its evolving
document, entitled
pattern over time so as to evaluate decoupling trends. Through its defined system for incorporating
“System of Environmental-
Economic Accounting: use of resources by industry, SEEA also permits evaluation of resource use over time by different
SEEA Applications and industries and may be used to evaluate the generation of wastes discharged into the environment,
Extensions”.** by industry or sector. The figure above presents an application of data analysis through the SEEA
 Strategies for development and transformation 41

Box II.1 (cont’d)

for 27 countries of the European Union in 2006, using data obtained from Eurostat. It shows the
decomposition of CO2 emissions from the perspectives of production and consumption. Information
derived from this exercise can be helpful in studying many policy questions.
Water and energy have been identified as two priority areas in many countries. The System
of Environmental-Economic Accounting for Water (SEEA-Water)e and the System for Environmental-
Economic Accounting for Energy (SEEA-E)f are subsystems of the SEEA Central Framework and provide
a more in-depth discussion of the statistical framework for water and energy. These subsystems also e  United Nations
provide examples of indicators that can assist in tracking progress towards national policy goals in publication, Sales No. E.11.
these areas. XVII.12.**
The SEEA Central Framework is accompanied by the SEEA Experimental Ecosystem f  United Nations
Accounting, which provides a robust statistical framework for countries seeking to measure the con- publication, forthcoming.
tributions of ecosystems to economic activities and human well-being as well as track the condition g  See the background
of ecosystems, changes in conditions, and the impact of those changes on the provision of services.g document entitled “System
of Environmental-Economic
The SEEA Experimental Ecosystem Accounting builds on well-established disciplines, including na-
Accounting (SEEA)
tional accounting, economics and ecological sciences. A research agenda designed to advance the Experimental Ecosystem
methodology based on testing and practical experimentation in several countries was approved Accounting”.**
by the Statistical Commission.h Selected modules of ecosystem accounts, in particular those focus- h See Official Records of the
ing on the measurement of biodiversity, flows of ecosystem services and ecosystem conditions, will Economic and Social Council,
provide, in due course, useful indicators for policy analysis. 2013, Supplement No. 4
SEEA accounts and resulting indicators can provide information to decision makers on (E/2013/24), chap. I, sect. C,
progress in meeting goals and targets, including the movement towards sustainable consumption decision 44/104. See also
the background document,
and production. Those accounts and indicators will therefore be helpful in monitoring the achieve- entitled “Research agenda
ment of progress towards meeting the sustainable development goals that may be adopted through for SEEA Experimental
the post-2015 consultation process. Ecosystem Accounting”.**

Sustainable development strategies

in developing countries

A heterogeneous developing world

Developing countries have become more heterogeneous than they were when Agenda 21 Human development will
was formulated. Some of them have proved successful in achieving industrialization and remain the pre-eminent
have reached per capita income levels close to those of developed countries. Others have goal of developing
countries, and further
not been so successful, and the difference between their per capita income levels and those progress along existing
of developed countries has increased further. This diversity among developing countries dimensions of the
can be seen with regard to the achievement of the Millennium Development Goals as well. Millennium Development
While some countries have made remarkable progress in achieving the Goals, others have Goals will require a more
lagged behind. These varied performances with regard to achievement of the Goals could be equitable distribution of
endowments and income
a point of departure in discussions concerning future efforts for sustainable development.

Further progress in achieving the current

Millennium Development Goals
An important priority for developing countries post-2015 is therefore to consolidate the
progress made, to overcome the weaknesses that remain and to strive to achieve further
progress along the dimensions encompassed by the current Millennium Development
Goals. With regard to Goal 1, as noted earlier, even countries that have done well in terms
42 World Economic and Social Survey 2013

of the $1.25/day poverty line need to raise the income of their poor population further;
otherwise, they may easily fall back into poverty, particularly because $1.25/day is a very
low threshold for measuring poverty.
Second, in the post-2015 phase, it will be necessary to pay more attention to
quality issues than was possible during the current phase. For example, as noted earlier,
in an effort to achieve Millennium Development Goals 2 and 5, many countries made
significant progress in raising school enrolment. However, less attention was paid to the
quality of schooling. Quality issues are also important with regard to several other Goals,
targets and indicators.
Third, more attention must be paid to coherence and compatibility of achieve-
ment made along different dimensions. For example, improvement in schooling enrolment
rates needs to match job creation rates. Thus, greater policy coherence at the national level
must be an important characteristic of post-2015 development strategies.
The above discussion also suggests that it will be important in post-2015 strate-
gies to pay greater attention to variations in temporal characteristics (such as duration,
gestation lag, etc.) of various dimensions of human development efforts. For example,
cash transfer programmes can exert rapid effects on poverty rates, and enrolment rates
may also respond quickly to investments. However, for investment in education and health
to be reflected (through human capital development) in a country’s economic (growth)
performance, more time is required. It will therefore be important that a lack of return to
investment in education and health in the short run not become a source of frustration.
This also implies that much of the investment made by developing countries in health and
education during the current Millennium Development Goals period may actually yield
returns post-2015. The issues of policy coherence and gestation lags will be discussed in
more detail later in this chapter.

Human development through more equitable

distribution post-2015
An important lesson for post-2015 strategies learned from the current Millennium
Development Goals experience is that equitable distribution of income, wealth and access
to opportunities and resources helps greatly in achieving human development goals. This
lesson was clear from the low elasticity of poverty reduction with respect to the increase
in average and total income of a nation. Cross-country evidence provides additional sup-
port for this lesson. For example, among Latin American countries, Brazil has been more
successful in poverty reduction in part because it also succeeded in reducing inequality,
countering the general trend in most other countries of an increase in inequality.
Research shows that redistribution of only 1 per cent of the income of the
richest 20 per cent can provide as much additional income to the bottom 20 per cent of
the population as would be derived from per capita income growth rate of between 8 and
25 per cent in the majority of developing countries, including almost all countries of Latin
America and sub‑Saharan Africa (Woodward and Simms, 2006, p. 19).
The fact that inequality in China rose as it succeeded in reducing the poverty
rate does not negate the importance of equitable distribution for human development. It
is well known that China and several other East Asian countries started off with a highly
egalitarian distribution of physical and human capital which allowed the growth benefits
to be distributed more widely and led to poverty reduction. A comparison with India
 Strategies for development and transformation 43

illustrates the point more clearly. Since India did not begin with an egalitarian distribution
of its initial endowment, the impact on poverty reduction of its recent growth has been
less dramatic than in China. Furthermore, the experiences of both China and India show
that a highly unequal distribution is socially unsustainable. According to many observers,
rising inequality is one reason behind the spread of insurgency in some parts of India.
The unequal distribution observed in developing countries is often the result of
the imitation of the economic model and policies of developed countries. Moves towards
more equitable distribution by developed countries will therefore be helpful in facilitating
the switch towards greater equality in developing countries, too.

Development in a more environmentally constrained

post-2015 world
While emphasis on further progress along existing dimensions of Millennium Development Intense local consequences
Goals is necessary, it is important to recall that unless human development and environ- are another reason why
developing countries
mental protection goals are integrated, they will remain in competition, jeopardizing both
may foster environmental
sets of goals. It is therefore important that post-2015 strategies of human development protection
internalize and reflect more thoroughly the environmental protection goal.
First of all, developing countries cannot ignore global environmental prob-
lems, such as climate change. As a whole, they are no longer minor contributors to these
problems. Without their playing an effective role, it will no longer be possible to solve
global environmental problems.
At the same time, it is important to recall the heterogeneity of the developing
world. There are now vast differences across developing countries with regard to their
contribution to environmental problems and their potential role in resolving them. In
particular, fast‑growing large developing countries, such as China, India, Brazil and South
Africa, currently assume an important role in dealing with global environmental as well
as other problems. Their inclusion in the Group of Twenty (G20) reflects recognition of
this changed reality.
On the other hand, a vast number of developing countries remain as marginal
as before with regard to their role in creating global environmental problems and their po-
tential for resolving them. Yet, many of them are, ironically, the worst sufferers from global
environmental problems. Thus, many small island developing States, such as Maldives,
face submergence due to the sea-level rise caused by climate change. The same situation is
found in many least developed countries, such as Bangladesh, which is the world’s seventh
largest country in terms of population (about 160 million inhabitants).
Industrialization causes not only global environmental problems but also severe
local environmental problems. The processes that increase greenhouse gas emissions also
lead to other types of air pollution whose impact is more local. Similarly, countries that
engage in large-scale deforestation not only increase greenhouse gas emissions, but also
suffer from landslides, the filling up of water bodies, and the diminution of biodiversity,
etc. Rampant use and inappropriate disposal of plastic waste clog local drainage systems.
Chemicalization of agriculture damages local water bodies, fish stock and the aquatic envi-
ronment. Local adverse impact is another reason why developing countries may pay more
attention to the environmental problems in their post-2015 strategies, within the framework
of “common but differentiated responsibilities”.
44 World Economic and Social Survey 2013

The South’s initiatives towards sustainable development

Many countries of In fact, in recent years, many developing countries have been implementing initiatives
the South are going that are more advanced than those of developed countries. For example, Ecuador has
beyond developed
included the “rights of nature” in its 2008 constitution, thereby recognizing the inalien-
countries in promoting
sustainable consumption able rights of ecosystems to exist and flourish. Under this initiative, individual citizens and
and protecting the organizations can petition and seek remedy in case of the violation of those rights, and
environment. The the Government is obliged to offer such remedy (box II.2). Nature is thus considered a
cooperation of developed “subject” rather than, as in the traditional view, an “object”, to be conquered, occupied and
countries can make these
initiatives of developing
exploited—or, at best, managed. Ecuador’s declaration of the rights of nature is part of the
countries more successful general initiative towards fostering buen vivir (the good life), which encompasses an alter-
native view of development—one that, instead of focusing on material wealth, emphasizes
harmony in the community and with nature. On the basis of this alternative philosophy
of development, Ecuador has decided not to exploit the oil reserves in its Yasuni National
Park in order to protect the forests of the Amazon. Many other developing countries have
come forward with pioneering initiatives aimed towards sustainable development. Several
developing countries, such as Bhutan, Costa Rica, Maldives and Tuvalu, have announced
their goal of becoming carbon-neutral.14
The economics historian Alexander Gerschenkron coined the phrase “advan-
tages of backwardness” to conceptualize the phenomenon whereby late industrializing
countries benefit from technologies that were already developed by early industrializing
countries.15 This concept may also be used in arguing for the leapfrogging of developing
countries to more sustainable post-industrial consumption patterns and lifestyles.
There are several directions in which developing countries can go in making
use of these advantages. One option is related to the fact that, in many cases, develop-
ing countries face the task of “building anew” rather than modifying what has already
been built. A clear example in this regard is provided by urbanization. Many developing
countries need to create new urban spaces. In doing so, they can “plan from scratch”
and make their cities environmentally more sustainable. Many developing countries are
indeed doing just that. For example, China is creating brand-new “eco-cities”, which rely
on public transportation and renewable energy, achieve high degrees of conservation and
recycling and minimize carbon emissions and other waste. Similar initiatives can also be
seen in Brazil, Cameroon, the Republic of Korea, the United Arab Emirates, etc.
Another direction along which such leapfrogging may be possible is that of
promoting sustainable life practices. Members of the more environment-conscious segments
of society in industrialized countries often revert to the practices of pre-industrial societies,
albeit upgraded to a new level. They are returning to organic agriculture, non‑motorized
modes of transportation (walking and biking), use of non-fossil fuels as a source of en-
ergy, vegetable-oriented diets, use of natural fibres instead of non‑biodegradable ones, etc.
Developing countries can make creative use of their pre‑industrial heritage to promote these
features of sustainable living. This does not mean, however, that sustainable development has
to be a throwback to the past. Indeed, sustainable development has to be a forward-looking
post-industrial goal which builds on the positive achievements of the industrial revolution.
14 Other countries and areas that have pledged carbon neutrality include Iceland, New Zealand,
Norway, the Holy See and British Columbia.

15 Economists later used this conceptualization to explain the faster growth rates of many developing
countries compared with richer economies.
 Strategies for development and transformation 45

Box II.2
Sustainable development initiatives from the South
Many developing countries have been implementing significant initiatives aimed at promoting sus- Many developing
tainable development. Ecuador, for example, has included the “rights of nature” in its constitution, countries have
adopted in 2008. In declaring that nature and ecosystems have the right to exist and flourish, Ecuador been implementing
empowers its citizens to petition whenever those rights are violated, and obliges the Government to advanced initiatives
remedy such violations. aimed at promoting
Recognition of the rights of nature reflects the concept of buen vivir (the good life) which sustainable development
is now gaining popularity in many countries of South America. The concept, which originated among and protecting the
the indigenous peoples of South America, focuses on social, environmental and spiritual rather than environment. Ecuador’s
material wealth. It recasts the relationship between humans and nature as a bio-pluralistic one, and initiative to include the
emphasizes harmony with other people and nature. Buen vivir is, in a sense, a response to conven- “rights of nature” in its
tional development efforts, which often failed to improve the conditions of the common people constitution and Bhutan’s
and damaged the environment. It constitutes an alternative concept of development, suggesting initiative to develop the
that the good life can be achieved only in a community that includes nature. The constitution of gross national happiness
Ecuador embodies buen vivir in a set of rights, including the rights of nature. Proceeding from the index are good examples
concept of the rights of nature, Ecuador has decided to leave the oil reserves (valued at approximately
3.5 billion United States dollars) in its Yasuni National Park untapped in order to protect the forests of
the Amazon.
In a similar vein, the King of Bhutan, Jigme Singye Wangchuck, coined the term “gross
national happiness (GNH)” in 1972 as a more holistic measure of quality of life and social progress than
the conventional gross domestic product (GDP). Inspired by the idea, the Centre for Bhutan Studies
developed a survey instrument to measure the well-being of the population, and policies in Bhutan
must pass a GNH review.
The four pillars of GNH are the promotion of sustainable development, preservation and
promotion of cultural values, conservation of the natural environment, and establishment of good
governance. Support for the concept of GNH is not limited to Bhutan. In fact, so far, five international
conferences have been held on GNH, in Japan, Canada, Thailand, Brazil and Bhutan itself.
These initiatives show that developing countries are not waiting for developed coun-
tries to provide initiatives that promote sustainable development. Instead, based on their own herit-
age and experience, they themselves are offering “aspiration models” of sustainable development.

Success in leapfrogging of the above types will depend, to some extent, on the
cooperation of developed countries. First, as shown in figure II.5, by presenting a new
“aspiration model”, developed countries can encourage the leapfrogging process. Second,
developed countries can provide technologies and market opportunities necessary for this
process to be successful. For example, developing countries are eager to expand and switch
to non-renewable sources of energy. Developed countries can develop large-capacity and
cost-effective wind-power and solar-power technologies and make them available to devel-
oping countries on favourable terms. Similarly, developed countries can open their market
for organic produce from developing countries.
Diffusion of new energy technologies and expansion of organic agriculture in
developing countries may also help developed countries switch to sustainable consumption.
Thus, a virtuous cycle may unfold, confirming that achieving sustainable development has
to be a joint task of both developing and developed countries. However, as shown above,
the new aspiration model (based on sustainable consumption) does not necessarily have to
be derived from developed countries. Based on their heritage and experience, developing
countries are themselves offering aspiration models of sustainable development (box II.2).
46 World Economic and Social Survey 2013

Challenges of financing human and

sustainable development
As noticed above, overcoming the weaknesses in the achievement of the Millennium
Development Goals on which apparent progress has been satisfactory and accelerating
the pace with regard to the Goals on which progress so far has not been satisfactory
remain important tasks for developing countries and the world community. Research
shows that considerable financial challenges will have to be overcome if these tasks are to
be accomplished. Evidence drawn from country-level economy-wide modelling analyses
for 27 developing countries (with 18 from Latin America and 9 from Africa) suggests that
achieving the Millennium Development Goals by 2015 will require a significant increase
in public spending in developing countries.16 The analyses started with the establishment
of a “business as usual” scenario which projected the progress towards targets of the
Millennium Development Goals that would be achieved under the currently expected
pace of economic growth and existing public spending priorities and budget financ-
ing policies. This baseline scenario allows non-linearities in the effectiveness of social
spending in achieving various targets of the Goals. The results showed that, although all
27 countries would make substantial progress towards achieving the Goals even under the
business-as-usual scenario, only two countries (Chile and Cuba) would fully meet by 2015
a set of targets for primary school completion, reduction of child and maternal mortality
rates, and expanded coverage of drinking water and basic sanitation.
The modelling analyses also probed a number of policy scenarios under which
public spending was stepped up as much as needed to create a path towards meeting the
human development goals by 2015. From a comparison of these policy scenarios and the
business-as-usual scenario, it was found that 18 countries would need to raise their public
spending by 2 percentage points of GDP on average for each year until 2015. For some
countries, many of them least developed countries, this figure increases to about 7 per cent.
The modelling analyses were redone for six countries of Latin America and the
Caribbean to take into consideration the effects of the recent global financial crisis which
caused a growth slowdown in many countries, thereby requiring changes in the baseline
assumptions (see Sánchez and Vos, 2010). It was found that the additional public spending
requirements specifically owing to the crisis would range between 1.6 and 3.4 per cent of
GDP per year between 2010 and 2015. These spending requirements are on top of those
that were estimated for those six countries (table II.1).

16 These analyses were conducted by national researchers and government experts with technical
support from UN/DESA and the World Bank. At the core of the economy-wide modelling
framework used is a dynamic computable general equilibrium (CGE) model called Maquette
for MDG Simulations (MAMS). This model was developed originally at the World Bank and was
subsequently improved in numerous country-specific applications in collaboration with UN/DESA
and national experts (Lofgren, Cicowiez and Diaz-Bonílla, 2013). The main results of the modelling
analyses have been reported in Sánchez and Vos, eds. (2013) and Sánchez and others, eds. (2010)
who covered, respectively, 9 case studies of countries of Africa and Asia and 18 case studies of
countries of Latin America and the Caribbean.
 Strategies for development and transformation 47

Table II.1
Additional public spending requirements for meeting human development targets under
two alternative financing scenarios,a 2010-2015
Percentage of GDP
Additional public spending requirements
Baseline Foreign financing Domestic direct
public spendingb scenario taxation scenario
Argentina 3.71 1.30 1.40
Bolivia (Plurinational State of ) 4.30 2.00 2.80
Brazil 7.32 1.70 2.20
Chile 2.33 0.00 0.00
Colombia 6.48 1.40 1.70
Costa Rica 7.30 1.10 1.40
Cuba 11.40 0.00 -
Dominican Republic 2.50 3.30 3.70
Ecuador 3.38 1.30 1.50
Egypt 1.50 0.26 0.28
El Salvador 5.09 2.60 2.80
Guatemala 3.11 4.80 6.10
Honduras 6.83 4.30 4.60
Jamaica 5.21 1.30 1.40
Kyrgyzstan 4.88 7.83 8.21
Mexico 3.37 2.90 5.50
Nicaragua 5.65 3.60 4.70
Paraguay 4.92 2.00 2.10
Peru 1.18 0.90 0.90
Philippines 2.00 6.30 7.41
Senegal 7.18 8.04 -
South Africa 3.07 - 9.08
Tunisia 5.09 5.56 6.09
Uganda 4.24 6.73 9.21
Uruguay 5.34 2.50 3.30
Uzbekistan 6.28 4.76 4.62
Yemen 16.04 10.39 17.39
Source: UN/DESA, based on studies presented in Sánchez and others, eds. (2010) for countries of Latin America
and the Caribbean; and Sánchez and Vos, eds. (2013) for all other countries.
a  Referring to the difference between the estimate for public spending in primary education, health, and water
and sanitation under each of the financing scenarios and the estimate for the same spending under the baseline
scenario. Targets are set for net (on time) primary completion rate, child and mortality rates, and access of the
population to drinking water and basic sanitation.
b  Lack of detailed information on public spending in primary education, health, and water and sanitation, as
required to set up the modelling analyses’ accounting framework, may have caused baseline public spending to
appear low for some countries (Chile, Egypt, Peru and the Philippines).
48 World Economic and Social Survey 2013

The modelling analyses also yield results that help in examining and com-
paring the implications of alternative ways of financing the additional spending require-
ments mentioned above. The implications were gauged by the differential impact on GDP
growth. It was found that domestic financing, using, for example, direct taxation, tends
to yield a less positive impact on GDP growth than does foreign financing (except for
Uzbekistan). This result is due to the fact that increased government taxation decreases
private disposable incomes and hence aggregate domestic demand. Investors may foresee
lower net profits for the future and therefore choose to reduce investments. The crowding
out of private consumption and investment is what reduces GDP growth and employ-
ment, hurting in the process private provisioning of, as well as the demand for, social
services. This feedback effect requires the government to invest more to compensate for
the loss of private spending in social sectors in order to ensure achievement of the human
development goals, thereby incurring even more public spending.17 The “crowding in”
from using tax revenues to finance public expenditures and investments may not take full
effect in a short period of time, as explained further below.
There are trade-offs associated with foreign financing too. It is well known
that the inflow of foreign currency, whether from borrowing or from receiving grant aid,
may lead to real exchange-rate appreciation, harming the tradable sector. This will be
particularly the case when the amounts are spent on non-tradable social services, as would
be required to achieve the Millennium Development Goals. The appreciation of the real
exchange rate may result in what is often labelled as Dutch disease if it leads to resource
allocation away from export industries, resulting in an undesirable structural change en-
tailing the move away from dynamic production activities.18 This shift would typically be
difficult and time-consuming to reverse should other neutralizing and coherent policies
not be put in place at the same time.
Regarding investments made to achieve the Millennium Development Goals,
another important issue concerns the gestation lag for the fruition of these investments
in terms of higher GDP growth. This is particularly true for investments in the education
and health sectors. For example, children need to go through one or more educational
cycles and there needs to be improved child and maternal health care today for there to
be a pay-off in terms of healthier students and workers several years from now. Countries
will require more rapid and sustained economic growth to reduce the costs associated with
stepping up upfront public spending.
Important insights in this regard have also surfaced from another update of
the modelling analyses for 4 of the 27 developing countries (Bolivia (Plurinational State
of), Costa Rica, Uganda and Yemen) (see Sánchez and Cicowiez, 2013). These updates
also extended the time frame of simulated scenarios to determine long-term pay-offs of
Millennium Development Goals-related investments. First of all, it was found that, be-
cause of the trade-offs discussed above, the growth effects of the increased Millennium
Development Goals-related investment remain limited during the period up to 2015. The
GDP growth rate in these countries was found to increase by 0.6-1.8 percentage points
17 The scenario analyses also indicate that tax financing would still be less costly as compared with
the case where the government resorts to domestic borrowing in most cases, excluding countries
where the “demand compression” effect of higher direct taxation appears to be particularly strong.

18 Repayment of newly acquired loans under a foreign borrowing scenario may offset some of the
appreciation of the real exchange rate in the long term. The most important resource allocation
effects from the relative price shift will occur, however, in the short term before the economy has
had enough time to adjust.
 Strategies for development and transformation 49

per year. One possible explanation of this low growth effect is the long gestation period
required for education- and health-related investment to bear fruit. To examine this hy-
pothesis, the modelling analysis was used to trace growth effects over the period 2015-2030,
assuming that the public investment levels associated with the Goals (as a percentage of
GDP) reached in 2015, when a number of Goals are set to be achieved, remain unchanged
for future years.
It was found that GDP could experience an additional percentage point
growth of 0.2-1.0. This growth effect beyond 2015 is explained by the delayed impact
of human capital investments made before 2015. Enough time would have elapsed for
children to have gone through one or more educational cycles and for better education
and better health to have led to an improvement of human capital. As a consequence, the
employment of newly available human capital, which is also more productive, generates
additional GDP growth.
Furthermore, whether or not these potential additional GDP growth effects
were realized would depend on whether commensurate investments had been made in other
areas of the economy, creating enough employment opportunities for the better-educated
graduates entering the workforce. Lack of those investments may translate into higher levels
of unemployment for the most skilled workers, as shown in the figure below, using two
country cases as examples. This negative result points to the importance of complementary
investments in different dimensions and the policy coherence that can ensure it.
One additional challenge stands out, besides the cost in terms of additional
public spending requirements and the macroeconomic trade-offs associated with financing
it. This challenge arises from the issue of whether there is real access to, and the macroeco-
nomic feasibility of using, a particular source of finance. First of all, domestic financing
through taxation is not an easy option, because existing tax burdens on taxable parts of the
economy in many developing countries are already considered high. Second, the foreign
financing route is also becoming problematic. On the one hand, if this financing comes
in the form of loans, then it increases the debt burden. On the other hand, a continued
financial crisis in developed countries is making prospects of aid and concessional financ-
ing for developing countries increasingly limited and uncertain.
In sum, the challenges of financing human development (and sustainable
development in a broader context) are based on the following concerns: (a) pursuing de-
velopment goals might demand the investment of significant public resources and have
macroeconomic consequences; (b) future potential crisis and sluggish growth could slow
down development progress, especially if expected long-term pay-offs of past development
investments are offset; (c) commensurate investments should take place in other areas of
the economy, creating enough employment opportunities for the better-educated gradu-
ates entering the workforce, in order for the past development investments to bring about
additional productivity improvement effects in the long term; (d) countries will need fiscal
space to pursue human (as well as sustainable) development goals and will have to carefully
assess their options in order to establish the feasibility or optimality of a financing strategy.
Unfortunately, the world confronts a highly constrained financing situation—
one where developing as well as developed countries require a huge amount of upfront
investment in order to realize the sustainable development emphasized at the United
Nations Conference on Sustainable Development in 2012. As indicated in chapter V,
mitigation policies designed to curb carbon emissions through the adoption of renew-
able sources of energy will also require substantial stepping up of new investments. And,
50 World Economic and Social Survey 2013

given existing financing constraints and challenges, accelerated investments for human
and sustainable development could overstretch countries’ public finances, with potentially
pernicious macroeconomic consequences.
Probably, most developing countries will have to consider a mixed financing
strategy for their human and sustainable development goals. In most cases, the balance
in this mix should be tilted towards broadening the domestic tax base, in view of the fact
that public debt levels are already high (restricting the scope for domestic borrowing) and
prospects regarding foreign aid are not bright. For a number of countries (particularly least
developed countries), foreign financing will be needed because they have no real scope for
further raising tax revenues. As a consequence, developed countries and the world commu-
nity will have to arrange adequate international financing for these countries so as to ensure
that they make further progress in achieving human development in a sustainable way.

A new type of global cooperation

A new type of global Global cooperation in the post-2015 era has to switch from the current framework, which
cooperation, based on is based predominantly on the donor-recipient relationship, and move to a new foundation
solidarity, is needed
of solidarity. Accordingly, global governance must become more democratic.
The role of the Millennium Development Goals in national development ef-
forts depended to a large extent on the degree of a country’s dependence on ODA (Toye,
2012; Vandermoortele, 2012). Over time, however, the importance of ODA for develop-
ing countries has been decreasing. As a result, there is now less scope for adapting the
post-2015 agenda to the donor-recipient framework (Vandermoortele, 2012). Instead, the

FigureII.9
Figure II.9 Unemployment rate of the most skilled labour under the baseline
scenario and Millennium a
Unemployment rate of theDevelopment Goals-financing
most skilled labour scenario,
under the baseline scenario
Costa
and Rica and Yemen,
Millennium 2005, Goals-financing
Development 2015 and 2030 scenario,a Costa Rica and Yemen,
2005, 2015 and 2030
Percentage

Business-as-usual scenario
8.0 Goals scenario
7.0

6.0

5.0

4.0
Source: Sánchez and
Cicowiez (2013).
3.0
a  Public spending is scaled
up as necessary to meet a set
2.0
of Millennium Development
Goals targets and is financed 1.0
through foreign sources in the
Goals-financing scenario. 0.0
2005 2015 2030 2005 2015 2030
Costa Rica Yemen

Source: Sánchez and Cicowiez (2013).

a Public spending is scaled up as necessary to meet a set of Millennium Development Goal targets and is
financed through foreign sources in the Goals-financing scenario.
 Strategies for development and transformation 51

framework has to be one of “solidarity”. The framework proposed in figure II.5 shows how
this solidarity may be generated and utilized.
The traditional imbalances between various groups of countries are shifting
with changes in economic strength (Toye, 2012). Often, as noted above, more of the
advanced initiatives for achieving sustainable development are created by developing
countries. Perhaps, through this changed reality, the old ways of thinking will ultimately
be overcome, which will pave the way for cooperation among all countries of the world on
the basis of solidarity.
 Chapter III
Towards sustainable cities

Summary
yy Numerous challenges threaten the ability of cities to become viable pillars of sustain-
able development. Unequal access to, and inefficient use of, public services, as well
as financial fragility and the harm inflicted by natural hazards, demand an integrated
and coordinated response at the local, national and international levels.
yy The predominance of small- and medium-sized cities provides an opportunity to
invest in green infrastructures, bypassing old energy technologies, and in social
deve­lopment, before social inequities become unsustainable.
yy Rural development is critical for an integrated approach to sustainability and for
reducing poverty. Ensuring wider and inclusive access to public services can reduce
rural/urban inequalities, disaster risk and food insecurity, as well as strengthen net-
works between cities and villages.
yy Building sustainable cities requires investment in (a) renewable energy sources, (b) ef-
ficiency in the use of water and electricity, (c) design and implementation of compact
cities, (d) retrofitting of buildings and increase of green areas, (e) fast, reliable and
affordable public transportation and (f ) improved waste and recycling systems. Cities
in poor countries need resources to support green technology transfer, and capac-
ity development, and to improve access to soundly constructed housing, water and
sanitation, electricity, health and education.

Introduction
Cities and towns have become the primary human living space. Since 2007, more than
half of the world’s population has been living in urban areas and the figure is estimated to
exceed 70 per cent by 2050. This is a hallmark of the transformation of humans’ economic
base and social structure, inasmuch as, previously, populations lived and worked primarily
in rural areas.
Cities can provide many socioeconomic benefits. By concentrating people,
investment and resources (a process known as agglomeration), cities heighten the pos-
sibilities for economic development, innovation and social interaction. More specifically,
cities also make it possible to lower unit costs so as to provide public services such as water
and sanitation, health care, education, electricity, emergency services and public recrea-
tional areas (Polèse, 2009; Satterthwaite, 2010). However, this requires a functioning city
54 World Economic and Social Survey 2013

government able both to ensure that such benefits are realized, and to adopt a sustainable
framework that encourages the city’s growth within ecological limits. Along these lines,
cities also face challenges that threaten their efforts to achieve sustainability, for example,
through improvement of access to, and efficiency in the use of, public services, as well as
reduction of their ecological footprint and financial fragility, and the building of resilience
against the adverse impact of natural hazards.
The present chapter recommends an integrated strategy for making cities thriv-
ing centres of sustainable development and innovation. It starts by assessing what a city is,
the scale and speed of urbanization in recent decades, and the main trends and projections
of urban growth across regions. The trends and projections analysed serve as an introduction
to the conception of future urbanization as a process that can enhance the benefits of cities,
while reducing the threats to a more balanced and sustainable development. The evolution
of the concept of urban sustainability is described and a framework is proposed based on
four pillars: economic development, social development, environmental management and
effective urban governance. The following section examines relevant challenges associated to
the fulfilment of those objectives by different groups of countries. The last section examines
urbanization through the lens of the investment opportunities that addressing those chal-
lenges involves. A proposal put forth for an integrated set of investments in infrastructure,
public services and capacity development is complemented by an examination of relevant
world experiences associated with urban sustainability at the sectoral level (e.g., disaster risk
reduction, housing and green infrastructure) as well as a policy framework for a sustainable
financing of cities.

The city and main urbanization trends

There is no uniform definition of what constitutes a city, given the diversity of urban
realities around the world. Every country defines cities according to its own criteria. It
should also be noted that gaps in and measurement issues connected with urban data limit
the accuracy of projections and international comparisons of levels of urbanization and
sizes of city populations. Box III.1 discusses the different criteria used in defining cities
and data issues.
Cities are diverse in terms of their size, structure, spatial form, economy,
wealth, local resources availability and ecological impact. According to population size
and conditions, urban centres can be, e.g., small, medium, large or mega. The popula-
tion of an urban centre can range from a few thousand to over 10 million people or
more. According to relevant studies, “small urban centres” have a population less than
or equal to 500,000 people; medium urban centres, a population between 1 million and
5 million people; and mega urban centres, a population of 10 million or more (United
Nations, Department of Economic and Social Affairs, Population Division, 2012; Dobbs
and others, 2011b). For statistical comparison of urban centres’ sizes and development,
this chapter uses the categories along with “large urban centres” defined as agglomerations
with 5 million inhabitants or more.
By 2050, the world urban
population could reach
6.25 billion, 80 per cent The scale and scope of urbanization
of whom would live in
developing regions, and At the start of the twentieth century, just 16 cities had 1 million or more people, with the
concentrated in cities of majority located in advanced industrialized countries (Montgomery and others, 2004). By
Africa and Asia 2010, there were 449 cities with 1 million people or more, of which three quarters were
 Towards sustainable cities 55

Box III.1
Definition of a city and data issues
The majority of countries use a single characteristic or a combination of administrative, population
size or density, economic and urban characteristics (e.g., paved streets, water-supply systems, sewer-
age systems and electric lighting) to define a city. The lower limit above which a settlement can be
considered urban varies greatly, between 200 and 50,000 inhabitants, which can give rise to error
when comparing urban populations (and urban areas) in different countries. For example, if India’s
national authorities would classify populations of 5,000 or more as urban, the country would be
considered predominantly urban and not rural. In Angola, Argentina and Ethiopia, all settlements
with 2,000 people or more are classified as urban. In Benin, only areas with 10,000 people or more
are considered urban. In Botswana, an agglomeration of 5,000 people or more where 75 per cent of
the economic activity is non-agricultural can be considered urban (Cohen, 2006). Certain countries
define the urban population as comprising people who live within certain administrative centres or
municipios (El Salvador) or under the jurisdiction of municipality councils (Iraq). Others define cities as
places with a municipality, municipal corporation, town committee or cantonment board (Bangladesh
and Pakistan).
The population of any urban centre is influenced by how its boundaries are set—for
instance, are they determined by the built-up area or are peri-urban areas which have little or no
urban development included within them? The size of a city can be made significantly larger if fringe
populations are included in official statistics; many cities have boundaries set to include the city
and large areas around the city which may include small towns and large rural populations. Most
large cities have more than one boundary—boundaries for the central city, for instance, for an entire
metropolitan area, or for a wider planning region which often includes many rural settlements. In
general, countries’ urban populations are defined as the residents whose main source of income is
not from agriculture or forestry (Satterthwaite, 2010).
Inadequate attention paid to data limitations has led to misconceptions regarding
urban trends which can ultimately distort urban policies. Urban population projections often do
not include high- and low-variant estimations, which are typical of world population projections
published by the United Nations (Satterthwaite, 2007; United Nations, Department of Economic and
Social Affairs, Population Division, 2012). Moreover, the traditional urban/rural dichotomy has become
increasingly inadequate for distinguishing between urban and rural settlements. Increased trade,
labour mobility and innovation in communications have spread urban functions and influence over
wide geographical areas, including rural ones. In parts of Asia and the Pacific, for example, intense
economic activity in the intersection between urban and rural areas has blurred differences (Cohen,
2006). Yet, in the case of countries in Latin America and the Caribbean, censuses and surveys that
consider the urban/rural dichotomy are still valid since they persistently indicate social inequalities
subsisting between rural and urban areas (United Nations, Economic Commission for Latin America
and the Caribbean, 2012). Still, some of the most profound social inequalities are seen within cities or
within nations’ urban populations.
To improve the consistency and comparability of data on urban populations across
countries and over time, the United Nations, Department of Economic and Social Affairs, Population
Division (2012) uses two auxiliary concepts: (a) urban agglomeration, which refers to “population
contained within the contours of contiguous territory” inhabited by, e.g., 750,000 inhabitants or more
and (b) metropolitan region, which includes both the contiguous territory and “surrounding areas of
lower settlement density” which are under the direct influence of the city through frequent transport,
roads, commuting and so forth (p. 7). In addition, there is a potential for research on urban databases
and data-collection mechanisms to support local policy, planning and investment decisions.
In general, caution is recommended regarding the interpretation and comparison of
urban population statistics between nations, owing to different official criteria for defining urban
areas, and setting city boundaries, and, in some cases, to the lack of census data. Source: UN/DESA.
56 World Economic and Social Survey 2013

located in developing countries (United Nations, Department of Economic and Social

Affairs, Population Division, 2012).
Pursuant to the caveats associated with urban population projections noted
in box III.1, the following estimations should be interpreted as guidance only. During
2000-2050, developing regions could add 3.2 billion new urban residents, a figure
larger than the world population in 1950 and double the urban population added dur-
ing 1950-2000. By 2050, the world urban population could reach a total of 6.25 bil-
lion, 80 per cent of whom may be living in developing regions, and concentrated in
cities of Africa and Asia. It is possible that African urban centres would house over
1 billion people by 2050, which would be about 3 times the figure for the urban popula-
tion of North America, twice the figure for the urban population of Latin America and
the Caribbean or Europe, and comparable to the figure for China’s urban population at
that time. These trends would challenge the institutional capacities of many of these cities
to provide decent employment, public services and a clean environment, especially for
those that already have sizeable—and growing—numbers of underserved residents living
in slums, under unsafe conditions (Satterthwaite, 2007).
In the next 10-15 years, for Urban population growth is expected to continue setting the pace of world
the first time in history, the population growth, and in the next 10-15 years, for the first time in history, the world rural
rapid pace of urbanization population is expected to decline (figure III.1).
would also usher in the
absolute decline of the Globally, a net 1.3 billion people was added to small urban centres during
world rural population 1950-2010, more than double the number of people added in medium (632 million) or
large urban centres (570 million).1 This trend is important, since different sizes of urban

Figure III.1 Population trends and projections, 1950-2050

Population trends and projections, 1950-2050
Millions of persons

10,000 Global population 80

Percentage share of global urban population

9,000 Global rural population
70
Share of urban population
8,000 (secondary axis)
60
7,000
50
6,000

5,000 40

4,000
30
3,000
20
2,000

1,000 10
Sources: United Nations,
Department of Economic 0 -
and Social Affairs, Population
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050

Division (2011; 2012).

1 United
Sources: During a similar
Nations, period, only
Department 40 million
of Economic andpeople
Socialwere added
Affairs, to urbanDivision
Population settlements with
(2012a; populations
2012b).
between
Note: A mid-variant 500,000was
projection andavailable
1 milliononly
people.
for the global population.
 Towards sustainable cities 57

settlements can affect the levels of provision of services needed to sustain growing popula-
tions. The challenges and policy implications of the likely continued predominance of
small urban centres and the rising significance of middle and large urban centres in the
next 15 years are noteworthy and will be further analysed below.

Diverse paths and paces of urbanization

There is considerable regional diversity in the patterns of urbanization and an even greater The patterns and paces
variation in the level and pace of urbanization of individual countries. For example, on of urbanization have been
diverse within developing
average more than three quarters of the Latin America and the Caribbean region is highly
regions and between
urbanized, whereas least developed countries and landlocked developing countries are still developing and
predominantly agricultural—although their path towards urbanization is expected to ac- developed regions
celerate in the next decades (table III.1). The case of the small island developing States is
worth mentioning because they have been able to achieve a balance through a mid‑level ur-
banization path (60 per cent share) with economies that are based on industry and services.
On average, nearly 80 per cent of the population in developed regions resides By and large, urbanization
in urban centres, contrasting with an average share of urban populations in Asia and in developing countries has
followed a brisker pace and
Africa of less than 50 per cent. At the country level, while urbanization in some African
has often been concentrated
nations such as Burkina Faso, Burundi, Ethiopia and Malawi can be as low as 20 per cent, in capital cities
the urban population represents over 60 per cent of the total population in South Africa.
Moreover, urban populations in low-income nations are highly concentrated in a very
small number of cities, which also contrasts with the urbanization pattern in developed
regions. For example, 75 per cent, 60 per cent and 47 per cent of the urban populations
in Sierra Leone, Kenya, and Guinea are concentrated in Freetown, Nairobi and Conakry,
respectively (Grübler and Buettner, 2013; United Nations, 2010b).

Table III.1
Regional figures for share of urban population, 1975, 2000, 2012, 2025, 2050
Percentage
Country/region 1975 2000 2012 2025 2050
World 37.7 46.7 52.6 58.0 67.2
More developed regions 68.7 74.1 78.0 81.1 85.9
Less developed regions 27.0 40.1 47.1 53.6 64.1
Africa 25.6 35.6 39.9 45.3 57.7
Asia 25.0 37.4 45.7 53.1 64.4
Europe 65.2 70.8 73.1 76.1 82.2
Latin America and
the Caribbean 60.7 75.5 79.4 82.5 86.6
North America 73.8 79.1 82.5 85.0 88.6
Australia and
New Zealand 85.4 86.9 88.9 90.3 92.4
Oceania 71.9 70.4 70.7 71.1 73.0
Least developed
countries 14.7 24.3 28.9 35.2 49.8
Small island
developing States 45.8 55.5 59.5 62.4 67.3
Landlocked
developing States 22.2 26.1 28.3 32.6 45.6
Source: United Nations, Department of Economic and Social Affairs, Population Division (2012).
58 World Economic and Social Survey 2013

Yet, “late urbanization” in Asia and Africa is expected to gain speed and con-
centrate the majority of the additional 3 billion urbanites during 2010-2050. Similarly,
the number of urban agglomerations (750,000 inhabitants or more) and the number of
inhabitants per agglomeration are expected to grow significantly in Asia and Africa by
2025 (United Nations, Department of Economic and Social Affairs, Population Division,
2012). It is expected that over 80 per cent of the urban population added in the next
15 years will be found in middle-income countries such as China, India, South Africa,
Nigeria, Indonesia and Pakistan (ibid.).

Changing patterns of urban settlements

Even though small urban Over 50 per cent of the world’s urban populations lived in settlements with 500,000 people
settlements will still retain or less by 2010. Although their significance will remain, the share will have been reduced
their predominance in
to 42 per cent by 2025 (United Nations, Department of Economic and Social Affairs,
2025, the importance of
medium and large urban Population Division, 2012). Medium cities (those with 1 million - 5 million people), on the
settlements will continue to other hand, will increase their share of the urban population, from 21 to 24 per cent over
grow at the global level a similar time interval. The share of the urban population in large cities (those with more
than 5 million people), including megacities, will grow the most, from 17 to 22 per cent,
with an absolute increase of more than 410 million people. By 2010, megacities of 10 mil-
lion inhabitants or more contained only 10 per cent of the global urban population (ibid.).
All of the types of growing cities will be located largely in low- and middle-
income countries. In many developing countries, the main challenge is to provide un-
derserved urban residents, including populations in large cities, with affordable access
to adequate public services and job opportunities. Inhabitants in poor urban settlements
typically reside on the outskirts as well as within large cities without adequate access to
piped water, waste disposal, electricity and good schools. Evidence also suggests that rates
of poverty and infant and child mortality can be high in small and large cities, often
indicating an inadequate access to public-health facilities and the lack of political will to
invest in them (Mitlin and Satterthwaite, 2012).
Cities in low-income countries may often lack the institutional capacity to
manage growing populations. Although some national Governments in developing
countries have begun to decentralize service delivery and revenue-raising to regional and
local levels of government, lower tiers of urban government often do not have enough re-
sources and adequate capacity to manage, e.g., health, education and poverty programmes
(Montgomery and others, 2004).

Is there a twin path between urbanization and

economic growth?
The economic strength of countries lies in cities; in fact, urban gross domestic product
(GDP) represents about 80 per cent of world GDP (Grübler and Fisk, 2013). Cities have
been pivotal centres for economic growth, employment creation, innovation and cultural
exchange. Cities in many developing countries (e.g., Bangladesh, Brazil, China, Honduras,
India, Nigeria, Peru and South Africa) concentrate the core of modern productive activi-
ties and are the areas par excellence where income-earning opportunities are to be found
(Satterthwaite, 2007). Cities are also the centres where women enjoy the highest labour
participation, health access, literacy rates and upward social mobility (Cohen, 2006).
 Towards sustainable cities 59

Nonetheless, urban population growth has outpaced economic growth as well

as the needed improvement of competence and institutional capacity of city governments
in many developing countries, which contrasts with the closer correlation found in de-
veloped countries (figure III.2). Thus, for an equivalent level of urbanization, the level of
income per capita in developing regions is several times lower. This trend, which might be
explained partly by different criteria used for defining urban centres, has implications for
the actual capacities of poor countries to build sustainable cities. Figure III.2 illustrates
this trend in relation to the urbanization of the region of Latin America and the Caribbean.
Figure III.2
Figure III.2
Urbanization and economic growth, developed regions and Latin America and the Caribbean, 1970-2010
Urbanization and economic growth, developed regions and Latin America and the
Caribbean, 1970-2010
Developed regions, 1970-2010
Urban population as percentage of total population

90
2010
80 1980 1990 2000
1970
70
60
50
40
30
20
10
0
0 5000 10000 15000 20000 25000 30000 35000

GDP per capita at constant 2005 prices in United States dollars

Latin America and the Caribbean, 1970-2010

Urban population as percentage of total population

90
80 1980 2010
2000
70
1990
60
1970
50
40
30
20
10 Sources: UN/DESA; United
0 Nations (2012a; 2012b).
0 1000 2000 3000 4000 5000 6000 Note: Data for each country
have been aggregated to
GDP per capita at constant 2005 prices in United States dollars obtain regional figures.

Sources: UN/DESA; United Nations (2012a; 2012b).

Note: Data for each country have been aggregated to obtain regional figures.
60 World Economic and Social Survey 2013

In particular, the urbanization process in least developed countries or coun-

tries of sub‑Saharan Africa may have occurred with negative or almost no economic
growth (figure III.3), which ultimately implies an increased precariousness of urban life.
Population in slums almost doubled in sub-Saharan Africa between 1990 and 2010, ris-
ing from 103 million to 200 million (United Nations Human Settlements Programme
(UN-Habitat), 2010). Even so, Satterthwaite (2010) recommends caution in the inter-
pretation of the negative correlation between economic growth and urbanization in sub-
Saharan countries because of data shortcomings, which can prevent accurate measurement
of urbanization patterns (see, also, Potts, 2006).

Figure III.3 GDP per capita and urban share of total population, sub-Saharan
Figure
GDP per
Africa andcapita
leastand urban share
developed of total1970-2010
countries, population, sub-Saharan Africa and least
developed countries, 1970-2010
Urban population as percentage of total population

40
2010
35
2000
30
2010 1990
25 2000 1980
20 1990
1970
1980
15
1970
10
Sub-Saharan Africa
5 Least developed countries
Sources: UN/DESA; United
Nations (2012a; 2012b).
0
Note: Data for each country
0 400 800 1200
have been aggregated to
obtain regional figures. GDP per capita at constant 2005 prices in United States dollars

Cities are constantly evolving as a result of dynamic processes heightened

by Sources:
population
UN/DESA;mobility, natural
United Nations (2012a;population
2012b). growth, socioeconomic development, envi-
Note: Data for each country have been aggregated to obtain regional figures.
ronmental changes and local and national policies. The trends and projections described
above serve as the basis for an introduction to the concept of future urbanization as a
process that can enhance the benefits and synergies of cities, while reducing the threats to
a more balanced and sustainable development.

Within a framework of
four pillars, effective A framework for sustainable cities
urban governance
can be combined with It has been suggested that the building of a “green” city is equivalent to the building of
the achievement of sustainability (Beatley, ed., 2012). Many countries are planning and engaged in building
social and economic
development and green cities and “eco-cities” as starting points for the building of sustainable develop-
effective environmental ment. Yet, it is important to understand cities’ sustainability as a broader concept which
management integrates social development, economic development, environmental management and
 Towards sustainable cities 61

urban governance, which refers to the management and investment decisions taken by
municipal authorities in coordination with national authorities and institutions. In this
regard, chapter II provides guidelines for possible sustainable development paths for coun-
tries at different stages of development.
The 1987 report of the World Commission on Environment and Development,
also known as the Brundtland Commission, defined sustainable development as develop-
ment that meets the needs of the present, without compromising the ability of future genera-
tions to meet their own needs. The report included a chapter on urban issues. In 1991, the
United Nations Centre for Human Settlements (UNCHS) Sustainable Cities Programme
attempted to define a sustainable city as one “where achievements in social, economic and
physical development are made to last” (United Nations Human Settlements Programme
(UN-Habitat), 2002, p. 6). However, this definition was still too general and neglected the
fact that a sustainable city must have a low ecological footprint and reduce risk transfer
(economic, social and environmental) to other locations and into the future (Rees, 1992).
The concept of sustainable cities and its links with sustainable development have
been discussed since the early 1990s.2 Sustainable cities should meet their “inhabitants’
development needs without imposing unsustainable demands on local or global natural
resources and systems” (Satterthwaite, 1992, p. 3). In this sense, consumption patterns of
urban middle- and high-income groups as indicated in chapters I and II are responsible for
the use of a significant portion of the world’s finite resources and contribute significantly to
the production of polluting wastes. Sustainable development should focus on better living
and working conditions for the poor, including affordable access to, and improvement of,
housing, health care, water and sanitation, and electricity.
The first approximations to a concept of city sustainability noted above were re-
flected in the 1992 Rio de Janiero Conference on Environment and Development (United
Nations, 1993) attended by more than 178 Governments. The 1992 Rio Declaration inte-
grated the economic, social, environmental and governability dimensions of sustainability
and argued for the eradication of unsustainable patterns of production and consumption,
the eradication of poverty, and the role of the State, civil society and international com-
munity in protecting the environment.
Another outcome of the United Nations Conference on Environment and
Development was Agenda 21 (United Nations, 1993), which aimed at preparing the world
for the challenges of the twenty-first century. Agenda 21, which was built upon at subse-
quent United Nations conferences, defined sustainability in the context of economic, so-
cial, environmental and governance issues, noting the decisive role of authorities and civil
society at the local, national and international levels for the implementation of sustainable
development policies. Yet, Agenda 21 did not explain how the concept of sustainability
could become the basis for the creation of sustainable cities.
The Habitat Agenda (United Nations, 1997), adopted by the United Nations
Conference on Human Settlements (Habitat II), held in Istanbul from 3 to 14 June 1996,
echoed the concerns expressed in Agenda 21 with respect to the multidimensionality of
development, and discussed urban sustainability as requiring a harmonious integration
of economic, social and environmental issues. At this summit, nations reported on the
progress towards achieving the sustainability of their cities. Yet, this Agenda still needed
to include climate change as one of the main threats to building sustainable cities and to
development in general.
2 See, for example, Environment and Urbanization, vol. 4, No. 2 (October 1992).
62 World Economic and Social Survey 2013

At the first session of the World Urban Forum convened at the headquarters of
the United Nations Human Settlements Programme (UN-HABITAT) in Nairobi from 29
April to 3 May 2002, an in-depth discussion was held on urbanization in the context of
sustainable development. The Forum affirmed that addressing economic, social, environ-
mental and governance issues was integral to the creation of sustainable cities, and that the
inability to address those issues would prevent the achievement of sustainable development
(United Nations Human Settlements Programme (UN-HABITAT), 2002). The main mes-
sages of the Forum were comprehensively discussed and reaffirmed at the World Summit
on Sustainable Development, held in Johannesburg, South Africa, from 26 August to 4
September 2002. More recently, this approach to sustainable cities has been echoed the
the Rio+20 Declaration (United Nations, 2012b, p.26) and by the United Nations System
Task Team on the Post-2015 UN Development Agenda (2012), which includes governance
under the broader umbrella of peace and security issues. In an increasingly urbanized world
which demands more sustainable ways of living, urban governance entails the fostering of
urban planning and environmental management, which includes the reduction of ecologi-
cal footprints, and the decentralization of decision-making, and resource allocation, as well
as enhanced policy coordination between local and national authorities.
In this context, achieving the sustainability of cities can be conceived as entail-
ing the integration of four pillars: social development, economic development, environmen-
tal management, and urban governance. Figure III.4 presents the four pillars for achieving
urban sustainability encompassing the balanced accomplishment of social and economic
development, environmental management and effective governance. Yet, the ways in which
a city is able to build sustainability will reflect its capacity to adapt, within the context of its
particular history, to the policy priorities and goals defined by each pillar.

Figure III.4 Pillars for achieving sustainability of cities

Pillars for achieving sustainability of cities

Sustainable cities

Social development Economic development Environmental Urban governance

management
 Education and health  Green productive  Planning and
growth  Forest and soil decentralization
 Food and nutrition management
 Creation of decent  Reduction of
 Waste and recycling
 Green housing employment management inequities
and buildings
 Production and  Energy efficiency  Strengthening of civil
 Water and sanitation distribution of and political rights
renewable energy  Water management
 Green public (including freshwater)  Support of local,
transportation  Technology and national, regional and
innovation (R&D)  Air quality global links
 Green energy access conservation

 Adaptation to and
 Recreation areas and mitigation of climate
community support change

Source: UN/DESA, Development Policy and Analysis Division.

Source: UN/DESA.
 Towards sustainable cities 63

The integration of the four pillars can generate synergies, for example, between
waste and recycling management (environmental management) and access to water and
sanitation (social development); between air quality conservation and green public trans-
portation; and among production and distribution of renewable energy sources, green
energy access, and adaptation to and mitigation of climate change, as well as between
the goal of reducing inequities (urban governance) and that of ensuring adequate access
to green housing, education and health (social development). Investment is the catalyst
behind the realization of each of the component goals of urban sustainability.
To build upon the four pillars can be a challenge for many cities and countries.
Cities are often at different stages of development and have their own specific responses
to policy priorities at the local and national levels. In this sense, the sets of sustainability
challenges to be overcome by cities are diverse.

The challenges associated with building

sustainable cities
The present section analyses the main social, economic and environmental challenges as- Social, economic and
sociated with building sustainable cities in developing and developed countries. environmental challenges
exert direct and indirect
For city governments, the challenges include securing the necessary resources
effects on cities and
for investment in disaster-proof public infrastructure, and renewable sources of energy, the lives of people in
and providing incentives to the private sector to create decent employment for large urban both developing and
populations that are underemployed and have limited access to good housing conditions, developed nations
clean water, sanitation, drainage and schools (table III.2).
Upper middle income and high-income countries with urban populations that
already have access to basic public services face the challenge of becoming more efficient in
the use of energy and water, reducing the generation of waste, and improving their recycling
systems. Growth of cities has often gone hand in hand with an increased use of natural
resources and ecological systems, driven by economic growth and changes in the economic
structure—in terms of a shift from agriculture to manufacturing and then to services.
While wealthier cities and people, in particular, may have well-managed resource systems,
they also have a greater ecological impact through drawing resources from larger areas. For
example, wealthier residents in New York City, Los Angeles and Mexico City contribute
greatly to the demand for freshwater from distant ecosystems, whose capacities are conse-
quently affected and whose use generates significant levels of pollution and greenhouse gas
emissions at the national and global levels (McGranahan and Satterthwaite, 2003). Thus,
urbanization can be an important contributor to high resource use and waste generation,
both with ecological effects at the local, regional and global levels.
Some of the most significant challenges associated with building sustainable
cities are discussed more extensively below.

Inequalities in access to
Socioeconomic inequalities basic services between
rural and urban areas
Inequalities between rural and urban areas as well as within urban areas have been features
as well as within urban
of development and urbanization in developing countries (Cohen, 2006; Baker., ed., 2012). areas have been typical
The gap between rich and poor neighbourhoods can imply significant differences in access features of urbanization in
to job opportunities and basic public services such as water and sanitation, electricity, developing countries
64 World Economic and Social Survey 2013

Table III.2
Challenges to and opportunities for building sustainable cities

Developing countries Developed countries

Main urban trends Challenges Opportunities Challenges Opportunities
Social
By 2025, urban Improve access Investment in public infrastructure Social cohesion Investment in compact
population will live to housing, water, (including transportation); urban development and
mainly in small cities sanitation; improve construction of compact buildings decentralization
(42 per cent) and public infrastructure; in middle-income countries;
medium-sized cities foster institutional strengthen links between cities and
(24 per cent) capacity rural areas
Number of urban Reduce number of Investment in universal access to Reduce urban Strengthening and
people living in urban poor and disease affordable water and sanitation; unemployment widening social safety
slums continues to risk; improve social establishing public transportation, due to economic nets; upgrading
grow cohesion; reduce youth and creation of jobs to reduce crises (of youth investment in social
unemployment growth of slums; employment of in particular); protection for an
the “youth” dividend in low-income provide adequate effective response
countries housing in poor to crises and their
neighbourhoods aftermath
Inefficient use of Improve waste and Subsidies to households and small Change Investment in
public services recycling management; firms to reduce non-saving water overproduction and retrofitting of buildings;
(water, electricity) support consumption of systems and waste; incentives to overconsumption in water- and energy-
local produce; change local communities to improve styles; improve saving devices;
overconsumption recycling systems waste and recycling upgrading of public
patterns of high-income management infrastructure
households
Ageing Create productive Investment in universal pensions; Fiscal pressure Investment in retraining
employment for older extension of working age; support to reduce health older persons, and
persons for family networks costs; improve extending the working
productivity age
Economic
Inequality and Create policy Investment in green industry, Reduce Investment on green
financial fragility space for inclusive adaptation to climate change, unemployment; infrastructure; policy
development; reduce structural economic change boost economic coherence and
underemployment; (industrial and service leapfrogging growth; strengthen coordination
promote economic for least developed countries); international
diversification strengthening regional cooperation cooperation
Food insecurity Improve access to food; Investment in urban agriculture, Reduce food waste Investment in storage
increase productivity local crops, storage facilities; R&D infrastructure; reducing
food subsidies; policy
coordination
Environmental
Energy access Provide access to clean Investment in capacity development, Reduce Investment and
energy and reduce use energy-saving devices, production overproduction and incentives to produce
of “dirty” energy in poor and use of renewable sources of overconsumption and use renewable
households (e.g., least energy; subsidies and incentives to sustainable levels energy sources;
developed countries); for efficient energy use and water decentralization of
discourage high-energy use for middle- and high-income energy production
consumption in high- households
income households
Climate change Reduce impact on Investment in health and Upgrade disaster Investment in
livelihoods; reduce education infrastructures and risk prevention mitigation, industrial
carbon emissions; facilities; adaptation and mitigation systems; reduce green transformation;
generate financial technology, early warning systems, carbon emissions retrofitting of buildings;
resources for adaptation green public trans­­por- tation; to sustainable levels policy coordination
strengthen regional cooperation for
green technology transfer
Source: UN/DESA, Development Policy and Analysis Division.
 Towards sustainable cities 65

education and health, housing and communications. As a consequence, many urban

residents in developing countries suffer to varying degrees from environmental health
issues associated to inadequate access to clean water, sewerage services, and solid waste
disposal. In many cities of developing countries, adequate water and sanitation services
are primarily channelled to upper- and middle-class neighbourhoods, while low-income
neighbourhoods often depend on distant and unsafe water wells and private water vendors
who charge higher prices than the public rate for water delivery (Cohen, 2006). The poor
often live in highly overcrowded dwellings in shacks which lack basic infrastructure and
services. On the whole, less than 35 per cent of cities in developing countries have their
waste water treated, while globally, 2.5 billion and 1.2 billion people lack safe sanitation
and access to clean water, respectively (United Nations Human Settlements Programme
(UN-Habitat), 2012). For a broader overview and assessment of the impact of social and
economic inequalities, see also chapters I and II.
Wider urban access to public services, income-earning opportunities and
broader social interaction in cities has driven rural-urban internal migration in many de-
veloping countries for the past 60 years (Beall, Guha-Khasnobis and Kanbur, eds., 2012).
The speed of urbanization has ultimately outstripped the limits of the economic oppor-
tunities provided by cities, making poverty a salient feature of urban life. Cohen (2006)
suggests that congestion costs in large cities might be high, since the well-being advantage
has declined in many cities of developing countries since the 1970s. Moreover, the rising
urban inequalities in, e.g., Brazil, China and the Philippines in the 1990s is consistent
with the existence of highly heterogeneous urban labour markets, which are in part the
result of their high level of exposure to world markets.
Mitlin and Satterthwaite (2012) indicate that 1 out of 7 persons in the world
lives in poverty in urban areas, mainly in informal settlements of the developing world,
with inadequate provision of water, sanitation, health care and schools. Yet, urban poverty is
still underestimated mainly owing to inadequate methodologies used to define and measure
poverty. For example, the $1.25-per-day poverty line does not necessarily capture higher
costs of food and non-food items in large cities, while indicators of improved water provi-
sion include public taps and standpipes which often do not provide safe and regular water.
About 1 billion people, lacking basic infrastructure and services, currently live
in slums, whose number may multiply threefold by 2050 if no policy framework is in place
to reduce their growth (United Nations Human Settlements Programme (UN-Habitat),
2012). More than half of urban dwellers in countries of sub-Saharan Africa and 40 per
cent in Asia lack access to basic sanitation (Baker, ed., 2012). The growth of cities in
least developed countries, in particular, often results in a rise in the number of people
living under precarious conditions in respect of their livelihoods and employment, whose
effect on the environment is harmful through their use of “dirty” energy, e.g., wood and
charcoal, to meet basic energy needs.
At the regional level, data provided by the United Nations Human Settlements
Programme (UN-Habitat) (2010) indicate that 62 per cent of urban populations in sub-
Saharan Africa live in slums, a proportion that is expected to rise in the next decades.
Slums in Latin America and the Caribbean and regions of Asia house about 24 per cent
and 30 per cent of the urban populations, respectively.
Further, international migrants working in low-skilled occupations have in-
creasingly joined the ranks of the poor in the main cities of both developed and developing
countries. Key industries and trades such as food production and processing, construction
66 World Economic and Social Survey 2013

and repairs, buildings maintenance, taxi driving, the garment industry, household services,
and agriculture often engage a significant share of immigrant workers.3 Frequently living
in insecure and low-quality conditions in terms of housing and public services, many
immigrants are undocumented and disenfranchised. In New York City and other cities in
the United States of America, for example, unsafe labour conditions for many immigrant
workers include working schedules of up to 60-72 hours per week and no social benefits
such as health care and social security (Orrenius and Zavodny, 2009; Passel, 2006).

Sprawl and weakened capacities

Many large cities have also experienced rising sprawl over the past 50 years, challenging
urban planning. Wealthier citizens have chosen to reside on the outskirts of cities where
they enjoy greater privacy, have bigger homes and better schools for their children, and are
spared having to use public transportation and endure the frenzied atmosphere of urban
downtowns. As a consequence, the carbon footprint of wealthier inhabitants, households
and neighbourhoods is often much higher than that of the rest of urban inhabitants
(McGranahan and Satterthwaite, 2003).
Small cities with less than 500,000 inhabitants experience a different type of
vulnerability. Although there is much diversity in their economic structure, many small
cities in developing countries have very weak economies and inadequate communication
with more economically dynamic cities. These cities tend to have inadequate infrastructure
for provision of basic public services, which may be of low quality. Access may be time-
consuming, costly and risky (in the case, for example, of public transportation). Poor land
management and weak urban planning capacities are part of the problem. The deficiencies
in urban governance, institution-building and adjustment to changing land development
conditions have reduced real possibilities for improving urban planning (Cohen, 2006).

Energy access
The present section highlights the differences between the energy needs of poor urban house-
holds and countries and rich ones. Access to cleaner sources of energy is intrinsically linked
to development, and vice versa. Countries with higher gross domestic product (GDP) per
capita (e.g., above US$ 4,000) are associated with the use of electricity by above 60 per cent
of the urban population, and the use of wood and charcoal for cooking by a low proportion
of urban households (e.g., 20 per cent or less).4 In fact, cities in the majority of middle-
income countries have access to electricity, including Amman, Bogota, Buenos Aires,
Cairo, Caracas, Jakarta, Rabat, Rio de Janeiro and Santo Domingo (Satterthwaite and
Sverdlik, 2013).
Similarly, while only 18 per cent of urban dwellers in developing countries use
wood and charcoal for cooking, the proportion for least developing countries is almost
four times higher. Overall, there are about 680 million people in developing countries
with no access to modern fuels (table III.3). Lack of access to electricity is associated with
3 At the same time, some of the “best and brightest” immigrants make up an increasing proportion
of scientists, engineers, computer specialists and medical doctors in cities of developed countries
(Kapur and McHale, 2005)

4 In countries with GDP per capita of US$ 6,000 or more, 95-100 per cent of their urban population
have access to electricity.
 Towards sustainable cities 67

Table III.3
Proportion of urban population lacking access to electricity and modern fuels, and
proportion using particular fuels for cooking, developing and least developed countries,
circa 2003-2007
Percentage
Lack of access to: Developing countries Least developed countries
Electricity 10a 56b
Modern fuels (mostly gas) 30c 63d
Fuel(s) used for cooking Developing countries Least developed countries
Wood, charcoal, and dung 18 68
Coal 8 3
Kerosene 7 4
Gas 57 20
Electricity 6 4
Source: UN/DESA, based on Satterthwaite and Sverdlik (2013).
a  Comprising 226 million people.
b  Comprising 116 million people.
c  Comprising 679 million people.
d  Comprising 130 million people.

informal urban settlements where dwellers typically have high transportation costs and
poor-quality housing. The use of cheap fuels implies increased deforestation, pollution,
health risks, energy cost and time burden. Poor people often have to spend a lot of time for
travelling to purchase or gather those fuels. In contrast, regular electricity supplies would
often be cheaper and safer, and could be used for household appliances (e.g., lights needed
by children when doing their homework and for reading) and home enterprises.

Common and differentiated impacts of natural hazards

The adverse impact of social inequalities on human health and the environment is multi- Effects of climate change
plied when we factor in the adverse effects of “natural” disasters. Natural hazards linked deepen the vulnerabilities
of cities in poor nations and
to climate change events have also increased in intensity and frequency. Most disasters threaten the resilience and
tend to occur in developing countries and the human cost in terms of both the number adaptation capacities of
of persons affected and the loss of human lives is much higher in these countries. Yet, cities in richer nations
some developed countries have also started to be affected despite their generally greater
resilience (United Nations, 2011b). Mutizwa-Mangiza (2012) indicates that 40 per cent
of the world’s urban population, many of them poor and vulnerable to storms, floods and
sea-level rise (e.g., southern Brazil, China, Viet Nam and Honduras), live less than 100
kilometres from the coast (see also World Bank, 2009).
The combined impact of sea-level rise, floods, heatwaves and storms have ad-
versely affected millions of livelihoods, homes and lives in different countries, with projec-
tions indicating that the trend will continue and, in some cases, worsen (United Nations,
2011b). Middle-income countries such as China, India, Indonesia, the Philippines and Viet
Nam had the highest number of floods and storms combined during 2000-2009. Cities lo-
cated along the west Coast of Africa and the coastlines of South, East and South-East Asia
have been affected by sea-level rise, flooding and salt intrusion in river flows and ground-
water, compromising the quality of clean water. Endemic morbidity and mortality due to
diarrhoeal disease are projected to increase in these regions. The reduction of the Andean
 68 World Economic and Social Survey 2013

glaciers and the melting of the Himalayan glaciers have disrupted the regular production of
hydroelectric plants and reduced water supply in many cities (World Bank, 2010a).
In fact, the likelihood of mega-disasters has seized the attention of policy-
makers, particularly in countries that have long coastlines, including Australia, China,
France, Indonesia, the Philippines and the United States. Coastal developments in urban
centres are likely to sharpen disaster risks from sea-level rise and increased intensity and
frequency of storms and floods (Lee and others, 2012). Although disaster risks such as
droughts disproportionately affect rural areas, there have been recent disasters in urban
areas—such as earthquakes in Japan (2011), Haiti (2010), Chile (2010) and China (2010);
flooding in China (2010), Pakistan (2010), Brazil (2010, 2011) and Bangkok (2012); and
the extensive damage wrought across cities along the East Coast of the United States
following Hurricane Sandy (2012)—which highlights the fact that urban disaster risk is
also a reality. The concentration of people and economic activity in areas at risk from ex-
treme weather events or earthquakes can interrupt global supply chains, reduce economic
output, reverse development gains, and affect the livelihoods of the poor who often live in
those areas (Baker, ed., 2012; United Nations Office for Disaster Risk Reduction, 2013).
Stronger storms and saltwater intrusion in water systems have weakened adap-
tive capacities in coastal cities of both developed and developing countries. The damages to
infrastructure in the former and the weakening of resilience in the latter threaten their pol-
icy space for taking effective adaptation measures and developing capacities for rebuilding.
The integrated effects of the challenges described above threaten the economic
resilience of cities and heighten their vulnerabilities. Cities have to start perceiving those
challenges as opportunities for investment and building cities to serve as the main pillars
for a sustainable world.

Opportunities for building sustainable cities

Challenges also offer a As demonstrated above, there are both challenges and opportunities associated with build-
strategic opportunity for ing sustainable cities. The multidimensional impact of megatrends represents a strategic op-
an integrated approach portunity for taking an integrated approach to urban planning and a major opportunity for
to urban planning
and investment in
investment in industrial transformation, improved infrastructure, social development and
industrial transformation, environmental management. Sustainable development in growing cities, of poor countries
infrastructure, social in particular, implies investment in infrastructure such as roads, water, sewers, electricity
development and and services such as schools, public transportation and health-care. Leapfrogging invest-
environmental management ment in green industrial transformation can generate employment for the “youth bulge”
dividend experienced by those countries. In cities of middle- and high-income countries,
investment in the production and use of renewable sources of energy, as well as in the
renovation of infrastructure, retrofitting of buildings and improved efficiency in the use of
electricity and water, is important. At the same time, investment in strategies for the reduc-
tion of waste production and improvement of waste collection and recycling systems are
needed in most cities across the world. Inevitably, there will be trade-offs between invest-
ments yielding benefits in the short term, e.g., infrastructure for development, and those
with benefits in the long term, such as environmental protection and disaster risk reduction.
Cities’ contribution to sustainable development can be multipled if more countries
are committed to that goal and when people are able to produce, consume and govern their
behaviour in a sustainable manner. Thus, urban sustainability defined within the framework
of a global integrated approach must include both developed and developing countries.
 Towards sustainable cities 69

An integrated and coordinated approach

An integrated approach to urbanization will be based on a holistic view of its social devel-
opment, economic development, environmental management (at the local, national and
global levels) and governance components. It will entail the coordination of objectives and
programmes among different city stakeholders (e.g., citizens, government and the business
sector), as well as the development of linkages between and within socioeconomic sectors
and activities. In economic terms, the integrated approach tries to improve synergies and
efficiencies among activities such as public transportation, energy consumption, biodiver-
sity and human health.
Further, under an integrative approach, city administrations would integrate in-
vestment in various types of infrastructures with the development of institutional and man-
agement capacities and the active participation of all stakeholders in the process of building
sustainable cities. The city of Curitiba in Brazil has gained worldwide recognition for having
successfully developed that kind of integrated approach to sustainability over the past 40
years. A description of the relevant process involved in Curitiba is offered in box III.2.
At the national level, the integration of the rural and urban sectors is critical.
Wider access to public services and development of linkages with industrial development
can leverage rural sector capacities to exchange resources and information, and engage in
social interaction, with urban areas.
Investment in economic and social infrastructure in rural settlements can be
a catalyst for reducing rural-urban migration. Although every area is characterized by
a different configuration of land use, resources and potentials, the systemic integration
of different villages, towns and cities in the context of their particular specializations
and strategic locations can bring sustainable development to both urban and rural areas.
Box IV.2 illustrates the positive effects of investment in rural infrastructure on Uganda’s
food sustainability.
Empirical evidence suggests that for the drivers of sustained development in
some newly industrialized countries of South-East Asia (Cambodia, Indonesia, Malaysia
and Viet Nam) within the past 50 years included improved social development in the rural
sector, increased agricultural productivity, and food supply, and support of decision-making
capacities of peasant farmers. In fact, macroeconomic stabilization was important insofar
as it was directed towards reduction of poverty, which was understood to be concentrated
in rural areas (Kees van Donge, Henley and Lewis, 2012). Henley (2012) argues that the
economic success of South-East Asia was due to pro-poor agricultural development and
historical consistency in respect of investment in agriculture, as was the case for Malaysia
over the period 1956-1990. Pro-rural sector policies are not the same as pro-poor policies;
for example, investment in land redistribution is not necessarily pro-poor when the money
is allocated to purchase land and not to implement poverty-reduction programmes, as was
the case in Kenya during the 1960s and 1970s.
The road towards building sustainable cities covers two types of invest­ment, Cities and nations need
namely: to engage in investment
in public infrastructure,
(a) Investment in infrastructure and capacity development to close social develop-
renewable energy, energy
ment gaps linked to the issue of access to good-quality public transportation, efficiency, adaptation,
water and sanitation, health, education, housing and energy services in urban retrofitting of buildings,
and rural areas; and better waste and
(b) Investment in urban resilience, including industrial transformation towards recycling systems
the use of renewable energy sources, creation of decent employment in green
productive activities, and adoption of adaptation and mitigation strategies.
70 World Economic and Social Survey 2013

Box III.2
How Curitiba became a reference point
for sustainable development
Curitiba, a city in southern Brazil, has approximately 3 million residents (including in the metropolitan
area). The implementation of the Curitiba Master Plan began during the first administration of Mayor
Jaime Lerner in the early 1970s. The plan relied on the physical integration of a public transport sys-
tem, land-use legislation and a hierarchized road network. The urban growth structure is character-
ized by a linear expansion across five “structural geographical sectors” which are served by “express
buses”. It links the city centre with the periphery and other neighbour municipalities, with priority
given to public transport.
The implementation of the Master Plan was conducted incrementally, consonant with
the perception of sustainable urban design as a long-term process. Curitiba first developed a modest
express route system with dedicated bus lanes. It then sought out ways to improve and extend the
system. The result was a surface networked system which provides high-quality service comparable
with that of well-known underground systems but at a capital cost that is about 200 times less. As a
result, mass transit is almost entirely financed by passenger fares.
The systematic approach to urban transportation has reduced travel times and in-
creased convenience for commuters and other travellers. Private companies operate public buses
whose intensive use continues despite the fact that Curitiba has one of the highest automobile
ownership rates in Brazil. Rider surveys suggest that at least 20 per cent of the new bus passengers
previously commuted by automobile. The city has replaced several downtown streets with broad
pedestrian malls and shopping areas. Reduced traffic appears to result in substantial fuel savings
as well as reduced carbon emissions. Estimates based on information from URBS, the public-private
company that manages the system, suggest that the reduction in automobile traffic has saved 27
million litres of fuel per year.
While Curitiba is best known for its innovative public transport system, this is only one
among many initiatives that have improved the environment and reduced resource use. For exam-
ple, residents of subsidized low-income housing have easy access to public transportation whose
route is in the direction of the Curitiba Industrial City, where polluting industries are not allowed.
Curitiba has 60 square metres of green area per inhabitant, one of the highest rates among all cities in
the world. Curitiba’s green spaces are integrated with flood control; and artificial lakes in many public
parks provide a flood control system for the entire city. A strictly enforced citywide policy ensures
that rivers and streams are protected and rainwater is collected and recycled.
Curitiba has also implemented relevant solid waste programmes. The “Garbage that is
not garbage” initiative, created in 1989, promotes domestic recycling through the separate collection
of more than one thousand tons of metal, plastic, glass and paper per month. Additional benefits of
this programme have included the positive change in the attitude of the population towards recy-
cling and the extension of the life of landfills through the conservation of considerable space. The
goal of the “Garbage purchase” programme is to clean up dense areas in low-income communities
(favelas), where garbage collection vans do not have space to circulate. The community sells garbage
to the city in exchange for bags of food, bus tokens, notebooks and tickets for soccer matches and
plays. The innovative feature of these programmes is the integration of environmental improvement
with social inclusion.
City planning is an ongoing challenge. Curitiba has grown more than fourfold in the
last 30 years, which has resulted in social issues and the environmental challenges associated with
Source: Jonas Rabinovitch, traffic and transportation, land use, waste management and housing. Yet, Curitiba continues to stand
Senior Adviser on out as a visible point of reference for integrated urban development based on sustainability princi-
Governance, Public
ples. The most important lesson is that Curitiba has taken control of its own destiny by embracing
Administration and
e-Government Issues, a sustainability approach which has brought important benefits. At the same time, it has become
United Nations an inspiration for thousands of small and medium-sized cities worldwide which are about to make
Secretariat. crucial choices for their future and the future of the planet.
 Towards sustainable cities 71

The first area of investment applies mainly to cities located in low-income coun-
tries and should be part of a development agenda that is supported by the international
community with a view to spurring sustainability. In particular, support should be directed
towards infrastructure investment efforts made by poor countries in order to reduce poverty
(see box III.5 for an example of investment in waste processing infrastructure (Dhaka)).
The second area of investment applies mainly to cities located in middle- and high-income
countries. In the case of economies with fast growth, for example, resources generated by
sustained economic growth in the past decade can serve as a means of financing the produc-
tion and use of renewable energy as well as building resilience against natural hazards.
All things considered, building sustainable cities requires an integrated ap-
proach to investment in (a) rural development and affordable access to public services
by the urban poor, (b) rapid, reliable, accessible and affordable public transportation in
all its forms, (c) industrial transformation based on the production and use of renewable
energy sources and the creation of decent jobs, (d) retrofitting of buildings and increase in
the number of green areas, (e) improved efficiency in the use of water and electricity and
(f) effective management of waste and recycling systems.
A study of urban households in the United States by Holian and Kahn (2013)
indicates that investment and effective measures to reduce air pollution and crime in down-
town areas have resulted in higher urban population density and reduced per capita carbon
emissions. The Plan Verde of Mexico City is also making positive strides in reducing urban
air pollution and carbon emissions (box III.3).
Green investment in poor countries would enable them to leapfrog from
dirty/high-carbon energy use to a low/zero-carbon development path. Investment is needed
in the renovation of infrastructures of transportation as well as in education programmes
that value efficiency in the use of public services. Households and businesses in cities of
middle- and high-income countries would need to continue investing in improving the
quality of life in urban centres and to create incentives to retrofit buildings and subsidies
for producing and consuming clean energy sources. Box III.4 lists 10 essentials for invest-
ments and measures to reduce disaster risk, including investment in critical infrastructure,
and early warning systems, and direct involvement of communities in designating preven-
tion and reconstruction priorities.

Trade-offs between investments?

Cities with a growing number of informal settlements are trying to meet basic urban
infrastructure needs, such as for public transportation, clean piped water, drainage sys-
tems and waste management. As a result, investment in adaptation to climate change may
take a back seat to investment in development. Moreover, building resilience has been
constrained by poor infrastructure, weak institutions and lack of enforcement of planning
regulations, e.g., in Pakistan. Similarly, in Narok and Kisumu (Kenya) and Moshi (United
Republic of Tanzania), the municipalities’ limited capacity, knowledge and coordination,
and competing priorities, have prevented the adoption of disaster risk reduction strategies
(United Nations Office for Disaster Risk Reduction, 2013).
Post-disaster reconstruction is another area where cities often face trade-offs
between investing in sustainable development and re-establishing services. As observed
by the Intergovernmental Panel on Climate Change (2012b), tensions frequently arise as a
result of competing demands for speed of delivery and sustainability of outcome. Response
72 World Economic and Social Survey 2013

and reconstruction funds tend to be time-limited, often requiring expenditure within

12 months or less from the time of disbursement, with disregard for long-term pay-offs.
Such pressure is compounded by the fact that multiple agencies work with limited resourc-
es and coordination. Indeed, trade-offs are often a by-product of short-sighted approaches
versus long-term investment in win-win sustainable development solutions.
In fact, trade-offs between investments are often associated with whether or
not formal established incentives exist for a particular type of investment. Wu and others
(2013) argue that, in China, investments in transportation infrastructure, e.g., roads and
electrification, tend to attract more incentives and therefore more rewards than invest-
ments in the environment. For these reasons, local urban authorities often prioritize the
former type of investment based on its higher correlation with real GDP growth, career
promotion and cities’ revenues from land lease sales. As a result, investments in the envi-
ronment tend to be negatively affected.

Box III.3
Plan Verde of Mexico City
In 1990, Mexico City had had 333 days in which the ozone level rose above Mexico’s national standard.
In 2006, the city developed a 15-year Plan Verde which included the goal of reducing greenhouse gas
emissions by 7 million metric tons during 2008-2012, which was accomplished in a timely manner.
The Plan also has a business and citizens education component. Nearly 20 city agencies have worked
together to optimize the use of the $1 billion-per-year investment, which represents about 7 per cent
of the city’s yearly budget. By 2009, the number of days with an ozone level above the standard had
fallen to 180. Moreover, the average number of hours per day during which the ozone standard was
above the norm fell from 4.9 in 1990 to just 1.5 in 2009.
In addition to improving air quality, the plan includes other “pillars” encompassing: land
conservation; public spaces; waste management and recycling; water supply and sanitation; climate
action planning; and transportation and mobility. The city’s efforts to control atmospheric pollutants
have included replacing ageing taxis, microbuses and government fleets with lower-emissions vehi-
cles, introducing a bike-sharing programme, and building a bus rapid transit system. The city offers
a tax incentive of 10 per cent of the value of a building for promotion of green roofs. By December
2011, 21,000 square metres of green roofs had been installed in public buildings and private establish-
ments. The city has also implemented 22 programmes on 11,000 hectares of conservation land for
improving water management by reducing soil loss due to water and wind erosion.
To reduce the effects of population growth and the increase in vehicle fleets, the city
has plans to replace official Government vehicles with fuel-efficient and low-polluting units. By 2012,
four lines of a bus rapid transit system which used clean-burning, ultra-low sulphur diesel fuel had
been inaugurated. The city is investing $2 billion in constructing a twelfth metro line and is providing
subsidies for replacing ageing taxis. By December 2011, 75,000 taxis had been replaced with more
efficient vehicles and 12,695 taxis had been scrapped. The city has restricted vehicle usage on certain
days and in certain high-traffic zones as part of the Hoy no circula programme which is designed to
reduce both traffic and emissions. The city has also introduced a bicycle mobility strategy (EcoBici),
which includes free bike rentals and the creation of 21 kilometres of new bicycle paths. The city has
also built bicycle-parking infrastructures at major metro subway stations. By December 2011, EcoBici
had made 1,200 bicycles available at 90 bike stations and had 35,000 registered users, who had taken
a total of 3 million trips.
Sources: United Nations
(2010b); and http://www.
By focusing on improving air quality across multiple dimensions including land use,
mexicocityexperience.com/ transportation, waste management and climate action planning, the city has produced effective
green_living/. programmes in seemingly unrelated areas such as water use and supply.
 Towards sustainable cities 73

Learning by doing in building sustainable cities

Building sustainable cities entails integration and coordination among sectors. For ex- Building sustainable
ample, a land plan would need to include space for industry, residential housing, and cities entails integration
green areas, to be integrated with adequate space for access to public transportation. Some and coordination among
social, economic and
overlaps would exist since investment in green infrastructure, for example, can imply a environmental sectors as
reduction of CO2 emissions, while protection of green areas can include management of well as within sectors such
groundwater sources. as transportation
Similarly, integration within sectors such as transportation would include the
development of linkages between various transportation modes (e.g., bus, tram, metro, bi-
cycle and walking) in order to reduce travel time, gas emissions and the use of private cars.
China, Hong Kong Special Administrative Region, for example, has an extensive network of
privately owned minibuses; maintains a low-fare tram system in the traditional downtown;
and has effective pedestrian connection links with commercial buildings which double

Box III.4
The 10 essentials for urban resilience

1. Put in place the organization and coordination needed to promote the understanding
and reduction of disaster risk, based on participation of citizens groups and civil society.
Build local alliances. Ensure that all departments understand their role in disaster risk
reduction and preparedness.
2. Assign a budget for disaster risk reduction and provide incentives for homeowners, low-
income families, communities, businesses and the public sector to invest in reducing
the risks they face.
3. Maintain up-to-date data on hazards and vulnerabilities. Prepare risk assessments, to
be used as the basis for urban development plans and decisions, and ensure that this
information and the plans for your city’s resilience are made readily available to the
public and are fully discussed with them.
4. Invest in and maintain critical infrastructure which reduces risk, such as flood drainage,
adjusted where needed to cope with climate change.
5. Assess the safety of all schools and health facilities and upgrade them, as necessary.
6. Apply and enforce realistic risk-compliant building regulations and land use planning
principles. Identify safe land for low-income citizens and upgrade informal settlements,
wherever feasible.
7. Ensure that education programmes and training on disaster risk reduction are in place
in schools and local communities.
8. Protect ecosystems and natural buffers to mitigate the impact of floods, storm surges
and other hazards to which your city may be vulnerable. Adapt to climate change by
building on good risk reduction practices.
9. Install early warning systems and emergency management capacities in your city and
hold regular public preparedness drills.
10. After any disaster, ensure that the needs of the affected populations are placed at the
centre of reconstruction, with support for those populations and their community Source: United Nations
organizations in designing and helping to implement responses, including rebuilding Office for Disaster Risk
homes and livelihoods. Reduction (2012), chap. 4.
74 World Economic and Social Survey 2013

pedestrian capacity, directing people away from the noise and fumes generated by motorized
traffic. Similarly, Bangkok has adopted the bus rapid transit (BRT), “a transportation system
that mobilizes high-capacity buses along routes with limited stops” (Lim, 2012, p. 36).
In respect of water management, cities face access and efficiency challenges.
Phnom Penh and Cape Town have been able to meet challenges by providing clean water
at affordable rates to all people, including the poor living on the outskirts. Singapore has
overcome its long-term water dependency with multi-pronged actions which included the
installation of desalination plants and the recycling of waste water (Lim, 2012).
The annex to this chapter sets out the different profiles and policy experiences
of a sample of cities in respect of building urban sustainability. Independent of its size
or its breadth of experience, each city has started on its own road towards urban sus-
tainability. Cities such as Curitiba, Copenhagen and Freiburg have greater experience in
building sustainability, and a few of their accomplishments have already served as models
for other cities; for example, Curitiba’s integrated bus system has been emulated by the
TransMilenio bus system of Bogotá, Metrovia in Guayaquil, and Metrobús in Mexico
City. Other cities have just started to design and implement a sustainability plan. As stated
earlier, cities are poised to become pillars of sustainable development. In this sense, urban
governance (figure III.4) can promote a more balanced and inclusive development as well
as ensure a more effective use of local and national resources.
As policy areas, the sectors indicated in the annex capture the economic, social
and environmental aspects of urban sustainability. The specific measures and activities
listed in each cell do not necessarily constitute all of the actions taken by each city; rather,
they reflect mainly the relevant information found and some of the agreed priority initia-
tives that cities have begun to carry out. In particular, some cities have been quite actively
supporting green infrastructure (in buildings and transportation); renewable energy and
reduction of CO2 emissions; and management of waste and recycling.
The sustainability challenges faced by each city are diverse and reflect the size of
its economy, technology capacities and population (e.g., Shanghai has 21 million residents,
while Ilo has 53,000 residents), as well as its development priorities. Information and
communications technologies (ICT) can increase efficiencies, reduce costs and enhance
quality of life; however, the adoption of ICT depends on the capacity to scale up and on
flexibility for implementation in different urban settings. Indeed, ICT also offers an op-
portunity to integrate cities’ infrastructures, including utilities, real estate, transportation
and other public services (Falconer and Mitchell, 2012).
Cities’ priorities are determined by their own urban planning capacities and by
the pressing development challenges that they face. Different stakeholders, coming, e.g.,
from the business, professional, government and political sectors, often gather to discuss
how to build a particular city’s sustainability. Their individual views on urban sustain-
ability have to be synthesized to yield common denominators, e.g., a common language
and a unified approach to implementation. The survey presented in the annex reveals the
existing gaps and the diversity of policy priorities adopted in different cities. For example,
housing in Kampala is a priority owing to the fact that 60 per cent of its inhabitants reside
in slums, while in Paris one priority is to ensure the implementation of insulation pro-
grammes for old buildings in order to improve households’ energy efficiency. On the other
hand, it is the Clean Air Project that is of foremost importance in Ilo, a city whose mining
activities have produced “one of the world’s highest levels of air pollution” (Boon, Alexaki
and Herrera Becerra, 2001, p. 215). The improvement of water infrastructure is essential
 Towards sustainable cities 75

to improving the quality and efficiency of water use in a large urban area like Mexico City,
while protection of groundwater to ensure a supply of safe drinking water and reduction of
water consumption per capita are main priorities in Shanghai and Freiburg.
In this context, the fact that cities differ in their complexities militates against
a “one size fits all” approach towards sustainability, since such differences render their
priorities, objectives and paths diverse as well. Thus, measures of progress will be tailored
to the particular challenges and opportunities determined and prioritized by the cities’
main stakeholders. Yet, establishment of stakeholder roles must precede development of a
sustainability plan. For example, Governments should develop technical standards, e.g.,
building codes while working closely with the private sector; in its turn, the private sector
should develop processes for partnering with government, academia and non-governmen-
tal organizations “to ensure solutions that are both functional and economically feasible”
(Falconer and Mitchell, 2012).
It is important to underscore the significance of ambitious housing plans and
successful integration of public transportation infrastructures in some cities. In this regard,
it is worth mentioning that China plans to build up to 36 million subsidized flats by 2015
for low-income people, mainly for the rural workers who come to work temporarily in the
city and cannot afford decent housing. Similar subsidized housing projects are planned
in Bangkok and Kuala Lumpur in order to reduce slums and squatter settlements (Lim,
2012). Of course, the quality of the housing to be built in terms of sustainability (based,
for example, on the materials used and energy efficiency) will need to be assessed. The
challenges faced by these cities in respect of providing adequate housing are enormous.
For example, a vast floating population circulating among most of the cities in China,
which is important for their economic success, do not have access to Government services
(Mitlin and Satterthwaite, 2012).
In general, the integration and coordination of different infrastructures and
modes of public transportation save travel time and energy and reduce congestion and car-
bon emissions; the success of these measures has been reported in cities like Copenhagen,
Curitiba, Freiburg and Paris. Other cities, like Bangkok, Lima, Mexico City and Singapore,
are also working on integrating different forms of public mobility. In many of these cities,
the goal is to reduce the transportation time between home, the city and the workplace, so
as to reduce energy consumption and ensure that people have more time to be productive
and enjoy urban life.
Copenhagen’s Finger Plan 2007 includes protection of its green belt and limita-
tion of sprawl development through better use of city land, with new compact buildings
located near public transportation and other services. The protection of green belts are im-
portant for reducing carbon emissions and supporting urban agriculture, which can provide
employment to local farmers, bring fresh produce to urban residents, and stabilize food prices,
since transportation and packaging costs are thereby reduced. More important, direct public
participation has been vital for planning legislation in Copenhagen, through, for example,
the Citizen’s Dialogue Project, which is being financed through the city’s annual budget.
Freiburg promotes the integration and mixing of functions within compact
buildings and neighbourhoods which encompass shops, medical offices, schools, churches
and children’s playgrounds, including nearby green spaces. Renewable energy production
is encouraged through the tax credits from the federal Government and subsidies from
the regional utility Badenova; grass-roots financing schemes also allow citizens to invest
directly in renewable energy sources.
76 World Economic and Social Survey 2013

It is important to note the level of awareness that some cities have attained
with respect to waste reduction and recycling for urban sustainability. Waste is treated
as a raw material and energy source in Freiburg, while cities like Copenhagen, Curitiba,
Kampala, Shanghai, Singapore and Stockholm, have made significant progress in recy-
cling and reducing waste. Private-public partnerships have often been the key to financing
and improving waste collection and transformation. Although by many accounts, Dhaka
exemplifies a city with an unsustainable growth pattern, box III.5 indicates that, even
under those circumstances, it is possible to build up an effective partnership on solid
waste management.
Lastly, in many cities, the use of the bicycle is becoming an essential part
of public transportation. Education and initiatives to discourage car circulation
(e.g., through the imposition of higher tariffs during rush hours in Singapore and the
Hoy no circula programme in Mexico City), and the provision of adequate infrastructure,
such as bike parks near metros and bike lanes, free bike rentals, and bike-sharing, have
facilitated the rapid adoption of bicycles as a means of transport and the rapid spread of
their use in cities of both developed and developing countries.

Act locally with national support and global coordination

To strengthen the financial and decision-making capacities of cities, national Governments
need to adopt an inclusive and decentralized approach towards the use of resources and
development. Issues such as rapid ageing in developing countries pose a real challenge to
urban authorities, which often do not have sufficient resources to respond and therefore
need long-term sources of finance. National authorities need to enhance decentraliza-
tion and share the resources needed for economic growth to increase the policy space
of local administrations. Effective dialogue between urban and national authorities on
development priorities can be a means of identifying synergies and areas of development
for national, regional and global coordination.
National sustainable strategies of development should explicitly consider cities
as main pillars for building sustainability. Some countries have already begun to build
sustainable cities in country capitals such as Copenhagen, Oslo and Stockholm and in a
selected group of cities including Tianjin, Chongqing and Shenzhen (eco-cities) in China.
A coordinated international response is necessary. Sustainable national strate-
gies should reflect development priorities that are consistent with cities’ priorities. For
example, food security and adaptation to climate change are two of the most immediate
priorities in poor countries, while recovery from financial fragility and measures for reduc-
ing the impact of ageing can be pressing priorities in rich countries. In both cases, upfront
investment in green productive activities, infrastructure and efficient use of public goods
is essential for building thriving and sustainable cities.
Urbanization will be truly sustainable only when it engages the commitment
of the global community. To overcome the challenges to building sustainable cities, the
identification of common and differentiated urban development priorities should itself
be prioritized and those priorities should be consistent with common and differentiated
responsibilities for addressing the impact of climate change among countries. Further,
binding commitments between countries to confront cross-border challenges such as cli-
mate change can greatly improve the effectiveness of urban sustainability strategies.
 Towards sustainable cities 77

Box III.5
A partnership in Dhaka to convert organic waste to a
resource and generate carbon credits
Economic development, population growth and urbanization have generated rising volumes and
diverse streams of municipal solid waste in Dhaka, a city with limited urban infrastructure and capa-
bility. The city generates 3,500 metric tons of municipal solid waste daily, which is transported to a
sanitary landfill. However, uncontrolled land filling has become a common practice in the city, which
does not have adequate facilities for treatment, recycling and disposal of hazardous waste, a com-
mon problem in many cities of poor countries. Eighty per cent of municipal solid waste generated in
Dhaka is organic in nature, with a moisture content ideal for recycling into compost.
Waste Concern, a local non-governmental research organization, works in partnership
with the Government, the private sector, international agencies and local communities to imple-
ment community-based composting. Its services include waste collection, separation and com-
posting. Since its launch of solid waste management projects in 1998, Waste Concern has served
30,000 people in Dhaka and 100,000 in 14 other cities and towns in Bangladesh, including low- and
middle-income communities. The project has led to new job opportunities and better livelihoods in
the communities.
Innovative financial arrangements have included community involvement and public-
private cooperation. Communities utilize a door-to-door collection service and share the cost of
waste collection by paying a monthly fee based on affordability. The private sector stakeholder has
joint venture partners which include Waste Concern and banking institutions. The investment re-
quired for the project was 12 million euros and the mode of financing was made up of equity (38 per
cent), a soft loan (45 per cent) and a loan from a local bank (17 per cent).
A private company ensures the sale of compost by enriching the compost with nutri-
ents and effecting its subsequent distribution to the market (e.g., farmers). As a result, 75 per cent of
the project’s revenue comes from the sale of compost. The partnership was also registered as a Clean
Development Mechanism project under the United Nations Framework Convention on Climate
Change;a as a result, the remaining 25 per cent of the revenue comes from community contributions
in the form of a user fee and the sale of certified emissions reductions (CERs).
The project had several positive effects: (a) reduction of the landfilling budget of the
city; (b) creation of assured revenue for 10 years through the sale of compost and CERs; (c) creation Source: United Nations
of 800 jobs for poor urban residents; (d) production of 50,000 metric tons of compost for sustainable (2010b).
farming; and (e) achievement of knowledgeability by urban communities about the resource value a  United Nations, Treaty
of waste. Series, vol. 1771, No. 30822.

Financing sustainable cities

The scale and scope of needed finance

Building sustainable cities poses significant financial challenges to national and municipal
authorities. It entails commanding enough resources to finance the cost of infrastructure
and the provision of a wide range of public services, within the context of major chal-
lenges such as ageing of populations and climate change threats. Urban authorities have to
prioritize competing financing requirements, usually without sufficient budget resources
to address the challenges of sustainable development simultaneously.
The nature of the trade-offs between economic development and climatic pri-
orities varies from city to city. For cities located in poor countries (low-income and lower
78 World Economic and Social Survey 2013

middle income), sustainable development depends mainly on their capacities to finance

investment in green infrastructure and access to basic services. For cities located in richer
countries (upper middle income and high-income), financing is needed for restructuring
cities’ design, infrastructure, transport and efficiency in the use of water and electricity.
Similarly, with a growing number of international migrants and rising in-
equalities among countries, global and medium cities in both developed and developing
countries are challenged to provide adequate public services. On the other hand, immigra-
tion has often stimulated the economic and cultural revival of urban neighbourhoods and
has been a source of labour vital for the growth and competitiveness of the cities. At the
same time, many cities across the world need resources to finance the industrial processing
of waste and the improvement of recycling systems.

A policy framework for sustainable financing

The creation of a policy framework for responding effectively to the challenge of financing
the sustainability of cities requires multilayered cooperation among local national and
global communities, including the development of partnerships to harness public and
private resources for the purposes described above.
Financing investment in public infrastructure, including adaptation to and
mitigation of climate change, is a daunting task, one that often demands large sums of
upfront finance and an acceptance of the fact that returns will be seen mainly in the
medium and long terms.
Regulatory measures, including market and non-market mechanisms, are
important for determining pricing structures, taxes and subsidies for households and
industry, e.g., for the development of compact neighbourhoods and the retrofitting of
buildings. Various types of taxes—included, for example, in lower fares for public trans-
portation—can be used to finance the gap between the financial outlay and the actual
cost of services.
Thus, for cities in poor and rich countries alike, part of the financing would
have to be directed towards limiting the damaging effects of climate change on the envi-
ronment, biodiversity and the livelihoods of present and future generations. In this sense,
the principle of common and differentiated responsibilities can guide the establishment
of an international cooperation framework capable of supporting the development and
resilience of poor countries.
Oil-exporting and emerging economies experiencing relatively high economic
growth but with urban settlements vulnerable, for example, to sea-level rise, storms and
droughts, should use part of the resources generated to finance cities’ risk reduction strate-
gies and improved infrastructure for adaptation, mitigation and provision of public services.

Examples of financing strategies

Bond banks and resource pooling can be useful instruments for reducing risk. In 1998,
the Ahmedabad Municipal Corporation issued 1 billion rupees in bonds (without a State
guarantee) to finance a water supply and sewerage project. The bond issue improved the
city’s finances (World Bank, 2013).
Public-private partnerships can also serve as viable instruments for raising
funds for financing infrastructure projects, particularly in developing countries with
 Towards sustainable cities 79

limited access to long-term credit. Public-private partnerships can improve asset utiliza-
tion and favour cost recovery through user fees. For example, improvement in the quality
of public transportation services through engagement of the private sector can justify
higher fees (see the annex for information on the public-private partnership established in
Freiburg, Germany, to finance the production of renewable sources of energy).
Cities in poor countries may also leverage the value of land to finance infra-
structure. In Cairo, for example, the auction of 3,100 hectares of desert land in 2007
generated $3.1 billion. This amount of resources was to be used to reimburse costs of
internal infrastructure and build a connecting highway to the road surrounding Cairo.
Leaseholds can also leverage the value of land. These instruments can generate the initial
capital needed to cover the start-up costs of infrastructure investments. In the long run,
other instruments, such as property taxes, can finance maintenance and upgrade of public
investments. However, land-based financing instruments require relatively strong and ef-
fective institutions and well-articulated legal frameworks.
Viet Nam has been able to finance universal access to electricity and achieve
high levels of access to water and sanitation. In the poorest provinces, equalization
has enabled access to basic services. Cities also finance themselves through taxes, land
leases, short-term debt, investment funds and cross-subsidies from provincial public utility
companies. Land leases, for example, are becoming an increasingly important source of
finance. Yet, financing infrastructure services is still a challenging task for many cities
(World Bank, 2013).
Sources of finance can have different degrees of stability and predictability.
Financing for Germany’s cities is largely derived from tax income tied to business profits,
which can fall during times of crisis. For example, since Berlin is liable for high interest
payments on past borrowing, it has requested debt relief from the federal Government. In
contrast, city budgets in France and Italy rely more on real estate taxes, partly because the
revenues are more stable and easier to predict.
However, the situation of cities in many poor countries is more problematic.
Financial support from national Governments and donor agencies is often minimal, and
provided, typically, only for the initial construction of infrastructure and not for ongoing
operations. Thus, cities rely mainly on fees, tariffs and property taxes. However, property
valuations can be out of date or incomplete, while capacities to collect taxes remain weak.
Sprawling, in particular, can weaken tax systems in dynamic cities since, frequently, sub-
urban residents pay property taxes not in the city where they work but in a different—and
smaller—community (PricewaterhouseCoopers, 2012).
In a context of policies of fiscal restraint, some national Governments are
pressed to grant more autonomy to cities in generating resources and determining their
destiny. For example, since 1988, the central Government of China has not financed local
expenditure; hence, local governments have to provide and finance public services.
 80

Annex
Examples of plans and policies for building sustainable cities
Education, Economic
training, growth, green
research, and economy, jobs, Green infrastructure Renewable energy Waste and Water, sanitation
Population Disaster risk information training/ (buildings, public and reduction of CO2 Energy recycling and ecosystem
City (thousands) reduction programmes Housing retraining transportation) emissions efficiency management management
Bogotá 9,000 (20 per Focused on reducing Yes (for water-use Green economy Green public transportation Air quality programme Yes (efficiency)
cent of nation's seismic risks for efficiency) accounts for 28 per network; mass transit bus
population) schools; law No. 1523 cent of city GDP system (TransMilenio)
of 2011 established a modelled on that of
new National System Curitiba; park space; bicycle
for Disaster Risk paths (Ciclovia programme),
Management with infrastructure for pedestrian
emphasis on engaging safety
local communities
Cape Town 2,480 Community action plan Poverty reduction High economic MyCiTi bus service and new 10 per cent of homes 14.5 per cent of Since 1994, the goal
measures: clearing storm based on the urban growth cycle lanes; human-scale would use solar power households (the has been to provide
water drains (short- renewal programme, design of buildings and by 2020; 10 per cent of wealthy) produce basic services to all
term); infrastructure including housing spaces energy consumption half of the city's (success with water
(medium-term); (a Government from renewable sources waste, which and energy, not yet
transformation and programme launched by 2020; possible represents four times with sanitation)
integration of informal in 2001) mandatory solar panels the waste per day
World Economic and Social Survey 2013

settlements (long-term). in every building produced by the poor

Emphasis on non-white
areas and informal
settlements
Ilo 53 Yes Yes Yes, the Ilo Air Clean Yes Yes
Project includes
assessment of impact
of air pollution on
children and crops, and
a contingency plan to
limit impacts; plan to
reduce health impact of
CO2 emissions
Kampala 1,660 (60 per Environmental Mapping; slum EcoMobility includes cycling, Improved waste
cent live in slums) protection measures upgrading through wheeling, walking and and recycling
such as tree planting and the provision of clean public bus transportation management
wetland conservation; water and better (intermodality)
relocation of residents housing
in informal settlements
along waterways;
planting trees near
schools to reduce wind
damage and risks to
children
(cont’d)
 Education, Economic
training, growth, green
research, and economy, jobs, Green infrastructure Renewable energy Waste and Water, sanitation
Population Disaster risk information training/ (buildings, public and reduction of CO2 Energy recycling and ecosystem
City (thousands) reduction programmes Housing retraining transportation) emissions efficiency management management
Seoul 10,600 The Seoul metropolitan Dissemination of High economic Buildings, integrated Wind, solar; during Yes
government has data to reinforce growth, partly transportation of bicycles, 2006-2010, air
responded to disasters good habits, e.g, supported by green bus, trains and taxis; half pollution was reduced
triggered by monsoons on the amount economy of the bus fleet to become by
with the Storm and of carbon electric by 2020; bike 20 per cent
Flood Preparedness emissions by each paths and parking spaces;
Plan, improving transportation pedestrian areas
drainage systems and mode and route
strengthening critical option
infrastructure
Copenhagen 509 (metro Climate Plan 2011 could Goal for 2015: 95 Integrated transportation, Wind energy; rate In order to warm Yes The city's 2004 Parks
region: 1.7 deliver savings of €3 per cent of home including bicycle use; of CO2 emissions buildings in Policy emphasizes
million) billion over 100 years residents would non-motorized transport or decreased by 15 per downtown areas, enhanced recreation
in losses from future be able to walk to active transport; 1 out of 3 cent during 1992-2002; the city reuses along the harbour
extreme flooding from a park, beach or residents cycles to work; a Climate Plan 2011 calls excess heat from and coast as well
the sea and rain swimming pool in network of 300 kilometres for 20 per cent cut in waste incinerators as improvement of
less than 15 minutes of bike lanes; green cycle carbon emissions by and power plants water cleanliness;
(the proportion was routes for long- distance 2001; goal: to become water consumption
60 per cent in 2010) travelling, designed to CO2-neutral by 2025 rate is 127 litres per
minimize stops due to car resident per day
traffic; the oresund bridge (objective is to reach
carries a highway and train 110 litres)
line connecting Copenhagen
and Malmö (Sweden)
(ferry connection for goods
transportation between
these cities was closed)
Portland 568 Low-income housing Regional Transportation Plan Goal: 100 per cent Residential Curbside Goal: by 2020, water
programme 2000-2020; coordinated green power and 50 Collection Service used would equal
transportation by bus and per cent reduction Programme has amount of water that
light rail system; car-sharing in electricity use reduced 40 per cent falls on city annually
programme; Portland by 2020 relative to of garbage in 2012;
Bicycle Plan for 2030: 2007; partnership residents recycling 85
bicycle network of 510 between the city and per cent of recyclable
Towards sustainable cities

kilometres, parking and Clean Energy Works materials; goal to

integration with other to improve energy recover 90 per cent
transportation modes efficiency in 6,000 of city's waste by
homes by 2013; goal: 2030; goal: fewer
to achieve at least 10 than 5,000 sheets of
megawatts of installed 100 per cent recycled
solar capacity by paper used per
2013; plan to reduce department per year
greenhouse gas by 2015
emissions by 80 per
cent by 2050
(cont’d)
81
 82

Education, Economic
training, growth, green
research, and economy, jobs, Green infrastructure Renewable energy Waste and Water, sanitation
Population Disaster risk information training/ (buildings, public Energy
and reduction of CO2 recycling and ecosystem
City (thousands) reduction programmes Housing retraining transportation) emissions efficiency management management
Freiburg 220 Incentives for on-site The online CO2 Construction of The “environmental Low-energy construction 60 "plus energy" 50 per cent City recycles more 40 per cent of
management of storm Diet calculator "passive houses" economy” employs standard so that buildings homes of the Solarof electricity than the State and territory is communal
water and landscape outlines a personal with no need for nearly 10,000 have a maximum energy Settlement create produced by the figure is greater forest; city adopted
planning; use of green CO2 footprint and an active system to people in 1,500 use of 65 kilowatt-hours more energy than combined than the national the 2010 Freiburg
roofs and bioswales information on maintain comfortable businesses, per square metre per year; they consume, and heat and average; waste is Forest Convention
to promote creation of how to offset temperatures (they generating €500 since the 1970s, building earn €6,000 per year
power; support used as raw material for sustainable forest
natural and permeable personal emissions reduce energy loss million per year; codes have been designed for residents; target of
programme for and energy source; management;
surfaces; metrics have (www.freiburg. by 90 per cent and economic benefits to enhance climate and home insulation
reducing CO2 emissions by 2009, 69 per 47 per cent green
been established for de/ CO2); centres of require energy of only lie mainly in "cool airflows"; integrated by 40 per cent by 2030,
and energy cent of produced space/parks
storm water fees by private and public 15 kilowatt-hours manufacturing, transportation: bus, tram, from 1992 levels; city
retrofits through waste was recycled;
volume of impermeable research investigate per square metre per research and rail, bicycle and pedestrian; adopted speed limit of
municipal number of landfills
property and estimated renewable energy year); city promotes education, and trips on public transit 18 per 30 kilometres per hour
subsidies; clean air fell from 50,000
rainfall at residential and resources; Solar planned and dense tourism; companies cent; walking 23 per cent; in main traffic axis;
corridors in streets in the 1970s to
commercial sites; water Training Centre environmental produce solar cells bicycling 27 per cent (on windmills, solar panels:
restrict fog from 200 in 2010; each
retention reservoir built for technicians housing and the machinery 420 kilometres of bicycle- the 450 renewable the Rhine River person produces
to reduce flood risks and installers; needed to friendly paths); inner city energy and solar valley, limiting 124 kilograms of
protection of manufacture them has over 5,000 bicycle companies employ electricity used in house waste and
groundwater for parking bays available, plus more than 10,000 lighting streets; bulk rubbish, lower
safe drinking water 1,000 in the main train people; the regional
linear time- than the national
supply through station; over 72 per cent public utility offers
variable electricity average of 143;
World Economic and Social Survey 2013

educational of all commuters use the "solar investmentscharges use meters heat produced
brochures (this tram system; majority of the subsidies" to residents
to gauge by three during incineration
intervention can population is within half a and businesses that
different time of residual waste
be listed under kilometre of station install solar panels;
zones, charging is used to generate
the right-most goal: to increase share
consumers electricity, which
column heading of renewable energy in
accordingly; feeds the grid to
(Water, sanitation the electricity market
improved supply 25,000
and ecosystem from 5 per cent to 20
insulation of households
management) per cent by 2020 buildings;
low- energy
construction
Singapore (city 4,600 The Marina Barrage High economic Goal: greening 80 per Solar; goal: to reduce Goal: 35 per cent Goal: recycling rate of Goal: to reduce water
State) project acts as a tidal growth cent of buildings by 2030; CO2 emissions by 30 per improvement in 70 per cent by 2030; consumption to 140
barrier to alleviate E- Symphony Card pays cent by 2030; Vehicle energy efficiency currently, 56 per cent litres per person per
flooding in low-lying for road tolls, bus travel, Quota System policy: by 2030, from of waste is recycled day by 2030, down
areas taxis, metro and even people bid for right 2005 levels from 156 litres in
shopping; goal: 70 per to purchase a vehicle 2008; 30 per cent of
cent of all journeys by (which discourages city's water needs is
public transportation by car purchasing and covered by treated
2030; Electronic Road generates revenue waste water (goal
Pricing system changes for repairing road is to reach 50 per
according to actual demand infrastructure) cent by 2060); goal:
in a corridor (to reduce building 0.8 hectares
congestion) of green space for
every 1,000 residents
(cont’d)
 Education, Economic
training, growth, green
research, and economy, jobs, Green infrastructure Renewable energy Waste and Water, sanitation
Population Disaster risk information training/ (buildings, public and reduction of CO2 Energy recycling and ecosystem
City (thousands) reduction programmes Housing retraining transportation) emissions efficiency management management
Shanghai 21,000 City’s flood resistance In 2006, city Goal: to build 36 Electronic ID Management Air quality programmes Goal: to reduce Domestic garbage Tap-water access rate
standard can withstand publicized the million affordable System (smart ID and energy usage per treatment rate: 82 100 per cent; waste-
once-in-200-years Shanghai Overall flats for low income licence tag cards); public unit of GDP by per cent; reduce per water treatment
high-tide level and cope Preparedness people in cities transport smart cards, bus 18 per cent and capita garbage to rate; 83.3 per cent;
with gales of up to 133 Programme for between 2011 and smart information systems reduce carbon 0.8 kilogram per day plan to reduce water
kilometres per hour; Public Emergencies 2015 emissions per unit in 2015, 20 per cent usage per unit of
levee of Huangpu River of GDP by 19 per lower than in 2010 output by more than
and urban flood control cent in five years 20 per cent by 2015,
projects able to resist (2010-2015) compared with 2010;
once-in-1,000-years 2015 target: to reach
high-tide level of the forest coverage of 15
Huangpu per cent and green
coverage of 38.5 per
cent; management
of green belt for
forest conservation
and reduction
of groundwater
pollution
London 7,400 Tidal waves are Yes Sustainable and Green economy Public transport subsidized The Air Quality Strategy Target of 60 per Target of zero Trees and woodland
controlled by the Thames affordable housing accounts for 19 under a central authority aims at reducing cent reduction of waste to landfill are protected; local
Barrier (1984), which programme; per cent of United (Transport for London), emissions from road CO2 emissions by minimizing authorities are
can be raised to cut off experimental Kingdom GDP but services are franchised transport and new by 2025, below waste by 2031; required to develop
advance of the North Sea low-carbon housing and 15 per cent of to various private firms development; results 1990 levels; target encouragement to local tree strategies
tide; target: to reduce development total employment (buses); city promotes of urban congestion of 25 per cent of reuse and increase linked to their local
the impact of the urban (BedZED) (2002), (70 per cent of smart travel, walking, charges (2003): 21 per heat and power recycling to 60 per open space strategies
heat island effect eco-development; employment in cycling; reduce travel by cent reduction of traffic, used must be cent by 2031
Greenwich London is private car; target: to achieve 30 per cent reduction generated by local
Millennium sector-based) zero-carbon in residential of congestion, 43 per decentralized
Village: includes an buildings by 2016 and cent increase in cycling systems by 2025;
ecological park, use zero-carbon in non during first year; £125 map tool assists
of environmentally residential buildings by million raised for public identification of
sustainable materials, 2019; high priority given transport improvement; major energy
recycled and local to bus travelling, improved ecological footprint consumers, CO2
materials, and mix of interchange between (land area for emissions, energy
Towards sustainable cities

social needs-based modes of transport; efficient sustaining all activities) supply plants,
rented housing and distribution of freight; is 42 times its community
privately owned units increase transport by water; bio-capacity and 293 heating networks,
sufficient cycle parking; times its geographical and heat density;
improved sidewalks area (estimation based local authorities
and small urban spaces; on consumption of are developing
restricted car parking in new water, energy, food, energy master
development production of waste, plans
and so forth); Low
Emission Zone standard
(2008) enforced use of
automatic licence plate
recognition
83

(cont’d)
 84

Education, Economic
training, growth, green
research, and economy, jobs, Green infrastructure Renewable energy Waste and Water, sanitation
Population Disaster risk information training/ (buildings, public and reduction of CO2 Energy recycling and ecosystem
City (thousands) reduction programmes Housing retraining transportation) emissions efficiency management management
Paris 2,211 (population Plan for heatwaves: City sponsors Paris and its Bike-sharing programme; Paris Climate Plan Paris Climate Plan to clean
density: 25,200 isolated persons can public information surrounding region new electric tramway (2007) goal: to reduce Plan (2007) goal: water in Seine
residents per register in Chalex campaigns produce about 30 lines replace overcrowded greenhouse gas consumption River to improve
square kilometre ) database; during to encourage per cent of national bus lines; the Paris emissions by 25 per of 25 per cent biodiversity; the
heatwaves, persons solidarity between GDP transportation plan cent and use 25 per less energy by Main Verte charter
are contacted and generations and (2007) aims at reducing cent of city's energy 2020, over 2004; (2003) promotes
visited; city supports neighbours transportation-related from renewable sources development organic gardening
insulation, shutters, greenhouse gas emissions by 2020, compared density bonuses practices; there
sun-shading, ventilation by 25 per cent by 2013 with 2004, and to in most are 50 community
and cooling systems by and 60 per cent by 2020 reduce emissions by energy-efficient gardens managed by
World Economic and Social Survey 2013

using district cooling (relative to 2004), mainly by 75 per cent by 2050; buildings; since neighbourhood non-
and geothermal energy; reducing car use; the plan renewable energy 2009, city offers profit organizations;
maps of floodable also supports low-emission represents 2.5 per cent free audits and drastic reduction of
areas are provided to all vehicles with recharge of city's total energy decision support chemical fertilizers
homebuyers stations and lower parking consumption on insulation, and pesticides in
rates for small and electric and subsidizes parks and gardens
vehicles; during 2001-2008, insulation projects in the last 15 years;
car traffic declined by for condominium green roofs and
19 per cent; car-sharing associations and walls; 400 beehives
programme adopted in owners; subsidies are dispersed
2011; plan to add 300 (grants) also used throughout the city
kilometres of bus lines, 120 to fund efficient
kilometres of tramway lines, heating, water
105 kilometres of tram or heating systems,
train, 13 new multimodal ventilation,
nodes, and 80 kilometres of and renewable
metro by 2020 energies
Source: UN/DESA.
Note: The present annex does not provide an exhaustive description of all of the sustainability policies planned for and implemented in the cities listed. Blank cells may indicate that policy initiatives in a
specific urban area are limited. Further research could provide additional relevant data and information on urban plans and policies.
 Chapter IV

Ensuring food and

nutrition security

Summary
yy The persistence of malnutrition reflects deep inequalities in the distribution of and
access to food at national and global levels. Ensuring that everyone in the world has
access to enough nutritious food should be at the forefront of the post-2015 develop-
ment discussions.
yy Increasing food production in parallel with population growth, urbanization and a
change in consumption patterns will require an integrated approach that takes into
consideration the nexus of food, water, energy, environment and climate, while reori-
enting food production, distribution and consumption.
yy Increasing agricultural productivity will be required, in particular in developing coun-
tries where the agriculture sector accounts for an important share of gross domestic
product and where large productivity gaps still exist.
yy Access of poor households to food and of isolated producers and smallholders to
markets will need to be improved, in particular given that hunger can exist even in
countries where there is enough food produced.
yy Food consumption will need to be oriented towards diets that are less resource-
intensive and more nutritious, which will be crucial for the sustainability of the food
system and for better health outcomes.
yy The transformation and development of the agricultural sector will require invest-
ments on a significant scale. The public sector should typically finance infrastructural
needs as well as research and development, while introducing adequate incentives
for private investments, such as risk protection and better access to credit markets. In
addition, Governments need to design a regulatory framework that ensures inclusive
and sustainable private investments.

Introduction
Ensuring that everyone in the world has access to enough nutritious food should be at
the forefront of the post-2015 development discussions, as recently emphasized by the
Secretary-General through the launch of the Zero Hunger Challenge.1 The present
chapter highlights the changes needed in the food system to ensure food and nutrition
security by 2050 and the challenges involved, given that malnutrition is only partly an
issue of food availability. The persistence of malnutrition reflects the deep inequalities in
1 Secretary-General Ban Ki-moon launched the Zero Hunger Challenge on June 20, 2012, at the
Rio+20 United Nations Conference on Sustainable Development. For further information see
http://www.un.org/en/zerohunger/challenge.shtml.
86 World Economic and Social Survey 2013

the distribution and access to food, knowing that one third of the food produced is not
eaten—a missed opportunity to feed the growing world population (Food and Agriculture
Organization of the United Nations, 2012b).
Recent studies have found that the challenge of malnutrition is broader than the
issue of hunger or undernourishment, as highlighted by the United Nations Millennium
Declaration.2 Low quality and low diversity of food are other major sources of malnutri-
tion. Individuals may have an intake of enough calories for daily subsistence, and still suffer
from “hidden hunger”, with low levels of micronutrients due to low diversification of diets.
This is a problem in both developing and developed countries, affecting 30 per cent of the
world’s population. The excess intake of calories is another major global public-health con-
cern, as overweight and obesity cause more than 2.8 million deaths per year among adults.
In addition to the multiple burdens of malnutrition, other problems are on
the horizon. On the demand side, population growth, rapid urbanization and consequent
changes in consumption patterns will require additional food. The Food and Agriculture
Organization of the United Nations (FAO) estimates that food production will have to
increase 70 per cent globally to feed an additional 2.3 billion people by 2050. At the
same time, food demand has been shifting towards more resource-intensive agricultural
products, such as livestock and dairy products, thereby exerting additional pressure on
land, water and biodiversity resources.
An increase in food production will also require integrating sustainable prac-
tices, particularly regarding the use of natural resources. Many of the current agricultural
practices have relied on cheap energy and abundant water and land, and are a leading
source of greenhouse gas emissions (The Hague Conference, 2010). These practices are
now proving unsustainable for the environment and health, due to contamination of air,
land and water sources. At the same time, they have led to substantial productivity losses,
thereby posing risks to food security.
Thus, increasing food production and improving distribution to respond to
population growth, urbanization and a change in consumption patterns will require an
integrated approach to addressing several challenges simultaneously along the entire food
chain. Such an integrated approach to food security and environmental sustainability
should also take into consideration the nexus of food, water, energy, environment and
climate, while reorienting food production, distribution and consumption.
The first challenge is to increase food production, while minimizing the en-
vironmental impact and increasing natural resource efficiency. This will require increas-
ing agricultural productivity, in particular in developing countries where the agricultural
sector contributes an important share of gross domestic product (GDP) and where large
productivity gaps still exist. The introduction of improved agronomical practices and ad-
vanced technologies will be central. Information and communications technologies (ICT),
for instance, can be used to inform smallholders about new farming techniques and market
prices (World Bank, 2008a), as well as to improve livestock traceability (Deloitte, 2012),
maximizing output, while minimizing negative impacts on the environment. Additional
investments in research and development (R&D) will be crucial in increasing productivity,
but better dissemination and adaptation of existing technology in different agroecological
regions will also need to be part of the solution. A broader rural development strategy
is also required, including infrastructural investments to better connect producers and
smallholders to output markets, including rural-urban linkages.
2 See General Assembly resolution 55/2.
 Ensuring food and nutrition security 87

The second major challenge will be to improve the access to food and markets,
as hunger often occurs in countries where there is enough food produced. Income poverty
is a major factor preventing access to food. Therefore, increasing the income level of poor
households will help them obtain food that is adequate in quantity and quality, thereby
reducing the prevalence of undernourishment. However, high inequality in the rural sec-
tor, in particular in the distribution of assets—such as land, water, capital, education and
health—is an obstacle that needs to be addressed in order to enhance food security. The
underlying issue of discrimination in the rural sector, including against women, also calls
for concrete action. In addition, social protection mechanisms, including safety nets, must
also be part of a broader strategy to facilitate access of lower-income groups to food, in
particular during economic shocks.
The third challenge is to orient food consumption towards “sustainable diets”,
that is, diets that are less resource-intensive and more nutritious, which will be crucial
for the sustainability of the food system. Such changes would also improve health con-
ditions related to low diversification of diets, including obesity. Reducing food wastage
will also contribute significantly to the sustainability of the food system. Currently, it
is estimated that 32 per cent of the total food produced globally is wasted (Food and
Agriculture Organization, 2012b). In order to substantially reduce the quantity of food
lost and wasted, changes have to occur at different points along the food chain: produc-
tion, storage, transportation and consumption. Strategies to reduce food waste will vary
among countries according to their structural conditions.
Finally, in an increasingly interconnected world, improving agricultural pro-
ductivity and the allocation of food within and across countries requires well-coordinated
actions at local, national and global levels. At the local and national levels, in particular in
food-insecure countries, institutions should promote transparency and accountability, as
well as the participation of all individuals in the decisions that affect them. At the global
level, the international community can help developing countries in their efforts to design
and implement policies that increase resilience to food price volatility and to climatic
shocks, as well as provide safety nets, especially for smallholders. Wealthier countries will
also be required to change their production and consumption patterns through actions
that should include reviewing trade policies to ensure that they are pro-food and pro-
nutrition security, establishing regional and international strategic reserves, and address-
ing the issue of speculation in land, as well as enabling the adoption of sustainable diets.

Multiple dimensions of malnutrition:

undernourishment, micronutrient deficiencies
and over-nutrition
The health risks associated
Malnutrition is a broad term encompassing conditions that hinder good health, includ- with undernourishment
ing both under-nutrition and over-nutrition. Under-nutrition can be the result of under- and inadequate diets in
nourishment (energy deficiency) or micronutrient (vitamin and mineral) deficiencies. many developing countries
Undernourishment continues to affect the world’s population (12.5 per cent), mainly in are running parallel
to a rapid rise in non-
developing countries (Food and Agriculture Organization of the United Nations, 2012a),
communicable diseases
despite remarkable progress in reducing hunger during the last decade, while stunting in many developed and
and micronutrient deficiencies affect a significant number of people. Obesity, on the middle-income countries
other hand, has been increasing rapidly in all countries, although its prevalence is still due to over-nutrition
88 World Economic and Social Survey 2013

considerably higher in developed countries. Thus, today, the world as a whole is facing
multiple burdens of malnutrition. The health risks associated with undernourishment and
inadequate diets in many developing countries are running parallel to a rapid rise of non-
communicable diseases in many developed and middle-income countries, owing to the
rampant increase in over-nutrition.

Under-nutrition

Food insecurity3 persists

Sub-Saharan Africa and According to recent estimations, in 2010-2012, about 868 million people were chroni-
Western Asia are facing the cally undernourished (Food and Agriculture Organization of the United Nations, 2012b).
most serious challenges to
reaching the Millennium Despite the fact that this figure is still particularly high and represents, as noted above,
Development Goal 1 12.5 per cent of world population, it also indicates that there has clearly been progress in
hunger target by 2015 reducing hunger at the global level (figure IV.1).
In several regions, however, the food and financial crisis slowed down that
progress, mainly owing to higher food prices, reflecting different levels of vulnerability to
external shocks and different country capacities to increase food supply when needed. Sub-
Saharan Africa and Western Asia are facing the most serious challenges to reaching the
Figure IV.1 Number of people undernourished and prevalence of undernourishment,
1990 -Figure
2012 IV.1
Number of people undernourished and prevalence of undernourishment, 1 990-2012
Millions of persons

1,050 20
Number of people (millions)
Prevalence (percentage) 18
1,000 16

Prevalence (percentage)
14
950 12
10
900 8
6

850 4
2
800 0
1990-1992
1991-1993
1992-1994
1993-1995
1994-1996
1995-1997
1996-1998
1997-1999
1998-2000
1999-2001
2000-2002
2001-2003
2002-2004
2003-2005
2004-2006
2005-2007
2006-2008
2007-2009
2008-2010
2009-2011
2010-2012

Source: Food and Agriculture

Organization of the United
Nations (2012b).

Source: UN/DESA, based on FAO, The State of Food Insecurity in the World 2012: food security indicators.
Available from http://www.fao.org/publications/sofi/food-security-indicators/en/.
3 Food security has been defined as access by all people at all times to the food needed for a healthy
life.
 Ensuring food and nutrition security 89

Millennium Development Goal 1 hunger target by 2015.4 Western Asia, in particular, has
experienced a significant increase in the number of people that are undernourished, from 8
million in 1990-1992 to 21 million in 2010-2012 (Food and Agriculture Organization of the
United Nations, 2012b), increasing the prevalence of undernourishment over that period.
The distribution of undernourished people in the world has also been altered
in line with different progression rates in hunger reduction during the past two decades
(figure IV.2). In the past 20 years, the share of the world’s undernourished people decreased
in East Asia and the Pacific, from 41 per cent in 1990-1992 to 28 per cent in 2010-2012,
whereas the proportion increased significantly in sub-Saharan Africa, from 17 per cent in
1990-1992 to 27 per cent in 2010-2012, as well as in Northern Africa and Western Asia,
from 1 per cent in 1990-1992 to 3 per cent in 2010-2012.
Periods of high food prices in the past few years have affected countries and re-
gions differently, according to their different levels of vulnerability to external shocks. For
instance, many African countries, such as the Democratic Republic of the Congo, were
fully exposed to price hikes and the global recession. Over the long run, the differences in
hunger reduction across regions and countries are attributable to several factors. Inclusive
economic growth, generating demand for the assets controlled by the extreme poor, has a
much higher impact on hunger reduction. In addition, when poor households invest part
of their increased income in health, sanitation and education, the impact of economic
growth on hunger reduction is also stronger. In parallel, as seen in the case of Bangladesh,
which is on track to reach the hunger target of Millennium Development Goal 1, higher
public spending on health and education with targeted interventions increases nutritional
success (Food and Agriculture Organization of the United Nations, 2012b).

Impacts of under-nutrition: undernourishment and

micronutrient deficiencies
Undernourishment is the result of food intake that is inadequate as regards providing An individual may take
sufficient calories to meet people’s physiological requirements on a continuing basis. in enough or even too
many calories for daily
Micronutrient deficiencies are also a result of under-nutrition, but in this case they are
subsistence, but cases
related to insufficient intake of vitamins and minerals.5 An individual may take in enough where diet is not diversified
or even too many calories for daily subsistence; however, if his or her diet is not diversified enough may lead to low
enough, the result may be low levels of micronutrients, a condition referred to as “hidden levels of micronutrients
hunger”. This is an issue in both developing and developed countries, affecting 30 per cent
of the world’s population (ibid.).
The relation between poor nutrition and poor health—including the existence
of a vicious cycle of poor nutrition, poor health and low income—is well documented.
For instance, iron deficiency anaemia impacts negatively on cognitive development and
4 The impact of the food price and economic crises during the period 2007-2010 in under­
nourishment prevalence was less severe than previously estimated. According to FAO, there are
two main reasons. First, the impact of economic shocks on developing economies was less severe
than previously estimated. Many developing economies, in particular the largest ones, continued
to grow at a relatively fast pace, albeit more slowly than in the pre-crisis period. Second, the
methodology used by FAO estimates chronic undernourishment, which does not capture the
effects of short-term shocks, such as price spikes. Therefore, the undernourishment indicator does
not fully reflect the impact of price spikes and other short-term shocks.

5 Vitamin A, iron and iodine deficiencies are the most commonly measured micronutrient
deficiencies because they are well known and have long been associated with specific health
consequences (Food and Agriculture Organization of the United Nations, 2013).
90 World Economic and Social Survey 2013

Figure IV.2 Distribution of undernourished people in the world, by region,

Figure IV.2 and 2010-2012
1990-1992
Distribution of undernourished people in the world, by region, 1 990-1992 and 2010-2012

1990-1992

2% 1%
6% 17%
Sub-Saharan Africa:
170 million
South Asia: 327 million

East Asia and the Pacific:

405 million
Latin America and the
Caribbean: 65 million
41%
Developed countries:
33% 21 million
Northern Africa and Western
Asia: 13 million

2010-2012

2% 3%
6%
27% Sub-Saharan Africa:
234 million
South Asia: 304 million

East Asia and the Pacific:

28% 239 million
Latin America and the
Caribbean: 49 million
Developed countries:
17 million
Northern Africa and Western
Asia: 25 million
34%

Source: Food and Agriculture

Organization of the United
Nations (2012b).

Source: UN/DESA, based on WHO (2012b).

Abbreviations: AFR, WHO African Region; AMR, WHO Region of the Americas; SEAR, WHO South-East Asia
Region; EUR, WHO European Region; EMR, WHO Eastern Mediterranean Region; WPR, WHO Western Pacific Region.
 Ensuring food and nutrition security 91

academic performance in school-age children (Food and Agriculture Organization of the

United Nations, 2013). Short-term consequences in terms of learning disability, as well as
long-term economic consequences, can be expected, since lower education levels lead to
lower income opportunities.
Vitamin A deficiency, for instance, is a leading cause of blindness and cor-
neal damage. In developing countries, 163 million children were estimated to be vitamin
A-deficient, with a prevalence of more than 30 per cent in 2007, down from approximately
36 per cent in 1990 (United Nations System Standing Committee on Nutrition, 2010).
From a longer-term perspective, there is also the risk of intergenerational
transmission of poor nutritional status. Women who suffer from undernourishment are
more likely to give birth to underweight babies, whose development will then be affected
throughout their life. Undernourishment may also lead to irreversible consequences, such
as physical stunting, excluding individuals from better-rewarded tasks which demand
greater physical strength. Ultimately, undernourishment affects individuals’ freedom and
well-being (Drèze and Sen, 1991).
Not only does undernourishment have microlevel negative consequences, but
it affects the whole economy, reducing its rate of growth. For instance in India, stunting
and iron and iodine deficiencies result in productivity losses equivalent to 2.95 per cent of
GDP annually (World Bank, 2006). Despite the evidence of negative outcomes from poor
nutrition in the short and long terms, nutritional health has not received sufficient priority
in the development agenda (United Nations, 2012c). In particular, a good nutritional
status for the whole population would have a positive impact on economic development.6

Over-nutrition

Obesity on the rise

Malnutrition has been traditionally associated with undernourishment; but in recent Overweight and obesity are
years, greater attention has been given to overweight (body mass index equal or superior often perceived as higher
income economy issues,
to 25) and obesity (body mass index equal or superior to 30), as a major global public-
but in fact they have been
health concern and a cause of death of at least 2.8 million adults per year (World Health on the rise, and at a fast
Organization, 2012b). Overweight and obesity are often perceived as higher income pace, in low- and middle-
economy issues, but in fact they have been on the rise, and at a fast pace, in low- and income countries
middle-income countries.
Globally, in 2008, the number of overweight adults reached more than
1.4 billion, surpassing the number of undernourished people worldwide.7 Almost 13 per
cent of the world’s population are obese.
The prevalence of overweight and obese individuals varies across the world.
Breaking down by World Health Organization (WHO) regions, in the Americas, over-
weight and obesity affect 62 per cent and 26 per cent of the population, respectively. On
the opposite side of the spectrum, in South-East Asia, only 14 per cent of the population
are overweight. In Organization for Economic Cooperation and Development (OECD)
6 See FAO, “Incorporating nutrition considerations into development policies and programes: brief
for policy-makers and programme planners in developing countries” (Rome, 2004). Available from
http://www.fao.org/docrep/007/y5343e/y5343e04.htm.

7 WHO (2013).
92 World Economic and Social Survey 2013

countries for which data exist, the prevalence of obesity varies from 4 per cent in Japan and
the Republic of Korea, to 30 per cent or more in the United States of America and Mexico.
Worldwide obesity almost doubled between 1980 and 2008 (figure IV.3). In
OECD countries, until 1980, obesity affected less than 10 per cent of the population.
Since then, that rate has doubled or tripled in many countries. In 2012, in 19 countries out
of 34 OECD countries, the majority of the population was overweight. OECD projections
suggest that more than 2 people out of 3 will be overweight or obese in some OECD
countries by 2020.

Figure IV.3
Figure IV.3 Age-standardized prevalence of obesity among adults aged
Age-standardized
20 years and over,prevalence of obesity
by WHO region, 1980 a among adults aged 20 years or over,
and 2008
by WHO region, 1980 and 2008
Percentage

1980
30
Source: UN/DESA, based on
2008
WHO (2012).
a  Obesity is defined as 25
a body mass index (BMI)
greater than or equal to
30, where BMI is equal to a 20
person’s weight in kilograms
(kg) divided by the square of
his or her height in
15
metres (m2).
Abbreviations: AFR, WHO 10
African region; AMR, WHO
Region of the Americas;
SEAR, WHO South‑East Asia 5
Region; EUR, WHO European
Region; EMR, WHO Eastern
Mediterranean Region; WPR, 0
WHO Western Pacific Region. AFR AMR SEAR EUR EMR WPR Global

Source: UN/DESA, based on WHO (2012b).

In low-
Abbreviations: AFR, and
WHO middle-income
African Region; AMR, countries,
WHO Region ofthe
the number of overweight
Americas; SEAR, children
WHO South-East Asia has
been Region; EUR, WHO
increasing. European
Out of 40 Region; EMR, WHO
million Eastern Mediterranean
overweight children Region; WPR, WHO
worldwide, Western
close to Pacific Region.
35 million
were aliving indefined
Obesity is developing countries
as a body mass in greater
index (BMI) 2010 than (Organization for BMI
or equal to 30, where Economic
is equal to aCooperation
person's
and Development,
weight in kilograms2012a).
(kg) dividedThus, it is not
by the sqaure of hissurprising tometres
or her height in see health
(m2). challenges associated
with over-nutrition in countries that are still facing the issue of undernourishment. These
two dimensions of malnutrition are sometimes experienced within the same household.
This is the result of the greater susceptibility to obesity of adults that have suffered from
undernourishment during their childhood (Hoffman and others, 2000).

Impacts of over-nutrition
The health consequences of over-nutrition and obesity are quite different from those of
hunger. There is an increase in non-communicable diseases instead of infectious and com-
municable diseases in those affected by over-nutrition and obesity. For instance, excessive
consumption of meat (especially red meat), dairy products and eggs by older children and
adults can have detrimental health effects and increase the risk of chronic non-communi-
cable diseases such as heart disease, cancer, diabetes and obesity. Excessive consumption
 Ensuring food and nutrition security 93

of refined sugars and carbohydrates has also been found to be associated with health issues
such as diabetes, overweight and obesity.
According to WHO, overweight and obesity are the fifth leading risk fac- According to the World
tors for global deaths, posing a greater risk than underweight. At least 2.8 million adults Health Organization,
overweight and obesity
die each year as a result of being overweight or obese. Compared with people of normal
are the fifth leading risk
weight, severely obese people die 8-10 years sooner. Every 15 extra kilograms (kg) increase factors for global deaths,
the risk of early death by approximately 30 per cent. In addition, 44 per cent of the dia- posing a greater risk than
betes burden, 23 per cent of the heart disease burden and 7-41 per cent of certain cancer underweight
burdens are attributable to overweight and obesity.
Obesity also represents an important source of health expenditure at the in-
dividual and macro levels. For instance, in any given year, an obese person incurs 25 per
cent higher health expenditures than a person of normal weight. At the macrolevel, obesity
accounts for 5-10 per cent of total health expenditures in the United States of America.
At the same time, obesity negatively affects personal income. Obese people earn 18 per
cent less than people who are not obese (Organization for Economic Cooperation and
Development, 2012a).

Increasing food availability

In developing countries, where the prevalence of undernourishment is higher and the In order to improve food
population is growing faster, food production will need to almost double (Food and availability, the first
concern will be increasing
Agriculture Organization of the United Nations, 2009c). Therefore, the first concern will
agricultural productivity,
be increasing agricultural productivity, in particular in countries where the prevalence in particular in countries
of hunger is higher and where large productivity gaps still exist. The main challenge, where the prevalence of
however, is to increase food production while minimizing the environmental impact and hunger is higher and where
increasing natural resource use efficiency. Finally, food production requires additional large productivity gaps
still exist
investments in rural infrastructure, including in harvest technologies designed to reduce
wastage at the production level.

Increasing agricultural productivity

Low productivity and slow growth in the agricultural sector, including in small farms,
raise specific concerns. Despite some improvements in total factor productivity in the ag-
ricultural sector (Fuglie, 2012), growth in yield, an indicator of land productivity, for most
cereals has been declining since the 1980s (FAOSTAT). Today, important gaps between
farmers’ yields and technical potential yields still exist in many developing countries.
In 2005, such gaps varied from 11 per cent in countries of East Asia to 76 per cent in
sub-Saharan Africa (Food and Agriculture Organization of the United Nations, 2011b).
Reducing these gaps would increase agricultural output, and consequently, food security,
as well as nutrition outcomes, in many developing countries.

The extensive menu

Extension services of technologies and
sustainable practices that
The extensive menu of technologies and sustainable practices that are already available
are already available can,
can, in part, reduce existing productivity gaps in agriculture. In sub-Saharan Africa for in part, reduce existing
instance, where the prevalence of undernourishment is high, important productivity productivity gaps in
gains—on the order of a two- to threefold increase in average yields—can be achieved agriculture
94 World Economic and Social Survey 2013

through better use of existing knowledge and technology (Foresight, 2011). Dissemination
of information and technical assistance will be an effective strategy for improving access
to knowledge and technology. Further, agricultural extension services are a useful tool
for helping farmers increase their productivity, and collaborate with a broader network
of farmers and researchers. In the current context, a large number of actors (civil society
organizations, the private sector, farmers and multilateral organizations) need to contrib-
ute towards this end.
A survey conducted by the Global Conference on Agricultural Research for
Development (GCARD) 2010 points to the importance of official agricultural extension
workers.8 The general perception is that their number is inadequate, especially when meas-
ured against the needs of small-scale farm holders, who have limited access to the services
they offer, services that represent an important vehicle for the transmission of knowledge,
information and training (Lele and others, 2010).
Thus, a longer-term commitment to training and a new approach to techni-
cal education are required. Training and education have to be more practical in nature
and oriented towards problem-solving and decision-making. At the same time, they must
involve farmers and civil society organizations in finding interdisciplinary and creative
solutions to new problems.
Focusing more on building capacity among farmers, in particular smallhold-
ers, is a better strategy than prescribing technological practices. The former approach,
considered to embody the empowerment model, would help farmers to identify and take
advantage of available opportunities (World Bank, 2008a). The exclusion of women from
technical support also needs to be explicitly addressed. In Africa, women receive 7 per cent
of agricultural extension services and less than 10 per cent of credit offered to small-scale
farm holders. Gender analysis and targeted initiatives must be incorporated in agricultural
education, research and extension services (Davis and others, 2007).

Increasing investment in R&D

In addition to existing technology and agricultural knowledge which already provide a
range of alternatives for achieving better outcomes, continuous research and development
in respect of new technologies are needed. In this regard, an important lesson from the
previous green revolution is that the development of new technology requires long-term
financial support for R&D, in parallel with wide and effective dissemination of informa-
tion and know-how (United Nations, 2011b).
However, public expenditure for agricultural R&D remains low in many de-
veloping regions (figure IV.4), the main reason being that since the 1980s, international
support for agriculture research has decreased and many national agricultural research
centres have scaled back their programmes for the production and distribution of seeds
(Dubin and Brennan, 2009). Thus, national initiatives must be designed to address the
lack of investment in R&D, including through partnerships with the private sector.

8 While the main function of agricultural extension workers is to provide and transfer knowledge
for increasing productivity, they are now increasingly being expected to fulfil a number of new
functions, such as linking smallholder farmers to high-value and export markets, promoting
environmental outcomes (involving, for example, watersheds, forests and irrigation water),
supporting microcredit groups, and coping with the effects of HIV/AIDS and other health
challenges (Lele and others, 2010).
 Ensuring food and nutrition security 95

Figure IV.4 Public research expenditure on food and agriculture, 1981-2008

Public research expenditure on food and agriculture, 1981-2008
Millions of 2005 purchasing power parity United States dollars
4000
Sub-Saharan Africa
East Asia and the Pacific, minus China
3500 China
Latin America and the Caribbean
3000 South Asia, minus India
India
2500

2000

1500

1000

500
Source: Agricultural Science
0 and Technology Indicators
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
database (http://www.asti.
cgiar.org/data/).

Source: Agricultural Science and Technology Indicators database (http://www.asti.cgiar.org/data/).

In developing countries, where agricultural R&D remains relatively weak, the
main focus of the public research institutions should be the adaptation of technology to
particular farming conditions and agroecological settings. However, the main challenge
in developing countries is their national research institutions’ lack of adequate resources.
For instance, the development of a new variety of wheat, rice or corn, requires 7-10 years
of breeding (Pardey and Beintema, 2001). The resulting discontinuity in funding compro-
mises their independence and capacity to operate efficiently, while poor documentation of
processes increases the risk of permanent loss of knowledge.
In addition to securing stable financial resources, national public research
centres have to change their organizational culture. They need to improve their respon-
siveness to the needs of farmers, including through joint experimentation and learning.
This requires that research institutions work more closely with farmers and other actors
such as non-governmental organizations, farmers organizations and innovation brokers,
which can make farmers’ needs known to the research and government communities, us-
ing innovations made possible by ICT. In this field, participation of women, especially in
sub-Saharan Africa where women constitute a large proportion of the agricultural labour
force, will also be critical to enhancing their decision-making in agricultural research and
extension services and to addressing their specific needs.
In developing countries,
Research institutions also need to expand their traditional disciplinary ap-
where agricultural research
proach to encompass an interdisciplinary focus in response to wide-ranging farmer de- and development remains
mands. For instance, transformation of diverse agroecological rural economies requires relatively weak, the
the expertise of biologists, agronomists, water engineers, nutritionists, economists and main focus of the public
social and political scientists (Lipton, 2010). research institutions
should be the adaptation
The private sector has become a more active player in agricultural R&D, but its of technology to particular
involvement has not been sufficient to compensate for the reduction in public expenditure. farming conditions and
In developing countries, public funding remains the main source of finance for agricultural agroecological settings
96 World Economic and Social Survey 2013

research. Moreover, the private sector tends to invest mainly in profitable research, in-
cluding agricultural chemical inputs, machinery and biotechnology, targeting wealthier
economies and larger farmers. The involvement of private research in managing natural
resources and maintaining biodiversity also remains limited (Biodiversity International
and others, 2012).
The private sector also can play an important role in promoting rapid techno-
logical innovation for achieving food security and tackling climate change. Biotechnology
and innovative market access for smallholders constitute one of the areas where the private
sector can play a major role in expanding research. Despite the fact that biotechnology
remains a controversial issue, it nevertheless holds great potential for increasing agriculture
productivity (United Nations, 2011b).
Biotechnology could be Today, one third of the rural population in developing countries lives in rain-
an effective instrument fed regions, characterized by frequent moisture stress, which limits their agricultural
for facilitating the
transformation
output. Biotechnology could be an effective instrument for facilitating the transforma-
of agriculture in tion of agriculture in these agroecological regions affected by harsher conditions. It has
agroecological regions a significant potential to increase yield gains by making crops herbicide-resistant, less
affected by harsher dependent on chemical pesticides and more resilient to water stress, while conferring on
conditions them a greater nutritional value.
So far, private research in biotechnology has concentrated on the development
of products that can be easily protected by patents and has focused mainly on the demand
from large-scale farmers. The cost of seeds and inputs may discourage use of this technol-
ogy by small farm holders, especially if the market continues to be dominated by a few
large companies which exert influence over prices. The potential of genetically modified
organisms to increase food production is limited not only by their excessive costs, but also
by their unknown possible risks, including long-term environmental and health impacts.
Independent assessments of the larger impacts of this technology are urgently needed.
Moving forward, the structure of incentives and the governance of innovation
in this area require radical changes. New mechanisms for engaging the private sector need
to be explored: results-based performance contracts granted on a competitive basis—for
the development, for example, of improved seed or crop varieties with higher water-stress
tolerance and greater responsiveness to fertilizers—may be one means of stimulating pri-
vate research. Patent buyouts and prizes may be other means of doing so (Elliot, 2010;
Bhagwati, 2005). Use of more traditional subsidies, co‑financing arrangements and joint
ventures, within a framework of appropriate protocols for maintaining the public-good
nature of research products, could also be explored (Pardey and Beintema, 2001).
Many countries face serious challenges to addressing these complex techno-
logical changes. Overcoming these challenges will require the cooperation of the public,
private and civil society organization sectors within countries, as well as between countries,
towards adapting know-how to specific agricultural conditions (Biodiversity International
and others, 2012). CGIAR (formerly the Consultative Group on International Agricultural
Research) has a positive record in developing technology well suited for smallholders,
although diffusion of these technologies has been a challenge. In 2008, CGIAR was
reformed to refocus its research and develop partnerships with the capacity to increase the
diffusion of results.
Yet, given the need to adapt technologies to different agroecological systems,
CGIAR and other international research institutions must work more closely with national
agricultural research centres so that they can adapt internationally developed technologies
 Ensuring food and nutrition security 97

to their various national contexts and “share back” their innovations with other countries.
The growing capacity of large national agricultural systems in Brazil, China, India and
South Africa, for instance, has generated South-South cooperation aimed at benefiting
countries with limited resources, by allowing them to adopt or adapt the technologies of
the countries with large agriculture systems, which are typically less capital-intensive and
have less intellectual property rights protection.

Sustainable management of natural resources

An increase in food production will also require integrating sustainable practices, in par- Agricultural productivity
ticular in the use of natural resources. Many of the current agricultural practices have and an efficient use of
natural resources, as well as
relied on cheap energy and abundant water and land, and are a leading source of green- climate-related adaptation
house gas emissions. These practices are now proving unsustainable for the environment and resilience-building,
and health. At the same time, they have led to substantial productivity losses, thereby should be part of an
posing risks to food security. Thus, agricultural productivity and an efficient use of natural integrated policy approach
resources, as well as climate-related adaptation and resilience-building, should be part of
an integrated policy approach.

Current unsustainable practices

Even if 90 per cent of the growth in crops will come from higher yields, land availability Available land for food
will continue to be crucial for agriculture. Arable land would need to expand by 12 per cultivation has been
shrinking, owing to
cent in developing countries by 2050 (Food and Agriculture Organization of the United land degradation and
Nations, 2009a). However, available land for food cultivation has been shrinking, owing competition from
to land degradation and competition from other uses, such as urban development and other uses, such as
production of non-food crops, like biofuels. In many regions, available agrarian land is urban development
constrained, especially when biodiversity and soil degradation are taken into account. and production of
non-food crops
Every year, about 12 million hectares of agricultural land are lost owing to land degrada-
tion, adding to the billions of hectares that are already degraded (Beddington and others,
2012). Soil degradation not only affects its fertility, reducing agricultural production op-
portunities, but also has negative effects on the hydrologic cycle, and climate, biodiversity,
landscape and other ecosystem services.
There are many factors leading to soil degradation which should be prevented.
The excessive use of chemical fertilizers and pesticides is considered the major factor affect-
ing the resilience of land. For instance, in the past 50 years, global fertilizer use increased
by 500 per cent, causing widespread pollution (Earth Security Initiative, 2012). Managing
the use of fertilizers will be crucial for long-term land development; for example, in the
United States, it has been demonstrated that in the long term, organic agricultural meth-
ods can outperform conventional chemical farming in terms of crop yield, sustainability
and profit (ibid.). While large-scale farming is, in general, identified as the main source of
excessive use of fertilizers and soil degradation, land fragmentation and limited farm size
can also be a source of soil degradation. In the minifundias of the Andean highlands of
Latin America for instance, poor small-scale farm holders over-exploit natural resources,
owing to population pressure and scarcity of suitable land (United Nations, 2011b).
The urbanization process is also increasing competition for arable land and
wetlands. So far, urban areas occupy about 1 per cent of the total land surface (United
Nations Environment Programme, 2012a), but urbanization is projected to continue at
98 World Economic and Social Survey 2013

a fast pace in the next decades (see chap. III). Between 2012 and 2050, the world urban
population is expected to increase by 69 per cent. At the same time, renewable energy strat-
egies, such as use of biofuels, are increasing demand for land resources. Hence, developing
the potential to create more sustainable land management systems, in order to reverse
current trends in food insecurity and unsustainable land degradation, is desirable—and
possible (United Nations Environment Programme, 2012a).
It is expected that More recently, the purchase (or long-term lease) of large extensions of land is
the increasing and subjecting use of land for cultivation and local food consumption to pressure (box IV.1).
competing demands These transactions have raised concern about their implications for rural communities and
for water will aggravate for the food security of countries already vulnerable to insecure food supplies.9 Improved
the serious depletion of
surface-water resources
national and international oversight mechanisms may be needed to prevent the unintended
negative impacts of leasing arrangements for large extensions of land on the food and
nutrition security of poor communities.

Box IV.1
Purchase of large extensions of land
The demand for agricultural land intensified at the peak of the food price crisis in
2007-2008. Estimates about the extension of land involved in large-scale acquisitions vary wildly, from
120 million acres, as reported by the World Bank in 2010, to 560 million acres, as reported by Oxfam
in 2012.a There are many factors explaining the accelerated interest in foreign land. Reportedly, over
60 per cent of foreign investment in land is for food exports and around two thirds of land deals in the
last 10 years were made with a view to producing crops for biofuels (Oxfam, 2012, p. 6). In addition,
land is also becoming an asset that offers portfolio diversification for international investors, such as
large pension funds and financial institutions (Earth Security Initiative, 2012).
There is a large controversy about the recent interest of foreigners in purchasing or
leasing large landholdings: some see an opportunity to leverage foreign investment for agriculture
and rural development, while others warn against the risk of displacing traditional rural communities
and pastoralists from their land, thereby increasing food insecurity in countries already at risk. In
countries like Ethiopia, Mali, Mozambique and the Sudan, this development has raised widespread
concerns over forced evictions, social vulnerability and dwindling water resources (Earth Security
Initiative, 2012). Pearce (2012) found that in countries selling (or leasing) large extensions of land, in
the largest majority of cases, local communities lose access to forests, pastures and water resources,
with no major gains in employment, owing to the use of capital-intensive technology in large farms.
In the absence of policies and institutions that provide secure tenure and adequate
safeguards to domestic smallholders and their communities, large-scale purchases of land may have
a  Oxfam (2012) recently unintended negative consequences for rural communities and small‑scale farmers. Countries such as
reported an area of Argentina and Brazil have already erected legal barriers in relation to the amount of farmland that can
203 million hectares be owned by foreigners (Earth Security Initiative, 2012). More recently, United Nations entities (such as
under consideration or the United Nations Conference on Trade and Development, the Food and Agriculture Organization
negotiation in 2001‑2010
(Oxfam, 2012). of the United Nations, the International Fund for Agricultural Development and the World Bank)
b  “Available land” in the adopted the Principles for Responsible Agricultural Investment with the intention of providing some
World Bank estimates is form of protection to rural dwellers. Globally agreed safeguards to protect the rights of traditional
defined as land that is communities, often lacking legal recognition of their rights to land, water and forests, are particularly
uncultivated, unforested relevant for countries in sub-Saharan Africa and Latin America where, according to the World Bank,
and productive (World
Bank, 2011). most of the 450 million hectares of “available land”b are located.

9 By some accounts, two thirds of land purchases occur in countries already facing hunger (Oxfam,
2012).
 Ensuring food and nutrition security 99

Water is another essential natural resource for agriculture, whose limit of sus-
tainability may have already been reached in many regions. Global water withdrawals have
tripled over the last 50 years and water withdrawals for irrigation are expected to increase
by almost 11 per cent by 2050 (Food and Agriculture Organization of the United Nations,
2009d). Yet, today, 80 per cent of the world’s population lives in areas with high levels of
threat to water security, particularly in developing countries (United Nations Environment
Programme, 2012b). In addition, it is expected that the increasing and competing demands
for water will aggravate the serious depletion of surface-water resources. Water scarcity rep-
resents an important challenge for agriculture, which uses 70 per cent of global freshwater.10
There are several causes of water scarcity. Intensive agriculture, including Extreme weather events
livestock production, has become a major factor in water quality degradation (United such as droughts and
Nations, 2011b). Excessive use of agrochemicals (pesticides and fertilizers) contaminates floods have been affecting
food production, with
waterways. Energy production and climate change are also main causes of water scarcity.
dramatic consequences for
For instance, use of traditional sources for energy production results in increased green- various agroecosystems
house gas emissions and climate change, increasing the frequency and intensity of extreme
climatic events such as flood and droughts, sea-level rise, and the loss of glacial and polar
sea ice, all of which contribute to water scarcity. Alternative solutions, such as utilization
of energy sources with lower carbon footprints, can also have implications for the water
environment. Hydropower production can contribute to fragmentation of river systems,
while the construction of some solar-energy infrastructure consumes significant quantities
of water (United Nations Environment Programme, 2012a).
Finally, climate has been changing, mainly owing to the levels of greenhouse Adaptation measures
gases in the atmosphere, presenting a serious threat to agriculture. Extreme weather events involving organic soil
such as droughts and floods, have been affecting food production, with dramatic conse- nutrient enhancement
and other ecologically
quences for various agroecosystems. In the coming decades, it is expected that climate sound methods—an
change will continue to have adverse effects on agricultural production. Even a modest cli- approach popularly
mate change of about 2º Celsius can change rainfall patterns, resulting in a shorter grow- known as climate-
ing season and lower agricultural production, particularly in areas that are already hot and smart agriculture—can
dry, for example, in Africa and South Asia (Beddington and others, 2012). Communities contribute to reducing
greenhouse gas emissions
already plagued with high levels of food insecurity and environmental degradation are
disproportionally affected. In particular, smallholders relying on rain-fed agriculture are
more vulnerable to climate change.
There are several factors contributing to the problem of climate change.
Current agriculture practices, including land clearing for cultivation and inefficient use of
fertilizers and organic residues, constitute one such factor, being responsible for 25-33 per
cent of greenhouse gas emissions (Beddington and others, 2012). While agriculture is a
major contributor to global greenhouse gas emissions, it can also be part of the solution to
the problem of climate change. There is ample room for lowering emissions throughout the
food system, through more efficient productive techniques and better demand manage-
ment. On the production side, climate change can be mitigated through carbon sequestra-
tion in both vegetation (forests, for example) and soil. On the demand side, reducing
wastage, for instance, will be important (see the sect., entitled “Diets and consumption
patterns”, below), as well as increasing demand for organic and eco-certified products,
which should encourage producers to pay more attention to sustainable practices. Despite
international and national awareness of the risks related to climate change, there has so far
been limited financial and political support for implementing more sustainable practices.
10 See Food and Agriculture Organization of the United Nations (2009b).
100 World Economic and Social Survey 2013

Improving management of natural resources

Improving agricultural outcomes will therefore require an integrated approach which pro-
motes the resource efficiency of the whole agriculture and food system, while mitigating
its environmental impacts. In this regard, government policies can foster an agricultural
innovation system approach to developing a comprehensive policy framework for innova-
tion, which can respond to the double challenge of increasing agricultural productivity
and achieving environmental sustainability (United Nations, 2011b).
The Southern Agricultural Growth Corridor of the United Republic of
Tanzania (SAGCOT) exemplifies such an integrated approach. The Growth Corridor
brings together the capabilities and resources of businesses, government and civil society
within a common platform in order to overcome the country’s various ecosystems barriers
to achieving the triple objective of agricultural productivity, food security and livelihoods
creation in a sustainable manner. By encompassing the entire agricultural value chain, the
SAGCOT approach attempts not just to raise agricultural productivity but to ensure the
necessary infrastructure, policy environment and access to knowledge required to create
an efficient, well-functioning agricultural value chain.
Traditional practices have recently also gained in importance within the
context of adaptation to climate change. For instance, local farmers and communities
have shown a great capacity to innovate in response to weather and other shocks. There
are thousands of successful experiences of localized enhanced pest and weed manage-
ment, water efficiency and biodiversity, including stories of highly successful innovation
in the most challenging circumstances characterized by a poor natural resource base and
widespread poverty.11 Traditional practices, such as low-tillage farming, crop rotation and
interplanting, water harvesting and recycling, water-efficient cropping, and integrated pest
management, have also proved their relevance to increasing productivity and ensuring
environmental sustainability.
Agricultural research should also consider the climatic, soil and water condi-
tions of the relevant agroecological region. Adaptation measures involving organic soil
nutrient enhancement and other ecologically sound methods—an approach popularly
known as climate-smart agriculture—can contribute to reducing greenhouse gas emis-
sions. As noted above, there is much interest in the climate change mitigation potential of
carbon sequestration, in both vegetation (forests in particular) and soil (United Nations,
2011b). The use of ICT and better access to information facilitate the transition to preci-
sion agriculture adapted to different agroecological regions. For instance, using satellite-
based remote monitoring and in-field sensing technologies is of great help in the global
and regional monitoring of crop productivity and weather-related impacts.

Investments in rural infrastructures

Addressing the structural In respect of addressing the structural constraints on food production and distribution
constraints on food within a wider framework of sustainable natural resource management, investments in
production and distribution
within a wider framework
infrastructure in rural areas will also be determinant. In particular, small farm holders in
of sustainable natural developing countries face limited access to output markets, which affects the efficiency of
resource management their farming. As a result of the existence of such inefficiencies, an opportunity is missed
will require investments in to increase agricultural output. This is especially regrettable since most of the findings
infrastructure in rural areas
11 See United Nations (2011b) for a more elaborate discussion of this topic.
 Ensuring food and nutrition security 101

presented in the literature dealing with agricultural development in low-income countries

indicate that small farm units tend to show higher productivity than large-scale farms.12
In agriculture-based countries, in sub-Saharan Africa and South Asia in particu-
lar, the priority should be expansions of basic infrastructure such as roads, electricity supply
and potable water. In many African countries, for instance, transportation can account
for 50-60 per cent of total marketing costs. Improving road connections is thus crucial for
bringing marketing costs down and stimulating local economies (World Bank, 2008a).
By addressing long-term structural constraints on food production, investments
in physical infrastructure can be a catalyst of productivity growth. In poor agriculture-
based countries, public investment will also play an important role in leveraging private
investment, which will otherwise not flow in sufficient amounts to meet needs, owing
to the perception that agricultural production is high-risk. Larger public investment in
infrastructure will provide greater incentives to increase private investment within a wider
framework of sustainable natural resource management.
The case of Uganda (box IV.2) not only provides a good illustration of the
potentially large impact that public infrastructure can have in increasing productivity, but
also raises important questions about the larger macroeconomic impacts of increasing gov-
ernment expenditures and the need to take into account the trade-offs involved in this deci-
sion. Carefully crafted strategies for achieving food security will require national consensus
and the political will to prioritize investments, as well as greater government capacities to
stimulate large productivity gains through sustainable finance. Development cooperation
would have an important role in at least two areas: (a) support for development of capacity,
especially within least developed countries, to conduct policy assessments, and (b) provi-
sion of additional resources for infrastructure development. Enhancing the outreach and
volume of resources in the Aid for Trade initiative for infrastructure development would
make an outstanding contribution to achieving the objective of sustainable food security.
In some countries, the focus should also be on crop harvesting technologies, In some countries, the focus
as significant wastage occurs at the producer end and before reaching the market, owing should also be on crop
harvesting technologies, as
to inadequate harvesting techniques (Institution of Mechanical Engineers, 2013). The
significant wastage occurs
amount of food wasted represents not only an economic cost but, more importantly, a at the producer end and
waste of energy and natural resources. As mechanized harvested systems are implemented, before reaching the market
food distribution and storage systems will need to be improved in parallel. Access to af-
fordable energy and cooling systems, for instance, could provide storage options and also
facilitate their installation by smaller scale farmers, isolated from markets, which would
ultimately increase food availability throughout the whole year.
Many developing countries, especially those with an agriculture-based econo-
my, will need external support to increase their investments in infrastructure. In 2010, the
international community launched the Global Agriculture and Food Security Programme
(GAFSP), which, among several activities, has been channelling long-term investments in
food and nutrition security. However, this Programme is costly and has required a high
level of funding that has not become available. Of the $1.2 billion pledged, $752 million
have already been received, of which $658 million have been allocated to country-led
programmes in 18 countries. More funds should be provided, however, to help implement
these strategies and support the development of new ones so as to reinforce the resilience
of the food production system.
12 These advantages may disappear for certain crops whose cultivation benefits from significant
economies of scale and input-intensive technologies.
102 World Economic and Social Survey 2013

Box IV.2
Infrastructure’s potential to drive productivity and
sustainable food production: the case of Uganda

Uganda is a low-income country with severe deficits in physical infrastructure, where agriculture
still generates about 23 per cent of GDP, which is relatively high compared with an average of 12 per
cent in sub-Saharan Africa. Several policy scenarios illustrate the potential of Government invest-
ments in physical infrastructure to drive productivity growth and enhance food production capacity.
These scenarios are compared with a baseline that delineates a continuation of currently expected
economic growth and public spending interventions up to 2030.a
Public spending in agriculture infrastructure, mostly for irrigation projects, represents
only 0.7 per cent of Uganda’s GDP under the baseline. The first scenario assumes an increase of
public investment in agriculture by the Government equivalent to 2 percentage points of GDP over
the period 2016-2030. As a result, factor productivity growth in agriculture—of about 2.4 per cent
per year under the baseline—is pushed up by an additional 1.3 percentage points per year during
a  The scenarios have the period 2016-2030. Consequently, agricultural output growth increases by about 1.5 percentage
been generated using a points per year. In a second round of effects, public spending spurs export growth and a higher level
dynamic economy-wide
of household consumption, especially of agricultural goods, but the results are also favourable at the
modelling framework
known as the Maquette national level (see table).
for MDG Simulations These results support the idea that public investment in agriculture infrastructure con-
(MAMS) (Lofgren, Cicowiez tributes to productivity gains. While investments in other public infrastructure, mainly roads and
and Díaz-Bonilla, 2013),
which involves, inter electricity supply, also yield positive results, they are relatively less significant in magnitude, particu-
alia, a microeconomic larly for agriculture, compared with the results under the first three scenarios.
analysis of determinants The main concern for policymakers is how to finance the new investments in infrastruc-
of productivity growth
where the stock of public ture. The financing requirements could create undesirable macroeconomic hardships and may be
infrastructure is one of the politically unattainable. In the case of Uganda, for example, the scenarios show that financing new
key drivers at underlying infrastructures through higher direct-tax revenues spurs GDP growth and household consumption
country-specific elasticity
relatively less than does, for example, financing them through foreign resources. However, the use of
values. Uganda’s baseline
scenario was first generated foreign resources affects export growth negatively, owing to real exchange rate appreciation. In ad-
for the period 2007-2015 dition to these macroeconomic hardships, other factors, like debt sustainability, (declining) support
by national researchers and from foreign donors and the issue of the real feasibility of raising tax burdens, need to be taken into
Government experts, with
technical support from UN/ consideration as well when defining a financing strategy.
DESA and the World Bank According to these simulations, the ideal scenario entails the creation of fiscal space by
(Matovu and others, 2013). reducing other government expenditures, which avoids the said macroeconomic trade-offs. The fea-
UN/DESA extended this
scenario up to 2030 for the sibility of this scenario will depend, however, on the political conditions for improving the efficiency
analysis presented here. of government spending and/or reallocating resources towards the agricultural sector.

Improving access to food

Investments in food Although crucial to improving nutrition outcomes, improving food availability is not suf-
production systems need ficient to ensure access to food. Food insecurity is more often the result of limited access
to be complemented by to food. As explained by A. Sen (1981), “starvation is a matter of some people not having
programmes designed to
enough food to eat, and not a matter of there being not enough food to eat”. Thus, invest-
increase the incomes of the
poor, as well as by social ments in food production systems need to be complemented by programmes designed
protection and safety nets to increase the incomes of the poor, as well as social protection and safety nets. At the
international level, measures also have to be taken to prevent excessive food price volatility
and to ensure that a pro-food security trade system is in place.
 Ensuring food and nutrition security 103

Box IV.2 (cont’d)

Uganda: selected real macro indicators under simulation scenarios, 2016-2030
Annual average growth rate
Direct-tax Foreign Allocative
Baseline revenue transfers efficiency
Irrigation systems
Agriculture
GDP 5.3 6.6 6.5 6.7
Exports of agricultural goods 3.5 7.3 6.2 7.0
Household consumption of
agricultural goods 5.0 5.4 5.8 5.8
National
GDP 7.0 7.2 7.6 7.4
Exports of goods and services 7.0 7.8 7.0 8.0
Household consumption 6.5 6.2 7.0 6.9
Roads and electricity supply
Agriculture
GDP 5.3 5.5 5.5 5.6
Exports of agricultural goods 3.5 4.1 3.6 3.7
Household consumption of
agricultural goods 5.0 5.0 5.2 5.2
National
GDP 7.0 7.1 7.4 7.2
Exports of goods and services 7.0 7.3 6.9 7.6
Household consumption 6.5 6.2 6.8 6.7
Source: UN/DESA, based on an updated version of MAMS for Uganda, presented initially in Matovu and
others (2013).
Note: In non-baseline scenarios, the Government generates the fiscal space needed to expand investments
in infrastructure by 2 percentage points of GDP above the baseline in 2016-2030. The new investments are
financed through higher direct-tax revenues, foreign transfers or allocative efficiency of government spending
achieved by reducing “wasteful” spending or “overlapping” government functions.

Limited access to food

Income poverty is obviously a main underlying factor preventing access to food. For in- Increasing the income level
stance, when comparing the highest and the lowest income quintiles of the population in of poor households will
help ensure adequate food
developing countries, the poorer children are almost 3 times more likely to be underweight quantity and quality, and
than children in the wealthiest 20 per cent of households (United Nations, 2012c). Hence, reduce the prevalence of
increasing the income level of poor households will help ensure adequate food quantity undernourishment
and quality, and reduce the prevalence of undernourishment. However, in many regions
and countries, economic growth has not been inclusive enough to provide employment
and income-earning opportunities for the poor.
104 World Economic and Social Survey 2013

As many poor people live in rural areas, it is not surprising that it is in those
areas that the prevalence of undernourishment is also higher. For instance, in developing
regions, children living in rural areas are almost twice as likely to be underweight than
children in urban households (ibid.). Therefore, economic growth should generate demand
for the assets controlled by the poor (Food and Agriculture Organization of the United
Nations, 2012b), in particular the rural poor.
Among the rural poor, the situation of small farm holders is at the heart of the
food security challenge. Small farmers face limited resources and assets, either for purchas-
ing or for producing the quantity of food that is adequate to their needs. Empirically, it has
been observed that the majority of the extremely poor and about half of the undernourished
people in the world, which includes 1.5 billion people in least developed countries, live on
small farms of less than two hectares, representing 90 per cent of farms worldwide (United
Nations, 2011b). Further, according to the most recent data, average farm sizes are still
declining in many countries, for example, in Africa, and in India (World Bank, 2008a).
High inequality in the Thus, addressing the issue of food availability and undernourishment in rural
distribution of assets— areas necessarily implies responding to the challenges faced by smallholders. In particular,
such as land, water, high inequality in distribution of assets—such as land, water, capital, education and health
capital, education and care—is a main obstacle which needs to be addressed so as to enhance food security.
healthcare—is a main
obstacle which needs to This is particularly evident in countries where large farms have been controlling a larger
be addressed so as to proportion of the land, while exacerbating the asset squeeze on smallholders (ibid.).
enhance food security Discrimination against women in the rural sector also has a negative impact on
the outcomes of efforts to secure access to food and nutrition. Women make up over 40 per
cent of the agricultural workforce in Africa and East and South Asia, but they constitute
only 5 per cent of landholders in Northern and West Africa, 15 per cent in sub-Saharan
Africa and 25 per cent in several countries in Latin America. Women have restricted access
not only to land but also to credit and technology, which increases their economic vulner-
ability and the instability of their situation with respect to nutrition. These restrictions
imposed on women exacerbate gender discrepancies with regard to nutrition, with serious
intergenerational effects, as nutrition in children under age 5 depends critically on the
nutrition of their mothers during pregnancy and lactation (Horton, 2008; Copenhagen
Consensus, 2008).

Generating income in rural areas

The ability to generate income for the rural poor will be a main determinant of food
security. Generating an increase in agricultural productivity is an important strategy for
increasing food availability, but it may not improve access to food of a large portion of the
population, including vulnerable social groups.

Improving agricultural income

A successful strategy for A successful strategy for increasing rural households’ income entails promoting the di-
increasing rural households’ versification of their farming activities. When comparing households relying on more
income entails promoting
diversified farming activities with those that remain engaged in more traditional farming,
the diversification of their
farming activities it is evident that the former are more successful in moving out of poverty. In Uganda, for
instance, the combination of higher productivity of land and diversification of crops, in
particular cash crops, has led to lower rural poverty (World Bank, 2008a).
 Ensuring food and nutrition security 105

In addition, a diversified farming system, integrating, for instance, horticul-

ture and livestock, can enhance nutritional outcomes, as it improves rural households’
access to foods from animal sources, fruits and vegetables. In Viet Nam, for example, the
vegetation, aquaculture, and cages for animal Husbandry (VAC) system, which includes
a diversified farming system at the household level, has contributed to improvements in
both incomes and nutritional outcomes, in terms of consumption of foods from animal
sources and fruits and vegetables (Food and Agriculture Organization of the United
Nations, 2013). This experience shows that integrated farming projects can be particularly
successful in raising micronutrient intake, in addition to improving income stability.
However, a main challenge is the unequal access to rural assets, which prevent
many households from adopting market-oriented strategies and moving out of poverty.
There are gaps in the institutional structure required for the operation of land markets,
financial services, input markets and producer organizations. An appropriate institutional
setting is also crucial for supporting small-scale farming, so as to increase agricultural in-
vestment and productivity, while preserving natural resources. Improving women’s access,
for instance, to several assets, such as land, input markets and technology, could increase
agricultural production by as much as 2.5-4.0 per cent, thereby reducing the number of
undernourished people by 12-17 per cent, equivalent to freeing 100 million-150 million
people from hunger (Food and Agriculture Organization of the United Nations, 2011b).
Moreover, flexible land management and the capacity to innovate in produc- Adult literacy and training
tion, storage and marketing practices and techniques require the appropriate use of infor- should be a priority in
mation and technology, as part of a continuous learning process (Davis and others, 2007). any strategy aimed at
strengthening farmers’
Therefore, rapid expansion of quality education in rural areas, including adult literacy and
capacity for response to
training, should receive the highest priority in any strategy aimed at strengthening farm- rapidly changing market
ers’ capacity for response to rapidly changing market conditions. Innovative mechanisms conditions
for the transmission of knowledge and training also need to be strengthened. The experi-
ence of the Farmer Field Schools—operating in 87 countries—shows that innovation and
flexible natural resource management can be advanced through farmer-to-farmer learning,
including participation in formal and informal research institutions. In-service and on-
the-job training and distance education have also proved effective and are increasingly
complementing extension services (United Nations, 2011b).

Non-farm economy
As has been extensively documented, many rural households complement their own ag-
ricultural activity with non-farm sources of income. In agriculture-based economies, the
share of rural income derived from non-agricultural sources may be only 20-30 per cent,
but in urbanizing economies, it can be as high as 60-70 per cent (Food and Agriculture
Organization of the United Nations, 2012b). That is to say, many rural households diver-
sify their source of income by dividing their time and labour units between farming and
non-farm activities.
Thus, in agriculture-based countries, growth in the agriculture sector can be
complemented by non-farm activities, creating a virtuous cycle of rural growth and em-
ployment generation (ibid.). However, as noted above (see the previous sect. on increasing
food availability), developing rural infrastructure and improving rural-urban linkages will
also be important for promoting additional sources of revenue. For instance, stimulat-
ing rural-urban migration will help in diversifying the income sources of the household
and reducing poverty, particularly in urbanizing economies. In China, for instance, the
106 World Economic and Social Survey 2013

existence of areas of high population density combined with lower transport costs has
stimulated labour-intensive manufacturing for export markets using the labour force from
rural areas (ibid.).
Rural development Moving forward, rural development strategies should enhance opportunities
strategies should for smallholders to diversify their agricultural as well as non-farm activities. These strate-
enhance opportunities for gies can at the same time reduce rural poverty and under-nutrition. First, they can enable
smallholders to diversify
households to both diversify their sources of income, by incorporating more cash crops in
their agricultural as well as
non-farm activities their agricultural production, and secure higher-productivity jobs outside the agricultural
sector. Second, they can lead to direct improvement of nutritional conditions through
enhanced access to a more diversified source of nutrients.
However, access to assets, individuals’ skills and migration opportunities will
all be determining factors in the process of moving out of rural poverty. Infrastructural
as well as institutional changes will be necessary to ensure access to rural assets, such as
land and water. Access to education will also be crucial to ensuring that the rural poor and
specific social groups, such as women, can take advantage of new income opportunities.

Social security and safety nets

As discussed above, one of the main obstacles to achieving food security is the lack of ac-
cess to food, in particular among lower-income groups which lack the necessary purchas-
ing power. The 2007-2008 food price crisis exacerbated the problem of food accessibility
and nutrition outcomes, in particular for poor people, who spend 50-70 per cent of their
income on food. A social protection system, including safety nets, can protect the most
vulnerable against short-term economic and food price shocks. Several large countries
were able to protect consumers by insulating their markets from international price shocks
with additional safety net programmes. Social protection can also contribute to long-term
resilience by facilitating access to food and by strengthening the ability of smallholders to
manage risks and adopt new technologies with higher productivity (Food and Agriculture
Organization of the United Nations, 2012a). The types of social protection instruments
will vary depending on national social needs, development objectives and fiscal space.

Safety nets in the short term

In the short term, As regards short-term relevance, emergency food assistance and safety nets are effective
emergency food assistance tools for meeting urgent food needs and protecting the poor and the most vulnerable
and safety nets are effective
against price or climatic shocks. Safety nets include community support systems, transfers
tools for meeting urgent
food needs and protecting (direct and indirect), subsidies, public works and microcredit. For instance, in the after-
the most vulnerable against math of the 2007-2008 food price crisis, 23 countries introduced or expanded cash trans-
price and climatic shocks fer programmes, 19 countries introduced food assistance programmes and 16 countries
increased disposable income measures (Food and Agriculture Organization of the United
Nations, 2009c). Multiple solutions are possible, but, in general, scaling up existing social
protection interventions has proved to be the best strategy for facing urgent challenges.
An adequate safety net can also ensure a basic level of consumption, which
enables poorer farmers to assume the higher risks associated with higher-return strategies,
which, potentially, could break the vicious circle of poverty and hunger. Public works (or
cash for work) programmes, such as India’s National Employment Guarantee Scheme,
represent typical employment-based safety nets which entitle individuals to a minimal
 Ensuring food and nutrition security 107

amount of work and income, while they contribute to labour-intensive infrastructure de-
velopment projects (Food and Agriculture Organization of the United Nations, 2009c).
These employment programmes can also incorporate training components, thereby en-
hancing human capital at the local level.

Social security in the long term

Long-term resilience and food security will require a more comprehensive social security Long-term resilience and
system. The main goal should be to establish systematic and predictable programmes, food security will require a
more comprehensive social
targeting specific social groups, including the poor and smallholders, which can enhance
security system
human capital and stimulate the adoption of new technologies. For instance, nutrition
intervention in early childhood, especially in the first thousand days, can lead to higher
adult economic productivity. In Guatemala, a study showed that children who had received
nutritional supplements before reaching the age of 3 earned hourly wages as adults that were
46 per cent higher (Food and Agriculture Organization of the United Nations, 2012b).
Much has been learned about how best to design social protection floors, how
to determine which combinations of plans work and where, and how to target them.
The international community can provide assistance to developing countries in design-
ing such plans in a cost-effective time-bound manner so as to realize the right to food,
as well as stimulate rural development, agricultural production and poverty alleviation.
Support should also be offered to help integrate the social protection floor plan within the
national agricultural strategies. The leaders of the G20, at their 2012 Summit, recognized
the importance of establishing nationally determined social protection floors. They are
being endorsed within International Labour Organization conference processes, which
could support national efforts. The international community may also need to help the
least developed countries finance their own social protection programmes.

A pro-food security international trade system

In today’s interdependent world, the implementation of national strategies to improve Conditions promoting
access to food also requires concrete actions at the global level. As observed during the trade and food market
transparency needed to
2007-2008 food price crisis, higher food prices deeply affected nutrition and macroeco-
reduce price distortions
nomic conditions of net food importing countries, especially in sub-Saharan Africa (Food and volatility will be crucial
and Agriculture Organization of the United Nations, 2011d), in part owing to a shortage to stimulating staple food
of the foreign currency required to increase food imports. Conditions promoting trade and production at the local level
food market transparency needed to reduce price distortions and volatility will be crucial and ensuring access to food
at the same time
to stimulating staple food production at the local level and ensuring access to food at the
same time.

The trade system

Agricultural trade is potentially a pathway for GDP growth, lower rural poverty and food
security. However, global markets have been working in favour of major production com-
panies and some food exporting countries, often to the detriment of small landholders.
The main challenge for the international trade system is to become more food security-ori-
ented, in particular as regards food importing countries. For instance, the export subsidies
and import protection granted by developed countries continue to create price distortions
108 World Economic and Social Survey 2013

in global food markets, with large negative consequences for developing countries. As a
result, several countries have reduced investment in their agriculture sector. In this regard,
as suggested in the specific proposals for the review of World Trade Organization rules,
the trade system should be flexible in order to protect non-traded agricultural sectors that
are vital to food security.
In food exporting countries, export restrictions must be disciplined, as agreed
at the G20 Cannes Summit in 2011 within the context of food crisis situations. Export
restrictions provide a disincentive to farmers to invest in food production and undermine
progress towards multilateral trade reforms and freer trade in the agriculture sector. At
the same time, in food importing countries, import and domestic taxes on food must be
temporarily reduced, especially when taxes constitute a significant proportion of the final
price. For instance, tax reductions could be a better option than a subsidy programme,
despite some of the negative effects on public revenue.
In the longer run, a fairer international trading system, taking into account
the food security, livelihood security and rural development needs of developing countries,
will be crucial. For instance, in higher-income countries, agricultural trade distortions
need to be eliminated, in particular subsidies and market restrictions, which have devastat-
ing consequences for farmers in lower-income countries. In this regard, the Doha Round
of World Trade Organization negotiations should be completed, with the Marrakesh
Ministerial Decision on Measures Concerning the Possible Negative Effects of the Reform
Programme on Least Developed and Net Food-importing Developing Countries13 assist-
ing countries in the implementation process.

Food security stocks and information transparency

Maintaining food stocks Maintaining food stocks at the global and regional levels is an additional useful mecha-
at the global and regional nism not only for improving emergency access to food, but also for stabilizing food prices.
levels is an additional useful
A certain level of world stock could be a sufficient condition for price stability (Committee
mechanism for improving
emergency access to food on World Food Security, High-level Panel of Experts on Food Security and Nutrition,
and stabilizing food prices 2011). Supporting and improving access to these stocks can enhance food security and
prevent humanitarian crises in countries under emergency conditions. These stocks
should, however, target lower-income countries and be released strategically to support
programmes that facilitate food access to the most vulnerable populations. In this regard,
the High-level Panel of Experts on Food Security and Nutrition of the Committee on
World Food Security made two important recommendations on how to maintain a mini-
mum level of world stocks and ultimately reduce food insecurity.
There is need for better Pursuant to those recommendations, first, there is need for better informa-
information, with the tion, with the creation of a transparent and coordinated food market information system.
creation of a transparent The elimination of most public stocks in OECD countries and the privatization of most
and coordinated food
State-trading enterprises have concentrated knowledge concerning agricultural commod-
market information system
ity availability in the hands of a small number of companies which maintain this informa-
tion as proprietary. One of the most important elements of the Action Plan on Food Price
Volatility, agreed by the G20 Agriculture Ministers at their meeting held in Paris on 22
and 23 June 2011, was the launching of the Agricultural Market Information System
(AMIS) to improve market information and transparency of data on current stocks, and
promote coordination of policy responses (see Ministerial declaration, para. 26). The
High-level Panel of Experts at the same time recommended that given the importance of
13 See Legal Instruments Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations,
done at Marrakesh on 15 April 1994 (GATT secretariat publication, Sales No. GATT/1994-7).
 Ensuring food and nutrition security 109

food insecurity, trading firms should be mandated to report on stocks instead of being
allowed to do so voluntarily. AMIS market information should also be extended to in-
clude food crops other than the usual global cereals, including livestock and fish. Second,
assuming the role traditionally played by the United States of America and China as stock
holders, the international community should maintain a minimum level of world food
stock. The objective would not be to defend a price band but rather to avert price spikes
through the release of stock when prices started to boom.
In addition, increasing food reserves managed by the World Food Programme
(WFP) could reduce delivery time and costs when a situation reaches crisis level. Since
WFP usually relies on cash to purchase food for its work, upward price spikes limit the
quantity of food it can purchase and its ability to respond to human needs. In order to
fill these gaps, including delivery time, WFP initiated a regional stocking programme in
2008—the Forward Purchase Facility—in Eastern and Southern Africa. This system of-
fered several advantages, such as more accurate provision due to reduced time lags between
requests and provision, and could be expanded to other regions. However, the lack of
funding, and of available advance financing in particular, constitutes a major constraint
on expanding this pilot project.

Diets and consumption patterns

Nutrition outcomes are largely determined not only by food production and accessibility
but also by food quality and diversity. A considerable potential for increasing the nu-
tritional status of people and the efficiency of the whole food chain lies in encouraging
changes in diet and consumption patterns, as well as designing pro-nutrition policies in
other sectors, such as health and education. In addition, reducing food losses is a cost-
effective means of increasing the availability of safe and nutritious food for all. Preventing
food wastage would also reduce the challenge of how to increase production in a world
with limited natural resources.

Sustainable diets
The challenge of feeding a rising and increasingly affluent population also requires be-
havioural changes in terms of consumption, including dietary patterns. In particular, the
livestock sector, which has grown rapidly to meet the increasing demand for meat, is
a prime contribution to water scarcity, pollution, land degradation and greenhouse gas
emissions. This has prompted calls for support of more sustainable diets with a more bal-
anced content of calories derived from animal food. While the caloric content of meat is,
on average, not substantially higher than that of cereals, meat production is much more
demanding in terms of natural resources. On average, grain-meat conversion ratios, i.e.,
the number of kilograms of cereals needed to produce one kilogram of poultry or beef
ranges from 2 to 1 for poultry all the way up to 7 to 1 for beef (United Nations Convention
to Combat Desertification, 2012). A decrease in the
Consumption by an increasingly affluent population in 2050 will exacerbate consumption of meat
can lead to a substantial
pressures on the use of land and water and increase greenhouse gas emissions from agri-
reduction in the use of land
culture (see previous sect. on increasing food availability). A decrease in the consumption and other natural resources,
of meat through adoption of more sustainable diets can lead to a substantial reduction in thus improving the
the use of land and other natural resources, thus improving the prospects of sustainable prospects for sustainable
development, as illustrated in box IV.3. development
110 World Economic and Social Survey 2013

Health and education policies to enhance nutrition security

There is a strong consensus that better nutrition will also require pro-nutrition policies in
other, related sectors. Public policies and programmes designed to improve health, water and
sanitation services will be particularly important. Increasing individuals’ awareness of the
benefits of healthier diets, through information campaigns and educational programmes,
is also relevant. A multifaceted approach to improving the nutritional status of people,

Box IV.3
Sustainable diets and reduced food waste
The Food and Agriculture Organization of the United Nations (FAO) has estimated that meat con-
sumption in 2050 will amount approximately to 4.65 billion tons. Poultry meat consumption level
is expected to be 2.3 times higher than in 2010, while consumption of other livestock products is
expected to be between 1.4 and 1.8 times higher (Food and Agriculture Organization of the United
Nations, 2009d). The world’s average daily calorie availability is projected to rise from an average of
2,789 kilocalories per person in 2000 to 3,130 kilocalories per person in 2050, a 12 per cent increase.
Further, current food waste is around 30-50 per cent of total production (Food and Agriculture
Organization of the United Nations, 2011d; Institution of Mechanical Engineers, 2013).
Using the T21 model, a the Millennium Institute simulated the impact of reducing meat
consumption and food waste on the demand for land.b The simulation assumes an overall reduc-
tion in the consumption of meat to provide 500 calories per capita per day in 2050 (down from the
620 projected by FAO). In addition, food waste and loss are assumed to decrease slightly from the
current 32 per cent of total production to 30 per cent. These two assumptions result in a substantial
reduction in harvested area, from an estimated 1.31 billion hectares required in 2050 to 1.065 billion
hectares, a savings of almost 20 per cent in respect of the demand for harvested land.
While the changes projected do not seem ambitious, much larger changes will have
to occur in each country, according to their starting point. For meat consumption, it is assumed that
Source: UN/DESA, based there is a global convergence towards the current world average of 500 calories per capita per day
on Millennium Institute, from animal food, which would require an increase in the consumption of animal food in low-income
“Global food and nutrition
countries in Africa, the Caribbean and Asia and a reduction in the consumption of animal food in
scenarios”, background
paper prepared for the high-income countries in Europe, North America and Oceania of 30-35 per cent.
World Economic and Social Similarly, the projected decrease of food waste and loss, from the current 32 per cent
Survey 2013 (2013). to approximately 30 per cent by 2050 is based on the assumption of a global convergence towards
a  The T21 model is a a level of about 200 kilograms per capita per year. This allows for some slight increase in food waste
dynamic simulation tool and loss in low-income countries (mainly driven by an expected substantial increase in production),
designed to support a gradual decrease of food waste and loss in middle-income countries, and a more drastic reduction
comprehensive, integrated
long-term national
in high-income countries.
development planning. While these results demonstrate that even a conservative change in global consump-
b  In addition to the tion patterns will yield significant reductions in the demand for harvested land, with consequent
simulation presented in lower pressure on the use of water, soil nutrients and energy, they also indicate that even small steps
this box, the Millennium towards improving the use of available resources require major changes at country level, in the way
Institute designed three that food is produced, transported and consumed.
more simulation scenarios
The available policy options for inducing these changes are largely country-specific and
with different assumptions
on changes in consumption require a large degree of coordination and consistency across multiple policy areas, with agriculture,
and waste patterns. For a health and education being the most obvious. Achieving an understanding of the policy instruments
full discussion of the results, available to countries for inducing a change in diets within different contexts requires further research
see Millennium Institute, and policy experimentation. Policy instruments such as taxing meat products or refined sugars and
“Global food and nutrition carbohydrates to discourage unhealthy diets, educational programmes, mandating corporate social
scenarios”, background
responsibility and labelling standards, production disincentives for meats and production incentives
paper prepared for the
World Economic and Social for whole grain cereals, vegetables and fruits, etc., need to be tested against the overall objective of
Survey 2013 (2013). promoting (and enabling) the adoption of sustainable diets.
 Ensuring food and nutrition security 111

including in preventing overconsumption and obesity, is essential. Hence, health and edu-
cational policies need to incorporate nutrition-related considerations in their programmes.

Health
Nutrition and health are inextricable, as a good nutritional status can be achieved only A multisectoral approach
within the context of overall conditions of good health. For instance, in developing coun- to improving the
nutritional status of people,
tries, access to basic health services is often inadequate owing to an insufficient number of
including in preventing
health centres and qualified personnel. The resulting poor health conditions and illnesses, overconsumption and
such as measles and gastroenteritis, will then have a negative impact on nutritional status. obesity, is essential
Similarly, the lack of safe water and of adequate sanitation leads to many diseases and
illnesses, while compromising the nutritional status of people.
Thus, health policies should include preventive health and hygiene measures,
which are essential for good nutrition, as well as ensure that nutrition components are part
of their programme. In developing countries, access to health-care facilities and services
for the poor, particularly women and children, has positive impacts on the nutritional
status of individuals (Food and Agriculture Organization of the United Nations, 2004).
In particular, as has been emphasized on many occasions, the first thousand days of life are
crucial for children’s survival, as well as being a determinant for their nutrition and health
status as adults. For instance, infants and small children should be breastfed exclusively up
to the age of six months. After those first six months and for up to two years, breastfeeding
should be complemented with safe and nutritious foods for infants (Food and Agriculture
Organization of the United Nations, 2013).
Considering the negative effects of both under- and over-nutrition on health Health systems need to be
throughout life stages (see previous sect. on the multiple dimensions of malnutrition), strengthened to respond
more effectively and
health and nutrition must be part of a life-course approach, in particular for the prevention
equitably to the health-
of chronic diseases. First, healthier diets and physical activity should be part of preventive care needs of people
measures to reduce negative health consequences in the long term. Second, national health throughout the life course
policies need to strengthen health systems, enabling them to respond more effectively and and prevent negative
equitably to health-care needs (World Health Organization, 2008). health consequences

Information campaigns and educational programmes

In the case of lower-income groups in developing countries, the income elasticity of de-
mand for dietary energy is positive and greater than for other income groups (Food and
Agriculture Organization of the United Nations, 2012a). However, as income increases,
there is a tendency to purchase more expensive foods, based on taste preferences, which
may not improve nutrition outcomes. In many cases, individuals are unaware of the health
problems associated with consuming certain types of foods, as well as of the importance of
certain micronutrients. In developed countries, people may be unaware of the health prob-
lems associated with a less diversified diet and consumption of specific foods. In countries
where overweight and obesity have increased, diets have typically shifted towards higher
intake of energy-dense foods which are high in fat, salt and sugars but low in vitamins, In developed countries, it
minerals and other micronutrients. has been observed that
poorly educated women
Thus, education programmes can improve the health and nutritional status
are 2-3 times more likely
of the population in general, and of women and children in particular. Women with to be overweight than
better education are more aware of the importance of adequate diets and can secure ac- those with high levels
cess to better-paying jobs. Several studies have shown that women with higher income of education
112 World Economic and Social Survey 2013

and greater bargaining power within the family exert a more positive influence on child
nutrition, health and education outcomes (Food and Agriculture Organization of the
United Nations, 2013). In developed countries, it has been observed that poorly educated
women are 2-3 times more likely to be overweight than those with high levels of education
(Organization for Economic Cooperation and Development, 2012a). Although the link
between education, knowledge and dietary intake is not clear, the impact of education and
knowledge is most evident when those at highest risk are considered (Food and Agriculture
Organization of the United Nations, 2013).
Inculcating basic knowledge of good nutrition, including family nutrition
practices, in primary and secondary schools, can help individuals make informed dietary
choices. Nutrition education could be included in the school curriculum and offered in
community centres targeting adults. Recent evaluations of various school-based nutri-
tion education programmes in Italy and Portugal showed that those programmes had
positive impacts in terms of both attitudes and consumption and health outcomes (ibid.).
In particular, nutritional education for women has a positive impact in terms of dietary
intake and malnutrition (ibid.). Yet, in many developing countries, gender discrimination
preventing school enrolment of girls is still a challenge, which ultimately has negative
impacts on nutrition outcomes.
Dietary guidelines In addition to education, information and nutrition advocacy can also have
constitute one example positive impacts on population conditions related to nutrition. Strategies aimed at influ-
of the public information encing consumer choice based on enhanced consumer awareness and knowledge should
tools used in many
countries which should
also be considered, as they may lead to a change in consumption habits. Dietary guidelines
be encouraged constitute one example of the public information tools used in many countries which
should be encouraged. Information and communications measures are particularly rel-
evant to preventing obesity. However, nutrition-related messages must be appropriate in
order to be effective. They should be delivered by health professionals, among others,
through a variety of channels and over an extended period of time.

Consumption patterns: reducing waste

Globally, approximately one third of the total food produced for consumption, amounting
to 1.3 billion tons per year, is lost or wasted (Food and Agriculture Organization of the
United Nations, 2012c). Because of food waste, an opportunity is lost to reduce malnu-
trition and significant unnecessary pressure is imposed on natural resources, including
through greenhouse gas emissions caused by production of food. There are several sources
of food wastage throughout the supply chain, from initial agricultural production down to
final household consumption (figure IV.5). This section examines food wastage occurring
at the consumption end is examined, along with the underlying factors associated with
different socioeconomic and agricultural development conditions.
The amount of food wasted in developed countries is higher than that in de-
veloping countries. Recent estimations show that the weight of food wasted per capita by
In developed countries, consumers in Europe and North America amounts to 95-115 kg/year, compared with the
food wastage occurs figure for sub-Saharan Africa and South and South-East Asia, which is only 6-11 kg/year
more frequently at the
(Food and Agriculture Organization of the United Nations, 2012c).
retail and consumer
end, owing, in part, to In developed countries, food wastage occurs more frequently at the retail
management practices and consumer end, owing, in part, to management practices and consumption habits. In
and consumption habits wealthier countries, sales agreements between producers and distributors may contribute
 Ensuring food and nutrition security 113

Figure IV.5 Lost and wasted food, by type of product

Lost and wasted food, by type of product
Global food losses (percentage)

Consumption
60
Distribution
Processing
50 Post-harvest
Agriculture
40

30

20

10

0 Source: Food and Agriculture

Cereals Roots Oilseeds and Fruit and Meat Fish and Dairy Organization of the United
and tubers pulses vegetables seafood products Nations (2012c).

Source: Food and Agriculture Organization of the United Nations (2012).

to the wastage of quantities of food due to the application of quality standards. As much
as 30 per cent of total harvested food does not reach the marketplace as a result of qual-
ity selection and cosmetic considerations (Institution of Mechanical Engineers, 2013).
Also, food production tends to exceed demand in developed countries as a precautionary
measure, in order to ensure delivery of agreed quantities. This situation entails a financial
loss for producers and additional pressure on natural resources.
In industrialized countries, once food production reaches the market, perish-
able products are displayed for a minimum period of time in supermarkets, reducing in-
store wastage. However, of the 70 per cent of harvested food that reaches the marketplace,
30-50 per cent is wasted at home by the final consumer (Institution of Mechanical
Engineers, 2013). Insufficient purchase planning and conservative expiration dates on
labelling, as well as significant discounts when food is purchased in higher quantities, are
the main factors explaining the large degree of waste at the consumer level.
In developing countries, the situation is relatively different, as waste may oc- In developing countries,
cur primarily at the producer level, owing to inadequate harvesting methods and at the the situation is relatively
marketplace, owing to inappropriate storage, rather than at home. At the producer level, different, as waste may
occur primarily at the
premature harvesting of crops usually causes a loss in nutritional value and, as a result, producer level, owing to
a significant portion is wasted as it is not suitable for consumption. At the marketplace, inadequate harvesting
waste also occurs when vendors keep food displayed in stalls for a long period of time, methods, and at the
using unhealthy preservation methods. However, urban households keep wastage at mini- marketplace, owing to
mum levels by buying small portions each time they purchase food. inappropriate storage
In developed countries, retail and consumption patterns will require profound
cultural changes, particularly regarding preferences and rejection of food based on cos-
In developed countries,
metic characteristics. As surveys show, consumers are willing to buy such food as long retail and consumption
as the taste is not affected (Food and Agriculture Organization of the United Nations, patterns will require
2011e). Raising awareness in food industries, and among retailers and consumers, is a key profound cultural changes
114 World Economic and Social Survey 2013

element in ensuring that consumers are offered a broader range of quality products in re-
tail stores. Further, a significant proportion of the food that is currently discarded but still
suitable for consumption could be sold or donated to commercial or charity organizations.
Governments may have to implement policies designed to stimulate differ-
ent marketing and food management practices which can modify retailer and consumer
decisions, and ultimately reduce the amount of food wasted at the marketplace and at
home. Such policies are particularly applicable to consumable fresh food products that
do not reach the market owing to cosmetic considerations. Publicity, advocacy, education
and even legislation can also be used to bring about ideological, cultural and behavioural
changes so as to reduce high levels of retail and domestic food waste in the developed
world. In addition, in wealthier countries, price incentives in retail spaces lead to over-
consumption, which ultimately increases food waste and health issues linked to excessive
caloric intake. As long as food market prices remain relatively low, there will be no incen-
tives to alter behavioural practices.
In developing countries, In developing countries, as discussed previously (see sect. on increasing food
investments in availability), investments in infrastructure will be crucial to reducing food wastage. Public
infrastructure will be
crucial to reducing
investments should focus on main infrastructures, such as roads and energy production.
food wastage In parallel, private sector investments could concentrate efforts on storage and cooling
systems. At the same time, it is important that food chain operators be trained to improve
production, handling and storage methods, in line with food safety standards.

Increasing financing for the agricultural sector

The transformation and development of the agricultural sector discussed in previous sec-
tions will require investments on a significant scale. There have been several studies on
and estimations of the financing requirements for agricultural development. Considered
within a long-term perspective, investment needs for primary agriculture and its down-
stream industries in developing countries were estimated at US$ 9.2 trillion (2009 dollars)
over the 44-year period from 2005-2007 to 2050 (Food and Agriculture Organization of
the United Nations, 2009a). This level of investments will have to be sourced from both
the public and the private sector. T h e public sector should typically finance infrastructural
needs as well as research and development. These investments would improve productivity
in the agricultural sector and attract private investment, which will benefit from positive
externalities. Yet, the policy environment must provide the right incentives for private in-
vestments. Risk protection and better access to credit markets, for example, can stimulate
private investments, from smallholders in particular.

The importance of increasing public investment in agriculture

The public sector needs to In many developing countries, the share of agriculture in public expenditure has to
take the lead in those areas increase in order to improve the agricultural system, as emphasized by the Secretary-
that offer little incentive for
General’s High-level Task Force on the Global Food Security Crisis (United Nations,
private investments—such
as rural infrastructure, and 2008). The public sector needs to take the lead in those areas that offer little incentive
research and development, for private investments—such as rural infrastructure, and research and development, as
as well as extension well as extension services—to increase agricultural productivity. Scaling up investment
services—to increase in these agricultural public goods and services has the potential not only to improve agri-
agricultural productivity
cultural productivity, but also to crowd in private investment. In addition, greater public
 Ensuring food and nutrition security 115

investment in community capacity development and social infrastructure has been consid-
ered indispensable to improving the management of natural resources and the livelihoods
of small-scale farms (Food and Agriculture Organization of the United Nations, 2012a).
The main challenge, however, lies in the fact that public resources allocated to
the agricultural sector have been falling short of the required levels, including in develop-
ing countries where food insecurity is higher and where smallholders need more support
in order to engage with the market. Government spending on agriculture has decreased
from the 1980s to the mid-2000s, representing only 6 per cent of total public expendi-
tures (United Nations, Department of Economic and Social Affairs, 2008). In Africa,
for instance, despite the landmark decision of Heads of State and Government of the
African Union, at the second ordinary session of the Union Assembly, held in July 2003,
to adopt the Maputo Declaration on Agriculture and Food Security,14 Governments have
not increased their allocation of resources to the agricultural sector as expected. Heads of
State and Government had committed to the allocation of at least 10 per cent of budget-
ary resources to agriculture and rural development within five years. The commitment
to allocate the same percentage by 2015 to coincide with the deadline for reaching the
Millennium Development Goal 1 target of halving hunger was renewed in 2009. However,
in 2008, only 8 countries out of 45 allocated 10 per cent or more of their total budgetary
resources to agriculture and rural development (figure IV.6). These countries were Burkina
Faso, Ethiopia, Ghana, Guinea, Malawi, Mali, the Niger and Senegal (Omilola and oth-
ers, 2010). Six of these countries are least developed countries, and were at the same time
the larger beneficiaries of official development assistance (ODA) and characterized by less
favourable agriculture conditions (Benin and others, 2010).
Major national emergencies, lack of peace and stability, HIV/AIDS and Contrary to the common
natural disasters were among the major challenges faced by Governments during the last perception, low economic
growth and low aggregate
decade, leading to fewer resources for agriculture. However, there are also several govern- wealth in a country are not
ance issues preventing more and better allocation of public resources to agriculture which necessarily an impediment
need to be addressed. The lack of transparency and political will is an underlying factor to higher public spending
on agriculture
leading to low levels of public spending in agriculture. Contrary to the common percep-
tion, low economic growth and low aggregate wealth in a country are not necessarily an
impediment to allocating higher public spending to agriculture. For instance, in Africa,
a small economy such as Malawi had already complied with the Maputo Declaration,
allocating more than 13 per cent of the total public budget to agriculture (te Lintelo and
others, 2013).
Another major challenge is the inadequacy of agricultural sector policy strate-
gies, including diversion of public spending from long-term investment to agricultural
subsidies. While subsidies, such as for energy, or fertilizer subsidies for agriculture, can
help overcoming short-term market failures, they tend to remain in effect much beyond
the original planned time frame, leading to inefficient use of resources. For instance, in
Zambia more than half of the agriculture budget during fiscal year 2005 was spent on
subsidies for fertilizers and crop marketing, while investment in infrastructure represented
only 3 per cent of the budget. Moreover, only 29 per cent of farmers were buying fertiliz-
ers, namely, those who were wealthier and closer to roads (World Bank, 2008a).
14 See document A/58/626, annex I.
116 World Economic and Social Survey 2013

Figure
FigureIV.6
IV.6 Agricultural expenditures and the Comprehensive Africa Agriculture
Agricultural
Development expenditures
Programme and the Comprehensive
(CAADP) Africa Agriculture
10 per cent target, 2008 (unlessDevelopment Programme (CAADP)
otherwise noted)
10 per cent target, 2008 (unless otherwise noted)
Agriculture expenditures as a share of total expenditures (percentage)

16 Agriculture expenditures/total expenditures

CAADP 10 per cent target
14

12

10

0
United Republic of Tanzania

Uganda

Burkina Faso
Niger
Sierra Leone***

Angola**

Madagascar**

Nigeria
Benin

Mauritania***
Seychelles
Congo***

Djibouti**

Côte d'Ivoire**
Liberia*

Namibia**

Mali

Guinea
Swaziland**
Mozambique**
Zambia**

Burundi**
Cameroon***

Chad**
Gambia**

Sao Tome and Principe**

Zimbabwe**
Guinea-Bissau**

Democratic Republic of the Congo**

Comoros****
Kenya*

Morocco***

Central African Republic**

Egypt***

Rwanda***
Botswana**
Lesotho**
Mauritius

Tunisia***
Sudan**

Togo
Ghana***
Ethiopia*

Malawi**

Senegal**
Sources: Based
Sources: on Regional
Based on RegionalStrategic
StrategicAnalysis
Analysisand
andKnowledge
Knowledge Support
Support System
System (ReSAKSS) data collected from various national Government
(ReSAKSS)
sources; and International
data collected from variousMonetary Fund (2009).sources; and International Monetary Fund (2009).
national Government
* = 2009
* = 2009
** = = 2007
** 2007
*** = 2006
*** = 2006
*** = 2005
***** = 2005
Incentives for private investment
Creating the right Insufficient public investment in agriculture is an important barrier to improving and
incentives and regulations ensuring food and nutrition security. At the same time, low private investment, including
is a major influence
in encouraging both
from smallholders in their own farming activities, constitutes another major constraint on
large- and small-scale improving food production. Creating the right incentives and regulations is a main deter-
private investments, while minant for encouraging both large- and small-scale private investments, while improving
improving smallholders’ smallholders’ livelihoods.
livelihoods There is scope for increasing production, food security and rural incomes with
greater investments in small farms. In particular, if investment focuses on the produc-
tion of food staples, rather than high-value products or export-oriented crops, there will
be better opportunities to increase food security in highly food insecure countries. In
Africa, for instance, it is estimated that the value of domestic and regional markets can
amount to more than 50 billion dollars annually, more than the value of total international
agricultural exports from the region (World Bank, 2008a; Sahan and Mikhail, 2012).
Furthermore, diversifying small farms’ food production is the best strategy for improving
rural households’ income and nutrition conditions.
 Ensuring food and nutrition security 117

There are numerous obstacles preventing higher investment in small farms. The
above-mentioned insufficiency of public goods and services limits potential returns to farm-
ers’ investments. The second issue is related to the lack of price incentives for small-scale
producers, in particular when there are price controls on food products which reduce their
potential net revenue. A third issue is the lack of access by smallholders to formal insurance
protection against risks, which, typically, include natural disasters, pest infestations and
price volatility, leading to lower investments in small farms, as a safeguarding measure.
An additional obstacle—and, arguably, the most important—is the lack of Expanding rural financial
access to credit markets. In many developing countries, agricultural financial services institutions and creating
specific financial products
remain underdeveloped, in particular the supply of seasonal credit for small farms, pre-
for small-scale farms will
venting farm-level investments. In many cases, when credit is available, banks increase risk be a key determinant in
premiums and interest rates to prohibitive levels, as they perceive small-scale production boosting productivity in
as particularly risky. Thus, expanding rural financial institutions and creating specific the agricultural sector
financial products for small-scale farms will be a key determinant as regards boosting
productivity in the agricultural sector. The public sector can not only supply specific
insurance and financing products to farmers, but also stimulate the development of insur-
ance and credit markets for smallholders (Organization for Economic Cooperation and
Development, 2010). Specific products could include leasing, matching grants, warehouse
receipt systems, commodity-based financial products, and overdraft facilities for input
dealers (United Nations, 2008).
Private investments in agriculture, particularly international private invest-
ments, are needed and can play an important role in boosting productivity and ensuring
food security, when directed towards strategic needs (Hallam, 2009). However, in order
to increase the positive impact of these investments, Governments need to design policies
and legislation that can create a more conducive climate for inclusive and sustainable
investments. Direct incentives, for instance, such as tax incentives, can encourage invest-
ments that directly support local smallholders. Contract farming can also lead to positive
investment, when small-scale farmers are assisted in contract negotiation and dispute
resolution (Sahan and Mikhail, 2012).
The onus of increasing the positive impact of private investment is on recipi- It is still essential that
ent countries, even if a regulatory framework is often missing in developing countries. national Governments
create regulations and
While international standards and voluntary actions can partly bridge the gap, it is still
incentives to ensure the
essential that national Governments create regulations and incentives to ensure a positive positive impact of private
impact. For instance, as observed above, large-scale land acquisitions from foreign private investments, particularly
investors must be regulated in order to maximize benefits for local communities. In rela- international private
tion to land, several mechanisms can be used, such as legal protection of all land rights investments
and the inclusion of local communities in political decision-making processes (Sahan and
Mikhail, 2012). Similarly, sustainable farming investments can also be encouraged with
adequate incentives and regulations for protecting the environment.

International support for agriculture

Developing countries
The support of the international community—bilateral and multilateral organizations, will need additional
international non-governmental organizations and other development partners—will be financial support from the
international community
crucial for the allocation of more resources to long-term investments in agriculture. In the
in order to increase the
last few decades, agriculture has been considerably neglected by donors and development allocation of resources to
partners. In the 1980s and 1990s, total ODA to agriculture exhibited a declining trend, long-term investments in
as a consequence of structural adjustment programmes that favoured industrial sectors agriculture
118 World Economic and Social Survey 2013

in developing countries. From the 1980s to 2008, aid to agriculture fell by 43 per cent
(figure IV.7). In terms of total aid programmes, the share of aid to agriculture declined
even more sharply, from 17 per cent in the 1980s to 6 per cent in 2008.
Despite the long-term decline, bilateral aid to agriculture showed an upward
trend in recent years, during the period 2003-2008. This recent trend coincided with
the onset of the new millennium and commitments made by the donor community,
in particular to Africa. In addition, in 2007-2008, the total annual average aid com-
mitments to agriculture amounted to US$ 7.2 billion (Organization for Economic
Cooperation and Development, 2010), which represented a positive step towards
increasing financing for agriculture in developing countries. Still, in 2008, the High-
level Task Force on the Global Food Security Crisis urged donor countries to double
ODA for food assistance, other types of nutritional support and safety net programmes,
and to increase the proportion of ODA to be invested in food security and agricul-
tural development from the current 3 to 10 per cent within five years (and beyond if
needed) so as to reverse the historic underinvestment in agriculture (United Nations,
2008). Further, global support of US$ 20 billion for agriculture over a three-year pe-
riod was promised at the Group of Eight (G8) Summit, held in L’Aquila, Italy, from
8 to 10 July 2009 (see L’Aquila joint statement on global food security, para. 12). By
the time of the 2012 Camp David G8 meeting, 48 per cent of the L’Aquila pledge had
been disbursed. Some countries such as Canada, Italy, the Netherlandas and the UK
had already fully disbursed their pledges (Organization for Economic Cooperation and
Development, 2012b).
Figure IV.7 Trends in aid to agriculture: commitments, 1973-2008
Figure
(Trends in moving
Five-year aid to agriculture:
averages andcommitments, constant 2007 prices)
annual figures,1973-2008
(Five-year moving averages and annual figures, constant 2007 prices)
Billions of United States dollars

Multilateral agencies
9 DAC countries
8

0
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

Source: Organization for Economic Cooperation and Development (2012b).

Source: Organization for Economic Cooperation and Development (2012).
Development Co-operation Report 2012: Lessons in Linking Sustainability and Development. Paris.
 Ensuring food and nutrition security 119

In order to maximize the positive impact of external aid on agriculture, coun-

tries that face food insecurity and small-scale farms should be prioritized. In line with this
perspective, sub-Saharan Africa and South and Central Asia have received, respectively,
31 per cent and 22 per cent of the total aid flows to agriculture in 2007-2008 (Organization
for Economic Cooperation and Development, 2010). However, continuity and coherence
of ODA for agriculture are also crucial for its effectiveness.
In addition, new mechanisms in global governance of agriculture are needed to New mechanisms in global
provide political support, coordinate across sectors and, in particular, ensure continuous governance of agriculture
will also be important for
and appropriate funding (World Bank, 2008a). Concerted action is needed by the interna-
better coordination across
tional community in addressing the issues of trade and global public goods (research and sectors and for ensuring
technology), as well as helping developing countries confront climate change challenges. continuous and appropriate
In the case of climate change, for instance, it is accepted that wealthier countries bear the funding
major responsibility for its emergence, while vulnerable farmers in developing countries
suffer most of its consequences. Thus, within the context of the United Nations Framework
Convention on Climate Change, several funds were created to finance adaptation in vul-
nerable developing countries. In 2010, aid for climate change mitigation was estimated
at US$ 17.6 billion, and climate change adaptation at US$8.9 billion (Organization for
Economic Cooperation and Development, 2012b). However, as observed earlier, the inter-
national community is underinvesting in global public goods for food and agriculture, as
these have only long-term pay-offs. Nevertheless, greater and better allocation of financial
resources is possible, once the international community acknowledges that investing in
sustainable agriculture is a means of ensuring global equity and stability.
 Chapter V
The energy
transformation challenge

Summary
yy The latest estimates confirm that trends in emissions are likely to lead to increases
in world temperature which could have catastrophic consequences. Even after ac-
counting for recent mitigation policies—including expanded use of renewable
energy sources and improvements in energy efficiency—the accumulated concen-
trations of emissions will be well above the safety mark of 450 parts per million of
carbon dioxide equivalent by 2050.
yy Pathways to an energy transformation for sustainable development are multiple: there
is flexibility in the energy technologies that need to be available and in the sectors in
which energy efficiency should improve, and there are options with respect to the
economic, social and cultural envelopes that could contain the increase in emissions,
while still allowing for a rise in welfare.
yy Despite their variety, sustainable pathways share some common ground. First, the
sooner policies scale up, the greater the technological flexibility will be and the less
costly mitigation will become. Second, policies increasing efficiency in the delivery of
energy services can go a long way. Indeed, if it chooses to, the world can avoid the
use of controversial technologies with high risks and high costs, including nuclear
power and carbon capture and storage.
yy This Survey finds a certain degree of technological over-optimism in the assessment
of sustainable pathways. While technology per se might not be the main limiting
factor, its implementation faces challenges. In this regard, our analysis is less sanguine
about the economic, social and cultural hurdles to be overcome in implementing
the decisive and coherent national policies that are called for, as well as in secur-
ing the commensurate level of international cooperation. The world needs a public
investment-led big push, capable of catalysing private sector investment and innova-
tion so as to sustainably transform the energy system.
yy The sustainable energy transformation is consistent with economic and social in-
clusion; moreover, policies promoting economic and social inclusion can, in some
cases, also result in reduced emissions. Universal access to clean cooking fuels and
electricity can be consistent with measures to contain the increase of emissions and,
pertinently, this can be achieved at a comparatively modest investment cost:
yy The investment necessary to render the energy system sustainable is, in principle,
affordable. However, the full costing of investment needs calls for resource allocations
several times larger than the direct energy investments that are needed to keep the
world on a sustainable pathway. Additional investments needed to achieve universal
access to modern energy by 2030 are, in comparison quite affordable.
122 World Economic and Social Survey 2013

Introduction
The world economic system is in need of deep transformation as a means of re-establishing
a balanced relationship with the Earth’s boundaries while accommodating the legitimate
development aspirations of the billions of people who would like to have access to quality
and nutritious food, decent clothing and shelter, health, good-quality education, water
and sanitation, and modern amenities. At the heart of this transformation lies the revamp-
ing of the world “energy system,” as it is energy that underpins the production of the
goods and services that sustain human life. The energy system harnesses natural resources
and transforms them into energy carriers, to be used by the appliances and machinery
that provide energy services, such as heat, refrigeration and transport. Providing energy
services to current and future generations requires energy systems that are sustainable,
in terms of both the use of natural resources and the disposal and absorption of the pol-
lutants associated with the generation and use of energy. To the extent that an energy
system is engaged in multiple interactions with the economy, society and the environment
(including interrelations with other physical resource and commodity systems), the only
way to build sustainability in the energy system is to introduce sustainable management
of those economic, social and environmental interactions.
The transformation of the energy system should be a core element in any agenda
for sustainable development that aims at improving the living standards of people within
a framework of equity and environmental sustainability. In the context of the Secretary-
General’s Sustainable Energy for All Initiative and at other occasions, explicit energy goals
(or targets) are needed to eradicate dependence on traditional use of biomass as a source
of thermal energy; to improve access to reliable and adequate quality electricity; and to
ensure that unreliable or low-quality energy sources do not compromise the opportunities
of those among the working poor who are self-employed or run household enterprises.
Achieving these objectives entails confronting the challenge of formulating
policies that adequately resolve the issue of potential trade-offs and take advantage of po-
tential synergies. Policies need to explore possible synergies with other development goals,
by promoting, for example, health, education, training and employment creation through
improvement of workers’ skills in the areas of design, deployment and maintenance of
sustainable energy systems.

The evidence for climate change and

human-activity generated emissions
A large number of studies have examined current energy trends and found them to be
outright unsustainable. They do, however, offer alternatives and have proposed a variety of
paths that have the potential to re-establish a balance between human activity and Earth’s
carrying capacity. Presented below are some of the major institutional exercises focused on
energy trends and alternative sustainable pathways.1
1 The release by the Intergovernmental Panel on Climate Change of its Fifth Assessment Report (to
be finalized in 2014) will further enrich our understanding of sustainable paths.
 The post-2015 energy transformation challenge 123

The room for effective action is shrinking

The growing body of analytical evidence provided by the scientific community unmistak- The latest assessments of
ably confirms that current incremental policies will not suffice to keep human impact energy trends confirm the
urgency of transformative
within the Earth’s boundaries. If current trends continue, the further infringement of those action to prevent undue
boundaries will lead to a dangerous increase in the risk of devastating consequences. If one accumulation of CO2
looks at the rise in the use of renewable energy, the advances made in reducing pollution in and risky increases in
many cities, the increase in the number of protected areas, the implementation of policies to temperature
improve sustainable use of natural resources, and the adoption of international agreements
to improve environmental sustainability, the world is probably greener today than it would
have been if no actions had been taken. Certainly, the world is, increasingly, using energy
more efficiently and there has been a 25 per cent improvement over 1980 efficiency indica-
tors. Some countries, notably China, and some regions have achieved large improvements.
However, even after taking into account all of these actions, the likely outlook does not
meet desired emissions reduction targets. Simulations incorporating current economic and
demographic trends, energy policies, emissions levels and current commitments indicate
that present efforts do not suffice to maintain accumulated emissions within acceptable
boundaries and safe temperature limits. Introducing policies and regulations that can ef-
fectively bring about a shift to a sustainable energy path is becoming evermore urgent.
World Energy Outlook 2012 (International Energy Agency, 2012) considers
two baseline scenarios and presents estimates extending to 2035. The “current policies
scenario” includes the implementation only of policies that had been adopted by mid-
2012. The “new policies scenario” includes all policies in the current policies scenario plus
a cautious implementation of recently announced policy commitments and the expected
impact of adopting new technologies (ibid.). In a sense, then, the second baseline scenario
takes an optimistic view of recent policies and technology development, mainly because
it assumes that they will be fully implemented. A comparison of these baseline scenarios
highlights two important points. First, new policy and technology developments are im-
portant steps in the right direction, for they imply a noticeable lessening in the increase
in emissions between 2010 and 2035 (figure V.1). Second, even after optimistically ac-
counting for recent green developments, the world is still a long way from a sustainable
pathway, as emissions will still be well above the sustainable prescribed level. While the
current policies scenario implies a long-term average increase in global temperature of 5.3º
C, the updated new policies baseline scenario softens the impact on world temperature by
1.7° C, yet still leads to a risky increase of 3.6° C. Based on scientific assessments, it has
been established that world temperature should not increase by more than 2º C.
A comprehensive review by the Intergovernmental Panel on Climate Change
(2012c) of 16 global energy-economy and integrated assessment models found a remark-
able increase in the use of renewable energy in many baseline scenarios. Based on the
increases in the use of renewable sources of energy foreseen by such baseline scenarios,
by 2030 the level of use of renewables will have doubled. Under other scenarios, the use
of renewable energy will be 3 or even 4 times the current level. Yet, again, these baseline
scenarios result in emissions implying dangerous increases in world temperature.
The baseline scenario presented in OECD Outlook 2050 (Organization
for Economic Cooperation and Development, 2012c) implies that concentrations of
124 World Economic and Social Survey 2013

Figure V.1
Global energy-related CO2 emissions by scenario, OECD and non-OECD,
Figure
2010, V.1 and
2020 Global
2035energy-related CO2 emissions by scenario
CO2 emissions (gigatons/year)

50 OECD
Non-OECD

40

30

20

Source: International Energy 10

Agency (2012), p. 52,
Figure 2.2.
Note: NPS = new policies 0
scenario; CPS = current CPS NPS 450 CPS NPS 450
policies scenario;
450 = 450 scenario. 2010 2020 2035

Source: World Energy Outlook 2012, Figure 2.2, page 52.

greenhouse gas emissions will rise to 685 parts per million (ppm) of carbon dioxide
Note: NPS = New Policies Scenario; CPS = Current Policies Scenario; 450 = 450 Scenario
equivalent (ppm CO2e) by 2050 and to over 1,000 ppm of CO2e by 2100, well above the
internationally agreed target of cumulative concentrations of required 450 ppm of CO2e
by 2050 required to stabilize world temperature (Intergovernmental Panel on Climate
Change, 2007b). These increases in greenhouse gas emissions will lead to temperature
hikes ranging between 2.0º C and 2.8º C by 2050 and between 3.7º C and 5.6º C by
2100. The predicted business-as-usual emissions are thus likely to trigger increases in
world temperature with potentially disastrous consequences for the environment and peo-
ple’s well-being: aggravated losses of biodiversity, increased pollution in cities, heightened
competition for water and a doubling of the number of premature deaths.
The projections and reviews of scenarios undertaken by the United Nations
Environment Programme (UNEP) (2012b) also suggest that current policies and underlying
trends fall short of what is required to prevent risky increases in world temperature. UNEP
scenarios are presented in conformity with countries’ emissions reduction pledges under the
United Nations Framework Convention on Climate Change,2 i.e., from the time commit-
ments were made to the year 2020. According to UNEP estimates, current commitments
are insufficient and will likely lead to a rise in temperature of more than 4° C. To stay within
the safe temperature range, the world needs to reduce emissions by another 14 gigatons (Gt)
of CO2e (GtCO2e)/year by 2020, beyond current commitments to reductions in emissions.

The many paths to a sustainable energy transformation

There are a large number There has been progress in the understanding of the changes that will be required to
of pathways towards achieve a sustainable energy transformation that keeps the Earth within safe boundaries.
transforming the energy
system so that the world
One overriding message from the hundreds of scenarios that have been produced by scien-
can achieve sustainable tists is that the world can follow a large number of paths to achieving sustainability.
development 2 United Nations, Treaty Series, vol. 1771. No. 30822.
 The post-2015 energy transformation challenge 125

The IPCC special report on renewables (2012)

The IPCC special report on renewables (2012c) looks at 164 scenarios presenting the results
of policies aimed at increasing the role of renewables in the energy system. Under more
than half of these policy scenarios, there is a significant increase in the use of renewables
with figures ranging from 64 exajoules (EJ)/year to more than 173 EJ/year and in some
instances to 400 EJ/year over current levels (figure V.2). The share of renewables in the
energy mix will increase in these scenarios from 13 per cent in 2008 to more than 17 per
cent and 27 per cent in 2030 and 2050, respectively. The most ambitious scenarios project
renewables sources accounting for about 43 per cent and 77 per cent of total energy in
2030 and 2050, respectively.
The IPCC review suggests that scenarios aimed at controlling emissions more
strictly require an energy mix with a higher share of renewables. To what extent renewables
can contribute to the control of emissions is still somewhat uncertain, however. For any single
level of emissions, there is a wide range of renewable energy combinations that are compat-
ible with that level of emissions; such large variation reflects the difficulty in modelling the
environmental impact of renewables, which in part stems from uncertainties surrounding
the deployment of renewable technologies (see legend in figure V.2). While there is a need to
increase our understanding of the interactions between renewable energy and emissions, the
IPCC review suggests a large potential for increasing the use of renewables.3

United Nations Environment Programme

emissions gap report
Noting the slow progress in international negotiations on reducing emissions, the UNEP
report (2012b) looks at scenarios where some important actions to curb emissions occur only
after 2020.4 Comparing these scenarios with scenarios under which most of the significant
environmental policy actions occur before 2020 helps highlight important trade-offs. The
first observation is that under scenarios assuming strong mitigation only after 2020, there
is obviously more flexibility given to the type of changes in the energy system that need
to take place in the short term. The trade-off is that under these scenarios, there is greater
pressure to accelerate progress after 2020, with the world becoming more dependent on
technological breakthroughs to be able to achieve the required reduction in emissions. For
example, the UNEP report concludes that not a single later action scenario published up to
2012 can meet the target of controlling the rise in world temperature without bio-carbon
capture and storage (United Nations Environmental Programme, 2012b, p. 29). A similar
trade-off applies to policy options and societal choices: the widening of options in the short
term narrows the room for future policy action (because higher emissions increase the risk
of rising temperature and climate changes).

OECD Environmental Outlook to 2050

OECD Environmental Outlook to 2050 (2012c) analyses the costs and benefits of an array
of policies aimed at transforming the energy system and avoiding high climate change
risks. The OECD core scenario makes several assumptions: (a) that mitigation options are
3 See also the discussion in IEA (2012b), chap. 7 entitled “Renewable energy outlook”.

4 There are only a handful of studies that have examine this type of scenarios, including Vuuren
and others (2013), Organization for Economic Cooperation and Development (2012c), and Rogelj,
McCollum and Riahi (2013).
126 World Economic and Social Survey 2013

Figure V.2 Global RE primary energy supply (direct equivalent) versus fossil
Figure V.2
and industrial CO2 emissions in 2030 and 2050
Global renewable primary energy supply (direct equivalent) versus fossil fuel and industrial CO2 emissions, 2030 and 2050
2030 2050
Renewable primary energy supply (exajoules/year) Renewable primary energy supply (exajoules/year)

- Maximum
400 400
- 75th

- Median
- 25th
300 300
- Minimum

200 200

100 100

0 0
0 20 40 60 0 20 40 60 80
CO2 emissions from fossil fuels and industrial processes CO2 emissions from fossil fuels and industrial processes
(gigatons of CO2 per year) (gigatons of CO2 per year)

Category I (<400 ppm) Category II (400-440 ppm) Category III (440-485 ppm) Category IV (485-600 ppm) Baselines
Source: IntergovernmentalPanel on Climate Change, 2011, page 21, figure SPM.9.
Source: Intergovernmental
Panel on Climate Change,
2012c, p. 21, fully flexible, (b) that all the necessary cooperation exists to implement an all-encompass-
figure SPM.9.
ing and harmonized global carbon market and (c) that least-cost mitigation options are
adopted. The core scenario is set to achieve the target of keeping the CO2e concentration at
450 ppm. To achieve the target, this scenario simulates a set of policies that could achieve
such a target, including actions to establish a global carbon price, followed by immediate
use of least-cost mitigation options in all sectors and regions, and gradual progress in the
decarbonization of the energy sector—stimulated by higher carbon prices, extensive use
of low-cost advanced technologies, including biomass energy with carbon capture and
storage. While the cost to the economy of keeping emissions in check under these assump-
tions would not be large, it would vary significantly across regions. Costs would entail
reductions of 2050 gross domestic product (GDP) ranging from -2.1 percent for OECD
countries to -8  per cent for Brazil, India, Indochina and China eliminated, with other
regions facing reductions of -4.4 per cent.5
OECD explicitly probes the effects of policies designed to curb emissions and
the impact that such policies would have on biodiversity, whose boundaries are among the
Earth’s most severely infringed. Under the OECD baseline scenario, by 2050 the world
will have lost 10 per cent of biodiversity, over and above the already reduced level for the
year 2010. The set of policies and technologies that lead to limiting emissions to 450 ppm
of CO2e in the OECD core scenario are unfortunately incapable of addressing the loss
5 Reductions in the Russian Federation are of the order of -6.5 per cent (see Organization for
Economic Cooperation and Development (2012c), p. 115, figure 3.18, panel B).
 The post-2015 energy transformation challenge 127

in biodiversity. The OECD core scenario reduces the loss of biodiversity by 9.9 per cent
relative to the biodiversity in baseline 2010, that is, there is a net gain of 0.1 percentage
points over the baseline projection to year 2050. A more detailed look at the simulation
helps reveal potential trade-offs. Most policies and positive climate change effects under this
scenario reduce the loss of biodiversity by 1.5 percentage points with respect to the 2050
baseline projection, but more intensive use of bioenergy under this scenario effectively adds
1.4 percentage points to the loss of biodiversity. Combining these two figures yields the
above-mentioned 0.1 percentage point net gain. Thus, the use of bio-energy to help reduce
emissions involves a trade-off of increasing biodiversity loss. Simulations using technology
combinations that rely less importantly on bio-energy result in larger net gains. On the other
hand, complementary policies can be of great assistance. When the core 450 scenario is
reinforced with increases in land productivity, ranging between 3 and 18 per cent depending
on type of land and region, the net loss in biodiversity is reduced by 1.2 percentage points.

Global Energy Assessment

The Global Energy Assessment (International Institute for Applied Systems Analysis, 2012)
builds 60 scenarios that include fundamental changes in energy and development policies,
e.g., policies related to the energy sector, changes in the user-end point demand for energy,
and changes in the transport sector, as well as policies broadening access to modern energy,
enhancing energy security and keeping emissions within safe levels (Riahi and others,
2012). The 60 scenarios are organized around three sets of options. The first set of options
includes different combinations of changes in the course of the evolution of the supply
of and demand for energy. At one extreme, the world relies mainly on improvements in
the supply of energy to meet the needs of a growing and increasingly more affluent world
population: the supply path. At the other extreme, the world population is still growing
and is becoming more affluent but in this case, measures are taken to improve efficiency
in the use of energy: the efficiency path. Between the two extremes, there is a mix of
improvements in supply and demand: the mix path. Of particular relevance to an increas-
ingly urbanized world (see chap. III), each of these three configurations of demand- and
supply-side changes can be deployed along with two different transport sectors systems:
one that continues to rely on conventional technologies and fuels (liquid) and one that
uses advanced technologies and fuels (hydrogen and electricity).
The set of three supply and demand possibilities and the set of two transport
options, as described, define six technological paths. For each of these six paths, the ex-
ercise considers 10 possible variations in the portfolio of technologies, e.g., one where all
technologies are available, one comprising all but nuclear, one comprising all but carbon
capture and storage (CCS), etc. In total, 60 alternative paths are considered. The results
of running these 60 scenarios are measured with a checklist to determine whether or not
they meet sustainability goals. Four sustainability goals are defined: (a) to attain almost
universal access to electricity and clean cooking fuels by 2030; (b)  to ensure that the
majority of the world’s population live in areas that meet the air quality guidelines of the
World Health Organization (WHO); (c) to limit global average temperature increase to
2° C (with a likelihood greater than 50 per cent); and (d) to limit energy trade and increase
the diversity and resilience of the energy supply. Scenario results are subject to the test of
meeting all four defined sustainability goals. A total of 41 out of the 60 scenarios success-
fully meet the test, underscoring the view that there are a variety of paths towards keeping
emissions and the rise in temperature within safe limits.
128 World Economic and Social Survey 2013

The most important insight provided by this ensemble of scenarios is that the
world can go a long way towards controlling emissions if there are adequate investments
in energy efficiency. The 60 scenarios can be divided into 20 scenarios within the supply
path, 20 scenarios within the efficiency path and 20 within the mix path. While all
20 scenarios that emphasize measures for efficiency in demand meet all four sustain-
ability goals, 13 out of the 20 scenarios that assume a mix of supply and demand changes
meet the goals and only 8 of the scenarios emphasizing the supply side pass the sustain­­
a­bility test.
The explanation for these results is that the increase in energy efficiency
provides enough room for all combinations of the two transportation paths and all five
technology portfolios to meet the sustainability goals. If gains in efficiency are small, how-
ever, the world becomes more dependent on the capacity to increase the supply of clean
energy, which depends in turn on the ability to innovate and adopt new technologies. If
substantial efficiency improvements are ruled out, the number of scenarios that meet all
four sustainability goals are reduced to only two, regardless of whether or not it is possible
to migrate from conventional to modern transport systems.
Another important insight that can be derived from this exercise is that
the technologies with greater technological, economic and social uncertainties—
nuclear energy, carbon capture storage (CCS), and bio-energy with carbon capture storage
(BECCS)—are not indispensable for achieving the four sustainability goals adopted in the
Global Energy Assessment exercise. That is, even if the world phases out nuclear energy
and/or discards the option of carbon capture storage and bio-energy with carbon capture
storage, the four Global Energy Assessment sustainability goals can still be achieved as
long as it keeps the demand for energy low and renewable technologies are implemented as
assumed in scenarios. The main lesson is that if the world cannot control the demand for
energy with efficiency measures, then nuclear, carbon capture storage and bio-energy with
carbon capture storage technologies will have to be accepted.6

Sustainable energy with economic and social inclusion

Since the IPCC Fourth Assessment Report review (2007b), many energy and climate
scenarios have included the assumption that countries’ GDP will converge towards the
top. Take, for example, the Global Energy Assessment and OECD modelling. The Global
Energy Assessment scenarios assume that the country or region with the lowest income
will have a GDP per capita of 8,000 purchasing power parity (PPP) United States dollars
by 2050 and US$ 26,000 in ppp prices by 2100. This means that regional income dispar-
ity, measured as the ratio of the top to the lowest income per capita, will drop from 17
in 2010 to 6 in 2050 and to 3 in 2100. The OECD modelling assumes that by 2050, the
lowest country or region GDP per capita will be US$ 13,000 ppp and the ratio of the top
to the lowest income per capita will have decreased, in ppp terms, from 12 in 2010 to 6
in 2050. The OECD modelling, explicitly builds changes in GDP based on the effects
of a set of growth drivers, including the age structure of the population, the labour-force
participation and unemployment rates, and education attainment, among others. The pro-
cedure explicitly discusses the role of important interactions determining growth, such as
the slowing-down effect that ageing has on growth and the upward effect that education
6 Consistent with the known economic, social and cultural difficulties associated with the use of
some of the proposed technologies substituting fossil fuels, the IEA (2012b) sustainable scenarios
do not include nuclear energy and carbon capture and storage.
 The post-2015 energy transformation challenge 129

attainment has on labour productivity and thereby on growth. The assumption of GDP
convergence is driven by the assumption of convergence in education.
The fact that these models include numerous scenarios where emissions meet Not only is economic and
the 450 ppm target and income convergence is still allowed for, implicitly demonstrates social inclusion, including
upward convergence of
that environmental goals are consistent with inclusive economic growth. IPCC (2007b)
GDP, consistent with the
found that models assuming GDP convergence tend to yield lower emissions mainly be- curbing of greenhouse gas
cause the increase in income is allowed to occur in countries where emissions per capita emissions, but it can also
(emissions/population) and the intensity of emissions (emissions/GDP) are lower because be an active contributor in
resources and technologies are allowed to flow to countries and regions where availability this regard
is more restricted.7 Hence, convergence of GDP per capita not only is consistent with, but
might also actively contribute to, environmental sustainability.
The relevance of GDP convergence to environmental sustainability goes be-
yond the reduction of between-country inequalities. Within each country, appropriate
and coherent policies promoting upward income convergence can result in great progress
towards implementation of an inclusive development agenda. To the extent that social and
economic inclusion indicators correlate with GDP per capita, reaching a GDP per capita
floor of say 10,000 PPP dollars by 2050 might also mean that the incidence of one dollar-
per-day income poverty would be about 5 per cent (figure V.3; see also World Bank (2012b),
p. 5, figure 0.2). Similar patterns would apply to other indicators such as child mortality,
female literacy, education attainment, health outcomes and access to water and sanitation,
among others. All of this suggests that economic and social inclusion, including upward
convergence of GDP, is consistent with—and can even be a net contributor to—the curb-
ing of greenhouse gas emissions. Consistency, however, is not equivalent to sufficiency.
Economic and social inclusion politices will have to be designed and implemented as the
world transforms its energy system.
Income convergence allows for convergence in human development but does
not assure it, particularly under conditions of persistent and, at times, aggravating in-
equalities (see chap. I). Climate change/energy/economy models have also looked at issues
of energy and environment-related poverty.
We begin by recalling that the Global Energy Assessment exercise specifically
included elimination of energy poverty among its four goals and found that 41 of its 60
scenarios fulfilled all four goals, i.e., universal access to electricity and clean cooking fuels
by 2030; compliance of cities with WHO air quality guidelines; limiting the global aver-
age temperature increase to 2º C; and limiting energy trade and increasing the diversity
and resilience of the energy supply.8 Although the 60 scenarios incorporate the economic
and social inclusion dimensions of sustainable development and establish whether or not
they are compatible with the 450 ppm target, the exercise does not indicate what specifi-
cally would be required to achieve economic and social inclusion in an environmentally
sustainable path. To address this question, the Global Energy Assessment compared two
scenarios, one including policies to achieve universal access to clean fuels and stoves for
cooking and access to electricity with another incorporating none of these policies. The
7 In general, scenarios featuring between-regions/between-countries income per capita conver­
gences result in lower emissions because slower growth rates in lower-income countries tend
to be associated with slower adoption of low-emissions technologies (Intergovernmental Panel
on Climate Change, 2007b, chap. 3, p.177). Accordingly, the more inclusive the income paths
underlying energy transformation scenarios are, the larger the gains in the stabilizing of emissions.

8 Rogelj, McCollum and Riahi (2013) also find that access to modern energy, as reflected in the
United Nations Sustainable Energy for All Initiative (United Nations, 2012d), is consistent with
environmental sustainability.
130 World Economic and Social Survey 2013

analysis was carried out for three key regions—sub-Saharan Africa, South Asia and Pacific
Asia—where access to modern energy is a critical issue.
The results of the comparison indicate that with the absence of energy poverty
policies, 2.4 billion people will still rely on solid fuels for cooking by 2030 (figure V.4), that
is, 300 million more people than the 2.1 billion so reliant in 2005. The implementation of
the most ambitious package providing clean energy fuel, which combines microfinancing
and fuel subsidies to cover the upfront costs of enabling access to modern energy and the
purchase of appliances (assuming a 50 per cent fuel subsidy in relation to market prices),
has the potential to ensure access to modern energy services for 1.9 billion people who

Figure V.3
Figure V.3 Income per capita, and social and economic inclusion
Income per capita, and social and economic inclusion
Poverty Education
Population below $1 a day (percentage), 1990s and 2000s Percentage

100 100
90 90
80 80
70 70
60 60
50 50
40 40 Primary school
30 30 enrollment rate
20 20 Secondary school
10 10 progression rate
0 0
0 10 20 30 40 50 0 10 20 30 40 50 60 70 80
GDP per capita, 2009 GDP per capita, 2010

Child mortality Sanitation

Mortality rate (deaths of children under 5 per 1,000 live births), 2010 Improved facilities (percentage of population with access), 2010

200 100
180 90
160 80
140 70
120 60
100 50
80 40
60 30
40 20
20 10
0 0
0 10 20 30 40 50 60 70 80 0 10 20 30 40 50 60 70 80
GDP per capita, 2010 GDP per capita , 2010

Sources: World Bank, “Global poverty and inequality: a review of the evidence,” World Bank Policy Working paper, No. 4623 (2008); and World Bank,
Sources: World Bank “Global poverty and inequality: a review of the evidence,” World Bank Policy Working paper, no. 4623 (2008);
World Development Indicators.
and World Bank, World Development Indicators.
 The post-2015 energy transformation challenge 131

would otherwise still rely on solid fuels for cooking.9 This set of policies, however, will still
leave 500 million people without access to clean cooking fuels.
Separately, the Global Energy Assessment looks at access to grid-electricity in Providing the world’s
the rural areas of three regions: sub-Saharan Africa, Pacific Asia and South Asia.10 The poor with access to clean
cooking fuel and electricity
baseline scenario indicates that in the absence of access to electricity policies, between
is possible without
70-85 per cent of the rural population of sub-Saharan Africa and 18-23 per cent of the significantly changing
rural population of Pacific and South Asia will still be deprived of electricity by 2030. global emissions
Implementing policies aimed at providing universal access to clean cooking fuels and elec-
tricity in these three regions will have no visible impact on emissions. Actually, greenhouse
gas emissions will be slightly lower than the emissions under the baseline scenario.
The International Energy Agency (IEA) World Energy Outlook 2012 provides
an interesting perspective on access to modern energy and the climate change implications
thereof. The IEA core new policies baseline scenario predicts that by 2030, 1 billion people
will still be without electricity and 2.6 billion people will lack clean cooking facilities. The
simulation of a scenario with granting universal access to clean cooking fuel and electricity
indicates that these policies can be implemented without significantly increasing emissions.
OECD Environment Outlook to 2050 examines the benefits of combining en-
vironmental policies and policies aimed at reaching the Millennium Development Goal of
access to water and sanitation. The report presents a scenario where the number of people

Figure V.4
Figure V.4
Impact Impact
of access of access
policies policies
on cleaner on cleaner
cooking cooking
in three in three
developing developing regions
regions
Populations (billions)

4.2 South Asia Solid fuel

Pacific Asia Liquid fuel
3.6 Sub-Saharan Africa

2.4

1.8

1.2

0.6

0
Base 2005 No new policies 2030 Microfinance at 15 per cent
and 50 per cent fuel Source: Riahi and others
subsidy 2030 (2012), p. 1,263, figure 17.31.

Source: Extracted from GEA 2012, figure 17.31, p. 1,263.

9 The Global Energy Assessment acknowledges that fuel subsidies are controversial (see, for
example, International Monetary Fund (2013)), but subsidies in this simulation are used to make
access to modern fuels affordable. Other policies specifically designed to address poverty and
environmental sustainability, such as tailored cash transfers, might be more appropriate.

10 Owing to lack of reliable data, the analysis leaves out the provision of off-grid electricity, which
could be a more appropriate and lower-cost alternative.
132 World Economic and Social Survey 2013

without access to improved water in 2005 will have been reduced to half by 2030, followed
by universal access to an improved water source and basic sanitation by 2050. The benefits
of such a scenario include prevention of premature deaths, better health conditions and
economic rewards to such sectors as fisheries and tourism (Organization for Economic
Cooperation and Development, 2012c, p. 247).11
The brief and selective review of sustainable pathways towards transforming the
energy system has yielded the following insights: (a) long-term trends are not sustainable
even if the effects of recent mitigation policies are taken into account; (b) transformative
changes can follow multiple paths; (c) transforming the energy system is consistent with
increasing economic and social inclusion; (d) a closer look at available scenarios warrants
the conclusion that not only is mitigation consistent with economic and social inclusion
but, in some instances, it also benefits from economic and social inclusion; (e) all feasible
paths require policies, resources and international cooperation well beyond current stand-
ards and trends. In sum, full sustainable development is possible, but it needs strong policy
interventions at global and country levels.

The challenge of transforming the energy system

Successful mitigation and sustainable development face multiple challenges. To begin with,
there is the challenge of ensuring that people and policymakers learn from scientific and
factual evidence and modify their views and current consumption patterns accordingly.
Yet, even if the world is fully convinced of the environmental risks of continuing current
trends, the task is daunting. The task involves the timely transformation of the energy sys-
tem. The accomplishment of this task involves a complex and potentially lengthy process.
The “energy system” harnesses natural resources and transforms them into energy carriers
to be used by the appliances and machinery that provide energy services, such as heat,
refrigeration and transport, among others (see box V.1 on the energy system). Providing
energy services to current and future generations requires sustainable energy systems. To
the extent that energy systems have multiple interactions with the economy, society and
the environment (including interrelations with other physical resource and commodity
systems), the only way to build sustainability in the energy system is to introduce sustain-
able management of those economic, social and environmental interactions. In the present
section, we discuss issues regarding two challenges to the transformation of the energy
system: the technological challenge and the economic, social and political challenge.

The technology challenge

Technology per se is not It is widely acknowledged that many of the technologies necessary for supporting sustain-
the limiting factor. The able development are already available. The challenge is how to improve these technolo-
most difficult obstacles
gies, how to accelerate cost reductions and achieve meaningful changes, how to integrate
to the implementation of
sustainable technologies lie them along coherent development paths that respond to specific local and sectoral needs,
in the economic, social and and how to provide incentives and mechanisms for rapid innovation, diffusions and
cultural domains knowledge-sharing (United Nations, 2011b, p. ix).
11 It should be noted that if instead of access to improved water, the focus shifts to access to safe
water, the reduction in mortality rates would be stronger (Organization for Economic Cooperation
and Development, 2012c, p. 303).
 The post-2015 energy transformation challenge 133

Climate change-energy models, which look carefully at available and foresee-

able technologies, confirm the view that technology is not the main obstacle. For example,
the Intergovernmental Panel on Climate Change Special Report on Renewables (2012c),
looked at four illustrative scenarios in which emissions were controlled and the use of
renewables increased significantly, and noted that in these cases only 2.5 per cent of the
globally available technological potential was used (Intergovernmental Panel on Climate
Change, 2012c, p. 23 and 796). The UNEP 2012 emissions gap report estimates that the
technological potential for reducing emissions between now and 2020 to be anywhere
between 14 and 20 GtCO2e, which is enough to accomplish the emissions reductions
of 8-13 GtCO2e that still need to be achieved beyond current reduction commitments.
These two examples confirm that current or foreseeable availability of technologies is not
the obstacle to achieving environmental sustainability, but also suggest that a significant
degree of uncertainty still pervades the assessment of technical possibilities.
Climate change-energy models coincide in pointing out that implementing in
the real world the modelled assumptions represents a daunting task. There are technical and
engineering obstacles that need to be overcome in order to implement the new technologies
(see United Nations, 2011b, pp. 54-58 and United Nations, 2012b). Still more challenging
are the unavoidable economic, social and cultural obstacles that will need to be overcome in
order to implement new technologies that are to replace the currently dominant fuel-based
technology envelope. Obstacles include not only the entrenched interests of the energy
industry but also challenges associated with shifts in land use and changes in the eco-
nomic structure and its associated consumption patterns. Finally, one should not forget that
implementation challenges are exacerbated by the fact that changes need to take place in a
short period of time (United Nations, 2011b).
The kinds of economic, social and cultural changes that might be involved in
switching energy sources are suggested by the following illustration. A technically feasible
large-scale plan intended to supply energy from solar sources to 1 billion people in Europe
and North Africa and half a billion in North America will require an expanse of solar
farms in the Sahara desert and North America equivalent in size to the State of Arizona.
The economic, social and political challenges associated with changing land-use patterns
so that such large extensions of land can be allocated to the generation of solar energy at-
test to the magnitude of the obstacles that need to be overcome when scaling up renewable
energy alternatives (United Nations, 2011b, pp. 55-56; MacKay, 2009). Another illustra-
tion is provided by the seemingly simple substitution of fossil fuel-driven automobiles
with electricity-propelled cars. Even if technically feasible and environmentally sound (see
MacKay, 2009, pp. 126-132), such a change will not occur unless the retail network that
supplies gasoline is altered and the auto repair sector revamped, changes that would require
significant investments and might be strongly resisted by vested interests. However, such
large investments might be made attractive if the full cost to the environment is properly
internalized in the price of buying and using fossil fuel-driven cars.
This simple example also helps to illustrate the role of cultural factors. It is of-
ten suggested that a shift to electric automobiles would be out of the question until electric
cars could perform at par with fossil fuel-driven cars, as if cultural norms were static and
unchangeable. This claim ignores the fact that preferences could (and probably should)
change in favour of clean transportation and that it might be possible to change behav-
iours, tastes and social views if consumers were confronted with prices for fossil-fuelled
cars that fully reflected emissions and other environmental costs. If this was the case,
134 World Economic and Social Survey 2013

Box V.1
The energy systema

The energy system constitutes the ensemble of production, conversion and use of energy and is
thus closely linked to the Earth’s carrying capacity and to the economic, social and cultural organiza-
tion of human life (figures A and B). The energy system comprises primary energy resources (e.g.,
coal, oil and gas) which are converted to energy carriers (e.g., electricity, gasoline and liquefied gas).
These carriers then serve in end-use applications for the provision of various energy forms (e.g., heat,
transport and light), required to deliver final energy services (e.g., thermal comfort, transportation
and illumination).
Energy conversion technologies are the critical component defining the energy system:
the energy systems can be characterized by the dominant set of technologies used to convert primary
energy resources into useful energy (secondary energy). Energy systems can be further differentiated
into the energy supply sector and the end-use energy sector. The energy supply sector encompasses
the extraction of energy resources (involving so-called upstream activities), their conversion into
suitable forms of secondary energy and their delivery to the locus of demand (involving so-called
downstream activities). The end-use energy sector, in turn, handles with the provision of services such
as cooking, illumination, heating, refrigerated storage and transportation. The ultimate goal of the
energy system is to meet the demand for energy services required to satisfy human needs.

Figure A
Global energy flows of primary to useful energy, including conversion
Global energy flows of primary to useful energy, including conversion
losses (waste and rejected energy), in EJ for 2005
losses (waste and rejected energy), in exajoules (EJ) for 2005

Energy Examples

Primary 496 EJ Crude oil Coal

144 EJ
Conversion Refinery Power Plant
Secondary 352 EJ Gasoline Electricity
22 EJ
Distribution Truck Grid

161 EJ Final 330 EJ Gasoline Electricity

End use Car Light Bulb
169 EJ Useful 169 EJ Kinetic Radiant
Services Passenger-km Light
Source: Grübler and others
(2012a), figure 1.2, p. 104. 496 EJ Waste and rejected energy
a  This box draws heavily on
Grübler and others (2012a).

Source: Global Energy Assessment: Toward a Sustainable Future (2012), International Institute
for Applied Systems Analysis, figure 1.2, page 104.
 The post-2015 energy transformation challenge 135

Box V.1 (cont’d)

Figure B
Schematic diagram of the energy system: illustrative examples of the energy sector
and energy end use and services
Environmental, economic and social impacts

Energy system
Energy sector Energy supply

Extraction and Uranium Farms and Energy

Gas well Coal mine Sun Oil well
treatment mine forests resources

Upstream
Natural Solar
Primary energy Coal Uranium Oil Biomass
gas radiation

Conversion Photo- Ethanol Energy

technologies Power plant Power plant Refinery technologies
voltaic cell plants

Downstream
Secondary Gas Electricity Electricity Electricity Kerosene Ethanol
energy

Distribution Electricity Electricity Electricity

Gas grid Pipeline Truck
technologies grid grid grid Energy
carriers

Final energy Gas Electricity Electricity Electricity Kerosene Ethanol

Energy demand
Energy end-use

End-use
Furnace Computer Light bulb Air conditioner Aircraft Automobile
technologies

Kinetic Kinetic
Useful energy Heat Electricity Light Heat/cold Energy
energy energy
forms

Energy services

Mobility Energy
Energy services Information Thermal Mobility
Cooking Illumination passenger services
processing comfort ton-km
km

Satisfaction of human needs

Source: Grübler and others (2012a), figure 1.1, p. 104.
136 World Economic and Social Survey 2013

many consumers might find the current performance of electric cars acceptable. In this
regard, an example of a rapid change in preferences is reflected in the 2008 introduction
of a policy combining bonuses and penalties in France. Reportedly, the introduction of
the policy coincided with a sudden 5 per cent drop and subsequent reductions in new cars’
average CO2 emissions (Durremayer and others (2011), p. 8; World Bank 2012b, p. 56).

The investment challenge

The initial investment Despite the sixfold increase in global investments in renewable energy in the period 2004-
needed to sustainably 2011, investments leading to sustainable development still fall far short of what is needed.
transform the energy
The range of estimates is large, reflecting uncertainties about costs that are still not well
system implies a significant
increase in energy- known; but the large range also reflects differences in approaches and modelling tech-
related investments niques.12 Investments needed to transform the energy system are usually classified as rang-
ing between energy investments and additional other investments needed to transform this
system. Estimates of each of these investments have to deal with a number of unknown or
uncertain costs, which results in a large range of estimates, particularly on non-energy in-
vestments and investments in developing countries. Synthesizing the investment estimates
of the Food and Agriculture Organization of the United Nations (FAO), IEA, OECD, and
UNEP, a report of the Green Growth Action Alliance (World Economic Forum, 2013)
indicates that the additional investments needed to put the world on a sustainable path
are at least US$ 0.7 trillion per year between 2010 and 2030 (World Economic Forum,
2013). This US$ 0.7 trillion figure refers to additional investments that will be needed on a
sustainable path in six sectors with readily available estimates (power generation, transmis-
sion and development, buildings, industry, transport vehicles and forestry). Estimates of
additional investments in other sectors, such as water and agriculture, are not well known
or not yet available, e.g., for roads, rail, airports and ports. The US$ 0.7 trillion figure, on
the other hand, refers only to additional incremental investments—it does not include
investment needed under the business-as-usual greening scenario.
To obtain a rough idea of total additional investments in energy-related sectors,
one can simply impute the proportional increase in known sectors to those we still do not
know and give a range for variation. Total energy-related annual investments in sectors for
which there is an estimate amount to US$ 2.1 trillion in a business-as-usual scenario. In
addition to this, US$ 0.7 trillion annual investments are needed in these sectors, an increase
of 33 per cent, to set the economy on a sustainable pathway. Now, total business-as-usual
investments in sectors for which the report does not include an estimate of additional sus-
tainable investments add up to US$ 2.9 trillion. Applying the same proportional increase
of known sectors gives an additional investment of US$ 1.6 trillion; and given the sector
variability in additional investments, one can think of a range of from US$ 1.1 trillion to
US$ 2.4 trillion (table V.1).
It is worth noting that these estimates confirm the view that investing makes
good economic sense. The Green Growth Action Alliance reports that, for some sectors, total
investments under a sustainable scenario might actually be lower than business-as-usual in-
vestments. For example, the IEA estimates compiled by the Green Growth Action Alliance
suggest that annual green investments in power and transmission are 8 per cent lower than
the business-as-usual figure (World Economic Forum, 2013, table 1.1). Investments might
also be lower in, for example, infrastructure for the transport of oil and gas.
12 See, for example, the discussions of needed investments in United Nations (2011b), pp. 174-175.
 The post-2015 energy transformation challenge 137

Table V.1
Additional investments for sustainable development, 2010-2050
Billions of US dollars
Additional
Business-as- investments on Percentage
Sector usual scenario a 2 oC scenario change Source
Known additional energy investments for sustainability, 2010-2030
Power generation 347 160 46.1 IEA
Power transmission
and development 272 -21 -7.7 IEA
Energy total 619 139 22.5 -
Buildings 358 296 82.7 IEA
Industry 255 35 13.7 IEA
Building and Industrial 613 331 54.0 -
Transport: vehicles 845 187 22.1 IEA
Forestry 64 40 62.5 UNEP
Transport and Forestry total 909 227 25.0 -
Total known additional
investment estimates 2141 697 32.6 -
Unknown additional energy investments for sustainability, 2010-2030
Road 400 - - OECD
Rail 250 - - OECD
Airports 115 - - OECD
Ports 40 - - OECD
Transport 805 - - -
Water 1320 - - OECD
Agriculture 125 - - FAO
Telecommunications 600 - - OECD
Other sectors 2045 - - -
Total unknown green
investment estimates 2850 - - -
Additional energy investments for sustainability, 2010-2030
Needed at least* 4,991 697 14 -
Needed lower 4,991 1,148 23 -
Needed mid 4,991 1,625 33 -
Needed higher 4,991 2,361 47 -
Additional inclusion investments for sustainability goals, 2010-2050
Lower** Business as usual 2 oC Percentage
Clean cooking and electricity:
Low a 15 34 125 IEA
Low b n.a. 36 - GEA
High n.a. 41 - GEA
Sanitation and water n.a. 5 - OECD
Source: Data from World Economic Forum (2013), p. 13, table I.1, compiling data from IEA, OECD and UNEP; inclusion
investment estimates are from International Institute of Applied Systems Analysis (2012), p. 1258, table 17.13; data
on sanitation and water from the Organization for Economic Cooperation and Development (2012c), p. 248.
  * Only known investment estimates.
  ** Lower is calculated as the percentage of the first quartile, and higher as the third quartile of the six sector
percentage changes.
138 World Economic and Social Survey 2013

Green Growth Action Alliance estimates, like any others, are contingent on the
policy and technology assumptions of simulated scenarios. The Global Energy Assessment
exercise provides useful insights on how assumptions about policies and availability of
technologies can affect estimates of needed investments. The Global Energy Assessment
estimates total energy supply-related investments at US$ 960 billion in 2010 (Riahi and
others, 2012); a figure consistent with the Green Growth Action Alliance compilations.
The annual average total energy investments in the baseline scenario is equal to US$ 1.8
trillion, while the mean of the annual total energy investments needed in sustainable
pathways is US$ 2.4 trillion. This means the mean additional annual investment in the 41
scenarios is US$ 0.6 trillion (very close to the Green Growth Action Alliance at-least figure
of US$ 0.7 trillion). Now, additional sustainable investments vary significantly depending
on the assumptions about efficiency demand, mode of transport and portfolio of technolo-
gies: the range of additional annual investments in the 41 scenarios starts at the low figure
of US$ 0.14 trillion but rises up to US$ 1.16 trillion.
Focusing on efficiency The main driver determining the magnitude of additional investments in the
and investing sooner 41 scenarios is efficiency. Pathways stressing energy supply policies have investment tags
rather than later reduces ranging from US$ 0.72 trillion to US$ 1.16 trillion (figure V.5a). In contrast, pathways
the size of the total
emphasizing efficiency tend to necessitate lower additional investments, ranging from
investment needed
US$ 0.14 trillion to US$ 0.65 trillion. Varying technology portfolios reveals interesting
investment patterns. Confirming the importance of maintaining flexibility in technology
choices, full portfolio pathways tend to have low additional investments (figure V.5b).
Portfolios that discard carbon capture and storage technologies tend to have low additional
investments, as these are expensive options. Running in the opposite direction, technology
portfolios featuring restrictions in the capacity to use renewables or bio-energy raise the
range of needed investments. The sharpest upward shift in the range of needed investment
is associated with portfolios excluding carbon sink technologies. More restricted portfolios
tend to result in some of the highest investment tags, particularly portfolios with no bio-
energy, no sink or limited bio-energy. One extreme case illustrates well the importance
of maintaining flexibility in technology portfolios. A high-efficiency technology pathway
featuring technology restrictions, no bio-carbon storage, no carbon sink technologies
and restricted use of bio-energy, turns out to carry an additional investment ticket of
US$ 1.08 trillion, way above the US$ 0.32 trillion median investment of efficiency pathways
(figure V.5a).13
The proportional size Energy investments differ, of course, by region (figure V.5c). To explore regional
of sustainable energy investments needs, we should focus on proportional changes, for both baseline and additional
investments is larger sustainable investments might vary significant across regions. While total energy invest-
for developing than for
ment in 2010 represents about 2 per cent of global GDP, energy investments in developing
developed countries
countries represent about 3.5 per cent of GDP, but only 1.3 per cent of GDP in developed
countries (Riahi and others, 2012, p. 1253). In the Western European Union region, for
example, rates are below 1 per cent of GDP, but in the sub-Saharan African region rates are
above 3.5 per cent; oil producing regions are characterized by high investment rates, above
5 per cent of GDP (own estimates based on the Global Energy Assessment online database).
Additional investments needed to achieve sustainability, relative to the baseline, across the
13 The largest investment tickets in Global Energy Assessment scenarios correspond to efficiency
(US$ 0.29 trillion-US$ 0.80 trillion), renewables (US$  0.26 trillion-US$ 1.01 trillion), and
infrastructure (US$ 0.31 trillion-US$ 0.50 trillion) (Riahi and others, 2012, Table 17.13, p. 1258).
Nuclear energy and carbon capture and storage imply investments ranging from no investment
to US$ 0.21 trillion.
 The post-2015 energy transformation challenge 139

Figure V.5a Additional investments in sustainable pathways, by supply, mix and

Figure V.5apolicies
efficiency
Additional investments in sustainable pathways, by supply, mix and efficiency policies
Billions of US dollars
1200
1000 - Maximum
Outlier
800 - 75th

600 - Median

400 - 25th

200 - Minimum
Source: See Global Energy
Assessment 2012 online
0
GEA-supply GEA-mix GEA-efficiency database http://www.
(high demand) (intermediate demand) (low demand) iiasa.ac.at/web-apps/
ene/geadb/dsd?Action=
Pathways htmlpage&page=about.

Figure
Figure V.5b
Source: V.5b on
based Additional investments
GEA 2012 online databasein sustainable pathways, by technology portfolio
http://www.iiasa.ac.at/web-apps/ene/geadb/dsd?
Additional investments in sustainable pathways, by technology portfolio
Action=htmlpage&page=about
Billions of US dollars
1400
1200
1000 - Maximum

800 - 75th

600 - Median
400 - 25th

200 - Minimum
0
No No nuclear Full Limited No Limited Limited No No Limited
carbon and no portfolio biomass nuclear renewables biomass bio-energy sinks biomass, no Source: See Global Energy
(dioxide) carbon (all and carbon bio-energy Assessment 2012 online
capture (dioxide) options) renewables capture carbon database http://www.
and capture and storage capture and iiasa.ac.at/web-apps/
storage and storage, ene/geadb/dsd?Action=
storage Types of technology no sinks htmlpage&page=about.

Figure
Source:V.5c
Figure based on
V.5c GEA 2012 online
Additional databasein
investments http://www.iiasa.ac.at/web-apps/ene/geadb/dsd?
sustainable pathways, by region
Action=htmlpage&page=about
Additional investments in sustainable pathways, by region
Billions of US dollars
180
160
140 - Maximum
120
- 75th
100
80 - Median
60 - 25th
40
- Minimum
20
0
Source: See Global Energy
-20
Middle Latin Common- North Western Pacific Other Centrally South Central Sub- Assessment 2012 online
East and America wealth America Europe OECD Pacific planned Asia and Saharan database http://www.
Northern of Asia Asia and Eastern Africa iiasa.ac.at/web-apps/
Africa Independent China Europe ene/geadb/dsd?Action=
states Regions htmlpage&page=about.

Source: based on GEA 2012 online database http://www.iiasa.ac.at/web-apps/ene/geadb/dsd?

Action=htmlpage&page=about
140 World Economic and Social Survey 2013

11 regions and 41 scenarios vary between -18 and 156 per cent.14 Additional investments
cluster in three regional groups: the first group, showing high relative investments, com-
prises sub-Saharan Africa, Central and Eastern Europe and South Asia; the second group
showing medium relative investments, includes economies of centrally planned Asia and
China, Pacific OECD, other Pacific Asia, Western Europe and North America, and; the
third group showing low relative investments, includes the Commonwealth of Independent
States, Latin America and the Middle East and Northern Africa. Minimum and maximum
investments by region also tend to cluster in these three groups, albeit imperfectly (figure
V.6a). Caution should be exercised when interpreting these estimates. For example, negative
regional investments tend to be associated with regions that currently engage heavily in the
production and export of fossil fuels, which suggests that the global shift to non-fossil fuel
sources of energy implies disinvestment in current production capacity. More generally, cau-
tion should also be exercised when interpreting the investment tags for developing regions,
as there is a tendency to underestimate required investments in energy infrastructure and
shelter in developing countries (O’Connor, 2009).
The size of additional investments also varies with other factors, among which,
timing is crucial. According to UNEP, the total cost of mitigation policies that begin only
after 2020 is 10-15 per cent higher than the cost of policies that start mitigation promptly
in 2013 (United Nations Environment Programme, 2012b, p. 28).15
A thorough accounting of Investments needed to transform the energy system include investments
energy-related investments beyond sectors, namely, investments in rendering sustainable the demand for energy.
and energy services-related Investments needed to change the demand for energy are likely to be significantly higher
investments might multiply
than investments in the supply of energy, but the size of the needed investments is also
by 10 the size of initial
needed investments more difficult to estimate. The Global Energy Assessment report estimates that there are
additional needed investments in the demand side of energy ranging from US$ 0.1 trillion
to US$ 0.7 trillion (Riahi and others, 2012, p. 1254). These investments include those
related to services on engines in cars, boilers in building heating systems, and compres-
sors, fans and heating appliances in households, among others. Accounting for the full
cost of demand-side energy technologies increases the investment figure by one order of
magnitude, to a range between US$ 1 trillion and US$ 3.5 trillion (ibid.). These include
investments in innovation, market formation and diffusion (Grübler and others 2012b,
pp. 1691-1695 and 1713-1724).
In contrast, the cost of targeted investments to achieve economic and social
inclusion is small. The Global Energy Assessment estimates that policies aimed at provid-
ing universal access to clean fuel cooking and electricity will require annual investments
ranging between US$ 0.036 trillion and US$ 0.041 trillion (see table V.1 and the above
discussion on inclusion). Similarly, IEA estimates at US$ 0.34 trillion the additional in-
vestments needed to achieve universal access to clean cooking fuel and electricity.16 The
OECD scenarios simulating policies designed to achieve universal access to an improved
water source and sanitation by 2050 find that those policies will require additional annual
14 The range of additional needed global investments across the 41 scenarios varies between 8 and
64 per cent, with a mean increase of 33 per cent.

15 See also OECD (2012c) estimates of significant negative competitiveness and income impacts of
delayed action (table 3.8, p. 127, and p. 129, figure 3.24).

16 Energy access is defined here as reliable and affordable access by a household to clean cooking
facilities and a first electricity supply connection, with a minimum level of consumption (250
kilowatt-hours (kWh) per year for a rural household and 500 kWh per year for an urban household),
which increases over time to reach the regional average.
 The post-2015 energy transformation challenge 141

investments of about US$ 0.005 trillion. One main message stemming from the reviewed
scenarios simulating policies designed to achieve energy inclusion is that the investment
needed to implement them is well within reach at the global scale.

Implementing sustainable development

There is an emerging consensus that the world needs to urgently undertake to achieve
transformative changes so as to avert increases in greenhouse gas emissions which have
potentially catastrophic consequences. Climate change-energy models have made invalu-
able contributions to our understanding of the range of possible means of transforming the
energy system. Less is known about how to proceed in countries and how best to organize
international cooperation so as to effectively transform energy systems in developed and
developing countries. Based on analytical contributions, a good number of policy propos-
als addressing the challenges of sustainable development were put forward in anticipation
of the United Nations Conference on Sustainable Development. In the present section,
we selectively look at three of those proposals and revisit the proposals broached in World
Economic and Social Survey, 2009 (United Nations, 2009) and World Economic and Social
Survey, 2011 (United Nations, 2011b). The three proposals selected encompass the green
energy strategies of Organization for Economic Cooperation and Development (2011a;
2011b), United Nations Environment Programme (2011) and World Bank (2012c). These
strategies, which are comprehensive in their coverage of issues, aim at rationalizing the
transition from the current state to an alternative path on which the environment is taken
fully into account. These exercises offer insights on alternative means of moving towards
sustainable development strategies. The emphasis is on the short term: “green growth
should focus on what needs to be done in the next 5 to 10 years.” (World Bank, 2012b,
p. 1). The World Economic and Social Survey (2009 and 2011) takes a more ambitious
approach. It argues that the world needs a big-push investment-driven transformation of
the energy system. We briefly highlight some of the arguments underlying these proposals.

Sustainable development pathways

OECD proposes to tackle the challenges with “an operational policy agenda that can
help achieve concrete, measurable progress at the interface between the economy and the
environment”; a green growth agenda (OECD, 2011b, p. 11). Policymakers seeking to
harmonize the economic and the environmental goals in a green policy agenda face three
obstacles, namely, (a) low returns to green investment, which leads to (b) lack of investment
and (c) slow innovation. To overcome these obstacles, OECD proposes that use be made
of a green growth diagnostic tool which classifies the main obstacles to green growth into
those causing low economic returns and those causing low capacity to appropriate gener-
ated returns, or low appropriability of returns (figure V.6). The first obstacle (low returns)
is further categorized as a problem related to: (a) inertia, as reflected in, e.g., low returns
to research and development and the presence of barriers to competition; or (b) low social
returns, as reflected in, e.g., infrastructure deficiencies and low human capital. The second
obstacle, low appropriability of returns, is further specified as: (a) government failure, as
reflected in, e.g., policy unpredictability and perverse subsidies; or (b) market failure, as
reflected in, e.g., the existence of negative externalities and informational imperfections.
142 World Economic and Social Survey 2013

FigureV.7
Figure V.6 Green growth diagnostic
Green growth diagnostic

Low returns to “green” activities,

innovation and investment

Low economic Low appropriability

returns of returns

Government
Low social Market failure
Inertia failure
returns

Information
Low returns to Inadequate Incomplete property
externalities
R&D infrastructure rights, perverse
and split
subsidies, preferences
incentives
to incumbents
Networks
effects Low human
capital
Negative
Barriers to Policy externalities
competition Low social capital unpredictability
and poor institutional and regulatory
quality uncertainty
Norms and
habits

Source: OECD (2012b)

p. 128, figure 5.1.
Once the main obstacles have been identified, OECD proposes that effective institutional
arrangements and policy packages be built for the transition towards green growth.
This policy package generates useful guidelines for building green-growth
strategies for countries at different levels of development (table V.2). For example, de-
veloped countries may consider enhancing the link between R&D and technological
innovation, investing in low-carbon infrastructures and using market-based pricing of
externalities. Developing countries, for their part, could focus on policies designed to en-
able a shift away from carbon-intensive infrastructure, the promotion of energy efficiency,
strengthening government capacities and providing incentives for the development, dif-
fusion and transfer of technology. Least developed countries might consider discouraging
open-access to natural resources, increasing productivity in the use of natural resources,
designing adaptation strategies and investing in infrastructure to support market access
(OECD, 2011a, pp. 1-15; see also OECD, 2011b).
 The post-2015 energy transformation challenge 143

The World Bank sees green growth as “the pathway to sustainable develop-
ment” and “a vital tool for achieving sustainable development” (World Bank, 2012b, p. xi).
It proposes a green growth strategy that rests on three pillars:
(a) Maximizing local and immediate economic or social benefits and avoidance
of the lock-in of economies in fossil fuel technologies for several decades (this
pillar seeks to prevent irreversibility in the adoption of energy systems and
reduce inertia);
(b) Providing incentives to engage in smart decision-making. Examples of the
measures covered in this pillar are green accounting (see box II.2), getting
prices right so as to overcome behavioural biases, providing incentives and
regulations to engage firms in green growth, and using regulations, innovation
strategies and industrial policies;
(c) Addressing the problem of financing green growth through the adoption of
innovative financing tools designed to tackle high upfront financing needs.
The overall strategy allocates different priorities to developed and developing
countries (World Bank, 2012b, pp.15-22; see also World Bank, 2012c).
One example of the priority-setting that could emerge from this policy
framework, mainly under the second pillar, would entail a focus by developing countries,
particularly low–income ones, on two actions: actions that create synergies across the
environmental, social and economic dimensions of development; and actions that have
high welfare benefits or do not carry large costs (table V.2). This policy framework would
recommend developing countries to focus on, for example, measures to reduce local

Table V.2
Some guiding principles for establishing green growth strategies

Local and immediate benefits

LOWER HIGHER
Trade-offs exist between
short-and-long-term or local Policies provide local and
and global benefits immediate benefits
LOWER • Lower-carbon, higher- • Drinking water and
(action is less urgent) cost energy supply sanitation, solid waste
• Carbon pricing management
Inertia and/or risk of lock-in and irreversibility

• Stricter wastewater • Lower-carbon, lower-cost

regulation energy supply
• Loss reduction in
electricity supply
• Energy demand
management
• Small-scale multipurpose
water reservoirs
HIGHER • Reduced deforestation • Land use planning
(action is urgent) • Coastal zone and natural • Public urban transport
area protectiion • Family planning
• Fisheries catch • Sustainable intensification
management in agriculture
• Large-scale multipurpose
water reservoirs
Source: World Bank (2012b), table O.1, page 17.
144 World Economic and Social Survey 2013

pollution, which could provide significant welfare benefits to poor families, by leading
to improved health and hence improved labour productivity. As regards developed coun-
tries, the strategy suggests a concentration on policies that could exert a long-term impact
on emissions.
UNEP closely associates green growth with a process “that results in improved
human well-being and social equity, while significantly reducing environmental risks
and ecological scarcities” (United Nations Environment Programme, 2010b as quoted
in United Nations Environment Programme, 2011, p. 102) and characterizes sustain-
able development as “improving the quality of human life within the carrying capacity
of supporting ecosystems” (IUCN/UNEP/WWF (1991), as quoted in United Nations
Environment Programme, 2011). UNEP further identifies a series of enabling conditions
for a green economy, including reducing subsidies that are harmful to the environment,
targeting public investments to green sectors, implementing government policies to en-
courage innovation and growth and establishing aggressive environmental regulation,
among others (United Nations Environment Programme, 2011, pp. 22-23).
Transformative changes World Economic and Social Survey 2009 and 2011 emphasize that prompt,
can be initiated through a integrated and decisive policies are needed to achieve sustainable development (see the
public investment-led big discussion in United Nations, Department of Economic and Social Affairs, 2012). World
push and decisive public
interventions to promote
Economic and Social Survey 2011 specifically views the green economy approach as be-
technological innovation ing fully compatible with sustainable development. Consistent with the magnitude of the
and implementation investments needed, their urgency, and the broad implications for the rest of the economy
and society, the view is that only a strong jump-start can effectively and in a timely man-
ner extract the economy away from the inertia of business as usual and move it towards the
transformation of the energy system. Transformative changes would be initiated through a
public investment-led big push and decisive public interventions to promote technological
innovation and implementation. This approach is not intended to substitute markets—on
the contrary, it rests on the assumption that only clearly defined sustainable development
policies can unleash the power of markets to bring about the needed energy transforma-
tion on time. As the World Economic and Social Survey acknowledges that a realistic and
desirable path towards sustainable development must allow for rapid economic growth in
the developing world, it argues that the transformation of the energy system must include
policies crafted to allow developing countries to simultaneously build low-carbon energy
systems and accelerate economic growth. It further argues that a carefully crafted public
investment-led approach will not disrupt economic balances and could actually crowd
in private investment. World Economic and Social Survey macroeconomic simulations of
the big-push approach confirm the assumption implicit in climate-energy models that a
low-carbon and converging sustainable development pathway is feasible (United Nations,
2009, particularly box IV.4).
The big-push approach is a realistic, well-grounded proposal which incorpo-
rates, inter alia, the historical lessons of the New Deal initiative (see United Nations,
2011b and United Nations, 2012b). The challenge, however, is much bigger now. When
compared with that of the mid-twentieth century, the world economy is currently not
only larger, but also more affluent, interconnected and natural-resource thirsty (see chap.
I of this publication). Public-led investment has proved capable of accomplishing large
socioeconomic transformations which would not have been feasible through implementa-
tion of incremental policies. A high degree of realism will be needed to properly gauge the
dimension and complexity of the obstacles that the world needs to overcome.
 The post-2015 energy transformation challenge 145

The enabling conditions for the transformation

of the energy system
Making low-carbon inclusive growth a reality requires putting in place the set of condi-
tions needed to create an “enabling environment”. Schematically, these enablers can be
organized into four groups: policy space and coherence; international financing; inter-
national cooperation; and enabling international institutions: rules and norms. First, the
transformation of the energy system will require a policy-setting framework within which
developing countries can design and implement industrial policies to accelerate growth,
foster green sectors and diversify the industrial and service sectors. Industrial policies have
been and continue to be used across a wide range of countries, but many developing
countries are constrained by international regulations and practices, notably in the trade
and property rights domains. Second, there is a need to make adequate international
financing available to developing—and, particularly least developed—countries; while
domestic sources should be tapped to the extent possible, the size of investments required
to promote sustainable development makes international finance indispensable. Third,
designing national sustainable strategies demands the integration of complex processes
across the macroeconomy, the energy sector, the deployment of technology, labour-market
regulations, policies for social and economic inclusion, and the environment. Building
national capacities and international cooperation in these areas will be important catalysts
for the formulation of coherent sustainable national development strategies. Fourth, of
particular importance is strengthening international cooperation to ensure that techno-
logical innovation and its adaptation occur where they are most needed and at the lowest
possible cost. An important enabler will be a fluid process of technological innovation and
adaptation facilitated by efficient technology transfer and cooperation at the regional and
international levels.
The magnitude of the endeavour is such that neither Governments nor markets
alone can tackle the desired energy transformation with success. While Governments and
markets have been successful in increasing the world’s aggregate affluence, they now need
to ensure that the entire world population enjoys equitable well-being while re-establishing
a balance with respect to the Earth’s boundaries. This change in priorities will require a
new institutional set-up to enable markets to carry out the required sustainable energy
transformation. As the global trade system is an important component of the institutional
framework within which markets operate, the world trade system should adopt sustain-
ability as one of its fundamental guiding principles. Meeting the challenge of building
policy coherent rules and interventions at global, regional and national levels will be criti-
cal to accelerating the required transformation of energy systems.

Coherent national policies for sustainable development

While global models have contributed significantly to the debate by laying out a number
of recommendations on policies and measures for a sustainable energy transformation,
there is a need to gain a better understanding of the design and implementation of energy
transformation strategies at country level and how to best forge and harness international
cooperation. A number of country experiences can shed light on policy alternatives. In
the present section, we review some concrete experiences that illustrate the complexity of
policy challenges and provide further guidelines for policy design.
146 World Economic and Social Survey 2013

The experience in using carbon taxes to pursue green-economy objectives has

by now a record spanning more than two decades, mainly involving developed countries.
More recently, a number of studies on carbon taxes in developing countries also started
to emerge, most of them sponsored by Governments, international organizations and aca-
demia. China and South Africa, for example, have been considering the implementation of
carbon taxes, but concerns about negative social and economic impacts in different areas
have delayed their introduction (see, for example, “Mitigating circumstances”, 2013; and
Birdsall and MacDonald, 2013). Studies suggest that, while taxing carbon can contribute
to curbing emissions, this seems to work better in combination with well-defined regula-
tory measures and complementary policies designed to offset (or compensate) the often
regressive income distribution effects of carbon taxes.
There are opportunities Furthermore, carbon or carbon-related taxes might represent an important
to coherently combine source of revenue, which raises the issue of how to make best use of them. A simula-
low-carbon growth tion exercise probing the effects of raising the price of oil through a tax on domestic
policies with strategies
for economic and consumption in Bolivia (Plurinational State of) (a gas exporting country), Costa Rica
social inclusion (a country where 90 per cent of electricity is hydro-generated) and Uganda (a country
dependent on oil imports to satisfy its energy demand) demonstrates the possibility of us-
ing carbon-related public revenues to finance economic and social inclusion programmes
(see box V.2 entitled Taxing oil to invest in education). Under the simulation, taxes are
increased up to the point where countries collect 2 additional percentage points of GDP
in tax revenue. Simulations show that the introduction of this tax reduces oil consumption
in productive sectors and among households, which has the effect of reducing emissions,
but at the cost of decreasing GDP. Allocating additional revenues to investment helps to
slow down the fall in GDP and, in some instances, even results in a net increase in GDP
(figure V.7). Most importantly, the use of additional revenues to finance investments in
education significantly improves education outcomes. Even though these simulations do
not include the impact of higher education on labour productivity, it should be expected

Figure
Figure V.7
V.8 Impact on GDP growth of a tax oil and investment in education
Impact on real GDP growth of a tax on oil and investment in education
Real GDP growth, percentage points from baseline GDP

0.2

0.1

-0.1

-0.2

-0.3
Bolivia (Plurinational State of)
-0.4
Costa Rica
-0.5 Uganda
-0.6
Source: Box. V.2, table. Tax-oil Tax-oil-infrastructure Tax-oil-education

Source: Based on table V.<num> of Box. V.<num>.

 The post-2015 energy transformation challenge 147

Box V.2
Tax oil to invest in education

Coherent policies to curb carbon emissions, promote economic

growth and pursue human development: examples for
oil-importing developing countries

The experience in using carbon taxes to pursue green-economy objectives has an interesting record
spanning more than two decades of experience, mainly in developed countries. More recently, a
number of studies on carbon taxes in developing countries have also started to emerge, most of them
sponsored by Governments, international organizations and academia.a China and South Africa, for
example, have been considering the implementation of carbon taxes, but concerns about nega-
tive social and economic impacts in different areas have delayed their introduction (see “Mitigating
circumstances”, 2013).
Fiscal policy can be instrumental for enabling developing countries to curb carbon
a  See, for example,
emissions while such markets develop. Not only could fiscal policy contribute to reducing carbon Alton and others (2012);
emissions but it could also, if combined with a set of coherent policies, promote human develop- Devarajan and others
ment, and offset some of its potential economic costs. Three policy scenarios are simulated to illus- (2011); Gonzalez (2012);
trate that this may be the case, using an economy-wide modelling framework applied with data sets Jaafar Al-Amin and Siwar
(2008); van der Ploeg and
for three oil-importing developing countries (Bolivia (Plurinational State of), Costa Rica and Uganda).b Withagen (2011), Resnick,
These scenarios are compared with a baseline which delineates a continuation of currently expected Tarp and Thurlow (2012);
economic growth and public spending interventions up to 2030. Sumner, Bird and Smith
(2009); and Yusuf and
In the first scenario (Tax-oil), the domestic price of fuel oil is increased by steadily raising
Ramayandi (2008).
(baseline) tax rates on domestic consumption and imports of oil in order to generate new revenue
b  A dynamic economy-
averaging 2.0 per cent of GDP per year during 2016-2030.c The new revenue is used to reduce the wide modelling framework
budget deficit. The second scenario is identical to the first except that new revenue, instead of financ- called Maquette for MDG
ing the budget deficit, is used for financing investments in public infrastructure such as roads, bridges Simulations (MAMS) is used
to generate the scenarios
and electricity networks (Tax-oil-infrastructure). The third scenario is identical to the second except (Lofgren, Cicowiez and
that the revenue is used to increase spending in education (Tax-oil-education). Public infrastructure Díaz-Bonilla, 2013). Its
and a larger pool of better-educated workers are drivers of productivity growth in the scenarios. application involves, inter
Moreover, new public infrastructure—which facilitates access to and functioning of education cen- alia, detailed (country-
specific) microeconomic
tres—and increased service delivery in education favourably impact attendance and promotion in all analyses of determinants
school cycles. of a set of human
The results show that, keeping all other things equal, unilateral fiscal policy restrictions development indicators
and productivity growth
on the domestic price of fuel oil would depress intermediate and especially final consumption of
drivers such as the stocks
fuel oil in the three countries (figure A). Carbon emissions would consequently likely be curbed—by of public infrastructure and
a margin not estimated here—but, on the other hand, industries that supply oil-intensive goods for highly educated workers.
the domestic market and exports would be penalized. In fact, GDP growth is 0.54 percentage points The application of this
modelling framework with
per year less in Uganda, and it also slows down in the other two countries, though by much less, as data for the three countries
they also produce and rely on alternative sources of energy, i.e., fuel gas in the Plurinational State of and extensions made to it
Bolivia and hydroelectric power in Costa Rica (table). are described in Sánchez
The simulated price shock has been smoothed by spreading it out over a period of and Cicowiez (2013).
c  The domestic price shift
15 years to make it more realistic. It is conservative in comparison with shocks that oil importing
directly affects domestic
countries have endured owing to world oil price hikes. Using a similar economy-wide modelling consumption of refined
framework, Sánchez (2011) shows that the negative impact on real GDP of the most recent oil price oil in all three countries,
boom (2002-2008) has been substantial in six oil-importing developing countries, and as high as imports of refined oil
in Bolivia (Plurinational
2.0 to 3.0 per cent of GDP per year in some cases. In the first policy scenario presented here, however,
State of ) and Uganda and
real GDP is only 0.3-0.4 per cent per year below the baseline levels. The simulated fiscal policy will also imports of crude oil in
be feasible should it not be used for protectionist purposes. Costa Rica.
148 World Economic and Social Survey 2013

Box V.2 (cont’d)

Box 1 Real
Figure A consumption of fuel oil in simulated scenarios, 2016 - 2030,
Bolivia, Costa Rica, Uganda
Real consumption of fuel oil in simulated scenarios, 2016-2030
Annual average
average growth
growthrate,
rate,per cent
percentage

8.00 Intermediate
7.00 Final

6.00

5.00

4.00

3.00

2.00

1.00

0.00
Baseline

Baseline

Baseline
Tax-oil-education

Tax-oil-education

Tax-oil-education
Tax-oil

Tax-oil

Tax-oil
Tax-oil-

Tax-oil-

Tax-oil-
infrastructure

infrastructure

infrastructure
Source: Box V.2, table.
Bolivia (Plurinational State of) Costa Rica Uganda

If, alternatively, the new revenue were allocated to investing in public infrastructure, on
Source: Based on MAMS application for Bolivia, Costa Rica and Uganda.
one hand, or to expanding service delivery in education, on the other, instead of using it to finance
the budget deficit, the output loss would be offset partially or fully. This is mainly because such
investments would spur productivity growth, but industries would also start employing more capital
d  There are additional
gains—not shown
(table). Oil-intensive industries would also be favourably impacted by increased availability of public
here—in terms of human infrastructure or better-educated workers. Interestingly, consumption of fuel oil would continue
development when to be unambiguously lower compared with the baseline (figure A). Increased public infrastructure
investments in public
infrastructure are stepped or service delivery in education would also trigger a positive synergy with human development.
up. Child and maternal Promotion in all cycles of education, for example, would increase remarkably owing mainly to more
mortality rates, for example, service delivery, but also to a lesser extent inasmuch as new roads facilitate access to and functioning
exhibit a reduction, as
the increased stock of of education centres (see figure B, for primary education).d Without these coherent policy interven-
public roads, bridges tions, taxing fuel oil consumption alone would actually reduce promotion rates in primary education,
and electricity networks
facilitates access to and
as household demand for education shrinks in tandem with the contraction of economic activity, as
functioning of health seen under the first simulated scenario.
centres and hospitals. The The new revenue from taxing consumption of fuel oil more could alternatively have
reduction in child mortality,
a proxy for the health status been invested in other social sectors (health, water and sanitation, and so on) or used to enhance
of the student population, sectoral production capacity. For example, a scenario analysis similar to that presented here shows
in turn, triggers a positive that investing 2 additional percentage points of GDP in Uganda’s agriculture infrastructure would
synergy for promotion
rates and other educational bring about productivity gains that contributed to agricultural output without expanding land use,
attainment indicators. while enhancing food security and even spurring export capacity (see box IV.2).
 The post-2015 energy transformation challenge 149

Box V.2 (cont’d)

Figure
Figure V.B
B Promotion rates in primary education in simulated scenarios, 2016-2030
Promotion rates in primary education in simulated scenarios, 2016-2030
Bolivia (Plurinational State of) Uganda
Percentage of relevant age cohort Per cent of relevant
Percentage ageage
of relevant cohort
cohort

100.00 100.00
99.50 99.00
99.00 98.00
98.50
97.00
98.00
96.00
97.50
95.00
97.00
96.50 94.00 baseline
93.00 tax-oil
96.00
tax-oil-infrastructure
95.50 92.00 tax-oil-education
95.00 91.00
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Source: UN/DESA, based on application of MAMS for Bolivia (Plurinational State of ), Costa Rica and Uganda.

Real GDP growth and its supply driving factors in simulated scenarios, 2016-2030
Source: UN-DESA, based on application of MAMS with data for Bolivia and Uganda.
Period annual averages, per cent
  baseline tax-oil tax-oil-infrastructure tax-oil-education
Bolivia (Plurinational State of)
GDP at factor cost 5.00 4.92 5.13 4.95
Total factor productivity 2.61 2.61 2.78 2.63
Total factor employment 2.39 2.31 2.36 2.32
Costa Rica
GDP at factor cost 4.25 4.11 4.25 4.36
Total factor productivity 2.22 2.18 2.29 2.25
Total factor employment 2.03 1.93 1.96 2.11
Uganda
GDP at factor cost 7.00 6.46 6.79 7.11
Total factor productivity 3.71 3.42 3.67 3.74
Total factor employment 3.29 3.05 3.12 3.38
Source: UN/DESA, based on application of MAMS for Bolivia (Plurinational State of ), Costa Rica and Uganda.

In the long run, the feasibility of the simulated policies will depend on countries’ ability
to shift towards alternative sources of energy. In a country like the Plurinational State of Bolivia, for
example, taxing fuel oil more may eventually lead to an increase in the demand for gas, another
fossil fuel. Thus, the shift to be pursued should be towards more environmentally friendly sources of
energy. The case of Costa Rica is interesting in this respect, as over the years, nearly 90 per cent of this
country’s growing demand for electricity has been met through hydropower plants, the construc-
tion of which has taken into consideration their environmental and social implications. Thus, taxing
fuel oil in this country may eventually incentivize further developments of environmentally friendly
hydropower generation and energy efficiency.
150 World Economic and Social Survey 2013

that better education would result in higher incomes for higher-skilled workers over the
medium and long terms. This exercise clearly illustrates the possibilities of combining
low-carbon growth policies with strategies for economic and social inclusion.
The reallocation of resources to investments with a long-term return, such as
for infrastructure and education, should also include policies to enhance labour produc-
tivity. In addition to investments in formal education, investments in training and the
adoption of the skills necessary to design, deploy and maintain sustainable energy systems
are key components of a big-push approach to sustainable development.
Further insights centring on the challenge of pursuing sustainable develop-
ment strategies can be derived from a series of studies that examined the economy-wide
implications of accelerating the achievement of the Millennium Development Goals for
education, health and sanitation under various financing strategies. These studies suggest
that while important synergies arise from the simultaneous pursuit of these three goals,
there are also noticeable trade-offs in relation to growth and macroeconomic balances.
Simulation results indicate that the additional investment necessary to reach these goals
are significant, in the order of 1-4 per cent of GDP (figure V.8).17 In these studies, nega-
tive macroeconomic effects can be neutralized or even made positive, if countries finance
additional investments with foreign grants.
In the World Economic and Social Survey 2011 presentation, the big-push
public investment-led strategy does not substitute for private investment and market

Figure V.8
Growth impact of policies aimed towards achieving the Millennium Development Goals,
Figure V.9
selected The growth impact of policies to achieve the MDGs
countries
Percentage points from baseline GDP

1.5

1.0

0.5

-0.5

-1.0
Foreign grants
-1.5
Foreign debt
Domestic debt
-2.0
Direct taxation
-2.5
Nicaragua
Guatemala

Chile
Costa Rica

Philippines
Bolivia (Plurinational State of)
Colombia
Tunisia
Jamaica
Peru

Uganda

Mexico
Uzbekistan
Argentina

Cuba
Paraguay
Honduras

Ecuador

Brazil

Senegal
South Africa
Kyrgyzstan
Yemen

El Salvador
Uruguay

Egypt
Dominican Republic

Source: Based on MAMS

simulation results reported
in Sanchez and others (2010)
and Sanchez and Vos (2013).

17 We leave aside extreme cases where expenditures relative to GDP are about 0.2 per cent and
8 per cent of GDP and above.
 The post-2015 energy transformation challenge 151

Figure V.10 Energy and the post-2015 vision

Figure V.9
Energy and the post-2015 vision

Energy enablers
Integrating energy systems
within the Earth’s boundaries
Reducing emissions of
greenhouse gases

Environmental
sustainability
Protecting biodiversity
Stable climate
Resilience to
natural hazards
Energy enablers Energy enablers
Inclusive
Non-dependence social development Increasing energy
on traditional Inclusive
economic development without compromising
biomass energy Adequate nutrition for all food access
Access to reliable, Eradicating income Human rights Quality education for all Education and training
adequate and good- poverty and hunger for sustainable
quality electricity Equality Reduced mortality energy systems
Reducing inequalities and morbidity
Convergence to best Sustainability Non-dependence on
energy services Ensuring decent work Gender equality
traditional biomass energy
per capita and productive Universal access to
clean water and Integrating water to
Access to modern employment the design of
energy services for sanitation
energy systems
the working poor

Peace and security

Freedom from violence,

conflict and abuse

Conflict-free access
to natural resources

Energy enablers

Conflict-free design and

management of energy
sources
Source: UN/DESA, Development
Reducing dependence on Policy and Analysis Division,
energy imports construction derived from
United Nations System Task
Diversifying energy sources Team on the Post-2015 UN
Development Agenda (2012),
p. 24, figure1.

Source: UN/DESA, DPAD construction from Realizing The Future We Want For All, UN System Task Team on the Post-2015
UN Development Agenda, figure 1, page 24.
152 World Economic and Social Survey 2013

contributions. Public investments are used to trigger the private investment and market
forces that have so far lain dormant and hence are unable to generate the type of changes
needed if world demand is to remain within the Earth’s carrying capacity. However, poli-
cymaking also needs to deal with a host of market and public sector failures and to be
able to elaborate well-crafted interventions, as proposed in the OECD, World Bank and
UNEP green economy strategies. To illustrate the unexpected ways in which public sector
interventions can spur market forces, it is useful to look at how a nationally oriented
environmental policy in Sweden later developed into a market-mediated regional trash
recycling activity (see box V.3 on policies and markets).
The potential relevance of the big-push approach and its emphasis on compre-
hensive coherent policies and strong international cooperation is illustrated by the case
of Bangladesh which has rightly identified adaptation as the issue of utmost concern
when dealing with climate change. Without losing sight of adaptation, the country has
also been active in the area of mitigation, with such policies as the promotion of solar
renewable sources (United Nations, 2011b). Furthermore, Bangladesh is considering an
energy strategy aimed at guaranteeing the energy supply needed by the country to con-
tinue growing and improving energy security by reducing dependency on imports. One
possible approach under consideration for achieving these goals entails basing the energy
system on enhanced coal technologies. Use of enhanced coal technologies leads to a re-
duction in emissions relative to traditional coal technologies, but to an increase relative to
pathways associated with renewable sources; and a more extensive use of renewables would
reduce the locking in of the country to fossil fuel sources. In the absence of adequate
financing and international support, however, Bangladesh should probably choose the
enhanced coal energy pathway. Choosing a sustainable pathway might be realistic only
under the conditions of a big-push strategy properly financed and assisted (see box V.4
on Bangladesh).
Policies designed to transform energy systems and deploy them in developing
countries work best when they are comprehensive, strategic and systematic. Policymaking
in these areas needs to overcome the tendency to oversimplify the planning framework

Box V.3
Policies and markets may provide unintended welcoming
effects: Sweden is importing garbage to generate electricity

With a strong tradition of recycling and incinerating, Sweden now has too many waste-to-energy
incinerators and not enough rubbish to meet demand. While Germany, Belgium and the Netherlands
are also importing trash from other countries, with Germany importing the most, Sweden is the
leading importer in terms of the share of rubbish burned.
To date, Sweden has imported mainly from Norway. However, as the European Union
seeks to reduce the dumping of 150 million tons of rubbish in huge landfills each year, Sweden sees
a chance to import more waste from other States of the European Union too.
According to Weine Wiqvist, head of the trade association Swedish Waste Management:
“It sounds almost foul to be importing waste, but the import to Sweden is not a problem. The dump-
Source: Ringstrom (2012). ing in landfills abroad is a huge problem.”
 The post-2015 energy transformation challenge 153

Box V.4
Bangladesh: between a coal-based energy system at hand
and a promising but distant sustainable energy system

Bangladesh is likely to experience severe negative impacts from climate change and it is preparing
for them.a The Government has already formulated its National Adaptation Programme of Action
and has taken measures to reduce climate change hazards, including community-led coastal affor-
estation, construction of dual-use flood shelters and programmes to reduce salinity, among others.
Bangladesh is also taking important steps towards mitigation. Notably, it has formulated an energy
strategy up to 2030, the Power System Master Plan 2010. The Plan, which identifies this strategy as
based on a “fuel diversification” scenario considers that it addresses the three main concerns, related
to the economy, the environment, and energy security. On the economic front, the Plan aims to
eliminate power shortages and to renovate the power infrastructure created during the first phase.
In terms of the environment, while the use of coal is central to the Plan, Bangladesh expects to lower
carbon emissions by improving the thermal efficiency of coal plants using Japan’s clean coal techno­
logy. The plan seeks energy security by lowering its current reliance on imported oil.
The power strategy relies on energy generation from coal. Currently, gas is the main
source of energy (60-70 per cent) and oil is second in importance (15-30 per cent). The Plan anticipates
changing this composition dramatically. The share of coal in power generation will increase from
less than 5 per cent in 2012 to about 50 per cent in 2030. Gas will account for 25 per cent and oil for
5 per cent. Nuclear and hydroelectric—domestic and imported, including wind and solar renew­
ables—will account for 20 per cent. The main reason behind the choice of coal as the main source
of energy is its comparatively low and stable price and the discovery of high-quality coal deposits in
the northern part of the country.
Mondal, Mathur and Denich (2011) argue that a policy package of carbon taxes and
regulations placing caps on emissions could have positive sustainability effects. Using a MARKAL
model for energy the authors run simulations showing that a policy package of mandated reductions
in CO2 emission and carbon taxes directly decreases the use of high-carbon fossil-based technolo-
gies in favour of clean renewable energy technologies. A cumulative CO2 emissions reduction target
of 10 and 20 per cent reduces cumulative net energy imports by 39-65 per cent, while a carbon tax
of 2,500 taka/ton reduces imports by 37 per cent by 2035. The simulated emissions reduction targets
and the carbon tax results suggest that the country can decrease its total primary energy use by
5-22 per cent, relative to the baseline, and do so while satisfying the energy needs of an economy
growing at 6.8 per cent per year. Thus, the adoption of low-carbon policies could allow the country to
reduce emissions, guarantee energy security, increase efficiency and expand the use of renewables,
with the added well-known health benefits.
This quick review invites the following question, which might be relevant not only for
Bangladesh but also for many other developing countries: Why not adopt ambitious low-carbon
policies? The nature of the answer is, in large part, of course, related to the difficulties of implement-
ing, in the real world, the assumptions made in the modelling realm. Implementation problems need
to be overcome in the area of financing of investments in energy generation and infrastructure
and, of technology development and adaptation; and political economy-related obstacles need to
Source: UN/DESA, be overcome in order to implement carbon taxes and regulations on capping emissions, which is
Development Policy and known to require complementary policies designed to neutralize or compensate for negative im-
Analysis Division.
pacts on vulnerable population groups. The adoption of sustainable development paths by devel-
a See, for example, World
Bank (2010b); and Thurlow, oping countries initially depends on effective internaitonal (sp) cooperation, including financial and
Dorosh and Yu (2011). technical assistance.
154 World Economic and Social Survey 2013

in terms of its scope, to focus on a narrow set of energy options, and to ignore trends in
other economic and social sectors. Policies will have to specify goals, establish standards
for performance, exploit niche markets and adopt a portfolio approach rather than pick
a few winning projects or technologies. Policies should be geared towards end users, with
specific goals for energy services, markets and the portfolio of technologies to be consid-
ered. Given multiple interrelations, the policy focus should be on clusters and should be
based on integrated assessments. Examples of integrated approaches to energy policies are
the water-energy-food nexus (NEXUS) and the climate-land-energy-water (CLEW) inter-
linkage. A best-practice energy policy feeding into the national biofuel policy of Mauritius
turns out to be inconsistent with respect to future water availability, the cost of extraction
and the energy security goals of the country. These inconsistencies were revealed only

Box V.5
Mauritius: coping with climate and land-use,
energy and water resources
Land, energy and water are among our most precious resources, but the manner and extent to
which they are exploited contributes to climate change. Meanwhile, the systems that provide these
resources are themselves highly vulnerable to changes in climate. Efficient resource management is
therefore of great importance, for both mitigation and adaptation purposes.
The lack of integration in resource assessments and policymaking leads to inconsistent
strategies and inefficient resource utilization, especially at the national level.
In Mauritius, a national biofuel policy that made sense from a best-practice energy, land
and water planning point of view was shown to be strongly inconsistent. This was discovered only
when the Government and international analysts modelled these systems in an integrated manner.
An integrated modelling approach of climate, land-use, energy and water resource systems (CLEW)
was particularly useful for assessing the response to climate change-induced reductions in precipita-
tion. The change in rainfall patterns led to increases in water withdrawals, which in turn led to higher
demand for the energy needed to drive pumps bringing water from its source to the fields and to
power water-desalination plants. The existence of a positive feedback loop means that this will lead
to increased demand for cooling of thermal power plants and thus to additional withdrawal of water
(unless they are cooled by seawater). If the increase in electricity demand is met with coal-fired power
generation, as planned, then the greenhouse gas benefits of the ethanol policy are eroded by in-
creased emissions from the power sector. Higher coal imports also have a negative impact on energy
security. The benefits of this policy—aimed at reducing energy import costs and emissions—are thus
clearly vulnerable to the impacts of climate change; and the long-term viability of this strategy would
be at risk if rainfall were to decrease further and droughts were to continue. In this case, producers
would have either to scale back production or resort to expensive water desalination. Both of these
options negatively impact the expected climate and energy security benefits of the policy and both
would be detrimental to the sugar and ethanol industry.
The water-constrained scenario does, however, also lead to better prospects for re-
newable electricity generation. Wind and photovoltaic electricity generation is typically much less
water-intensive than fossil fuel generation. Furthermore, if power consumption for water desalination
facilities were to make up a significant share of total system load, intermittent resources such as wind
could be integrated more easily. Since water is cheap and easy to store, it is not important that it be
produced at a specific time. It could therefore be treated as an interruptible load and shut down in
the event that wind generation was unavailable during times of high system load.
In response to these factors, the Government of Mauritius has appointed a high-level
CLEW panel to ensure consistency among its climate, land, energy and water strategies.
 The post-2015 energy transformation challenge 155

by an integrated assessment of the biofuel policy which included the potential effects of
climate-change on water precipitation (box V.5). Increasing the production of biofuels is
a natural candidate for the role of addressing energy insecurity and rising greenhouse gas
emissions. Burkina Faso, like many other developing countries, would do well to consider
expanding the production of biofuels to address energy security concerns and cope with
greenhouse gas emissions, even at the cost of accelerating the rapid deforestation that
affects the country. However, an integrated assessment recommended the implementa-
tion of policies that intensify the use of land for agriculture production (see discussion in
chap. III). Even if there are inevitable trade-offs, increasing the intensity of land use leads
to net reductions in emissions, contained deforestation and improved energy security
(box V.6).

Box V.5 (cont’d)

Box 3 Predicted impact of climate change on water availability in Mauritius,
Predicted impact
water related of climate
energy change on
consumption water
and availability
greenhouse gasinemissions,
Mauritius, predictions
water-related
for 2030 energy consumption and greenhouse gas emissions, for the year 2030

Storage volume level of reservoirs in Mauritius under three climate change scenaries
Millions of cubic metres
45
Reference
40 scenario
35 Average case
30 reduced
rainfall
25
“Worst-case”
20 reduced
15 rainfall
10
5
0
2010 2015 2020 2025 2030

Additional electricity demand for water, 2030* Additional greenhouse gas emissions, 2030*
Megawatt hours Tonnes of CO2 equivalent
70,000 300,000
250,000 Coal production
60,000 200,000

50,000 Desalination 150,000

100,000 Electricity generation
40,000 50,000
0
30,000
-50,000
Source: Howells and others
20,000 -100,000 Transportation (forthcoming).
Irrigation
-150,000 * Compared with the
10,000 scenario without climate
-200,000 Petroleum refining change impacts, under the
Other
0 -250,000 worst-case scenario.

Source: Howells et al., forthcoming.

156 World Economic and Social Survey 2013

Integrated energy Integrated energy assessment and planning constitute a critical tool for the
assessment and planning design of sustainable strategies, particularly in developing countries—and even more so
constitute a critical tool for
in those countries that are likely to be affected by climate variability. However, these
the design of sustainable
strategies, particularly in countries rarely have the capacities needed to undertake such analysis. Widespread access
developing countries to integrated energy assessment and planning tools should be part of the international co-
operation framework for sustainable development. It is important to harness the expertise
on energy systems acquired by a number of research institutions throughout the world to
assist developing countries in the task of building sustainable energy systems. It will thus
be important to establish a network of independent centres for energy systems analysis
with a mandate to assist the design and implementation of sustainable energy plans in
developing and least developed countries.

Box V.6
Burkina Faso adds energy in order to reduce emissions

Policies to reduce emissions have to take into consideration the fact that the economic-
environment system is complex, specific and interlinked. In Burkina Faso, a country with rapid de-
forestation, growing energy insecurity and greenhouse gas emissions, an integrated approach finds
that a measure with damaging direct effects on each of these factors has disproportionately positive
knock-on effects. This phenomenon is uncovered by an integrated modeling of the system, allowing
for appropriate national development actions.
Box 2 Changes in the energy balance In summary, agriculture is ex-
Changes in the energy
in Burkina Faso, 2030 balance panding rapidly, eating into forest, a natural
in Burkina Faso, 2030 “carbon sink”. Forest supplies vital fuel wood
Terajoules used for cooking and heating. As forest is dis-
placed, people are forced, for energy needs,
40,000 Fertilizer
to use oil, which is imported and expensive.
production
20,000 Emissions are increasing as the carbon sink is
Mechanization
of agriculture disappearing and oil use is increasing. Energy
0 security is reduced as more oil is imported,
“Annual
Harvestable” and energy poverty is increased as the price
-20,000 energy of the new energy source (oil) is relatively
content expensive.
-40,000
However, agriculture in Burkina
-60,000 Faso is not intensive. The land requirements
for similar outputs can be significantly re-
-80,000 duced by changing practices. Those changes
would include higher application of fertilizer
-100,000 and mechanization. To fully grasp these link-
ages it is useful to recall that conventional
-120,000
production and application are highly green-
-140,000 house gas-intensive and increased mechani-
zation requires higher volumes of oil use in
Source: Hermann
and others, 2012. -160,000 tractors and other equipment.

Source: Hermann et al, 2012.

 The post-2015 energy transformation challenge 157

More broadly, significant investments will be needed in technological in- It will be important to
novation and adaptation, supported by efficient technology transfers and cooperation at establish a network of
independent centres for
the regional and international levels (United Nations, 2011b). The design of sustainable
energy systems analysis
energy systems as part of national development strategies calls for capacities and skills to assist in the design
that are not abundant in many countries of the world. Building such capacities will enable and implementation of
countries to undertake transformative energy plans that would otherwise be considered sustainable energy plans
completely out of reach. in developing and least
developed countries

Sustainable energy systems in a

global development agenda
The transformation of the energy system should be a core element in a post-2015 develop- Member States currently
ment agenda. The four dimensions integrated in the UN-System view of the post-2015 working on defining the
main threads of the post-
development agenda provide a useful reference for framing the transformation of the
2015 development agenda
energy system (United Nations System Task Team on the Post-2015 UN Development might take note of the
Agenda, 2012). Each of the four dimensions can be mapped to further detail for relevant importance of explicitly
energy transformative policies. For example, the environmental sustainability dimension incorporating energy goals
can be directly linked to the promotion of renewables and energy efficiency, as well as
linked with integrated energy policies (figure V.9). The inclusive economic development
dimension can relate to policies for reducing dependence on traditional biomass energy
and policies aimed at providing universal access to electricity, among others. The inclusive
social development dimension can be mapped to integrated policies for ensuring access
to modern energy and food security, and to strategies for integrating access to water and
provisioning energy, for example. The dimension of peace and security can be related
to policies designed to lessen dependence on energy imports or policies for diversifying
sources of energy. Member States currently working to define the main threads of the
post-2015 development agenda might wish to take note of the importance of explicitly
incorporating energy goals.
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