CH 2

CHAPTER- TWO
Issues on the Environment and

Development
1
Introduction
• The current environment and development issues are;
– Population growth is a serious problem of environment
– i.e, increase in population growth result over utilization of
natural resource beyond their capacity.
– Also, as population increases the demand for goods and
services getting from the environment increase simultaneously.
– Urbanization which also arising from increase in population
growth in rural area and result rural-urban migration which
result unemployment in urban area.
– Unemployment
– poverty
– Climate change which consists erratic distribution of rainfall,
increasing temperature, reduction precipitation which result loss
and damage of biodiversity, soil erosion reduction in production
of crop and livestock's. 2
Population growth and the environment
• The inter linkages between population growth and
the environment are complicated.
• Persistent world Population growth compared to
resource availability makes sustainable
development much more difficult.
• Malthus brings a view about population growth
would exceed the growth of food supply, resulting
in starvation and death.
3
• Ecologists suggest that the environment poses a carrying
capacity to support humans (biological life). Beyond that
capacity, ecological disruption (disaster) would occur.
Currently;
– The world has lost one fifth of top soils from its crop land
or arable land as a result of increasing population. It would
require an increasing demand for food which in turn
increasing the need of arable lands which finally creates
land degradation
– The world has lost one fifth of its tropical forests due to
wild fire in finding additional cultivated land as a result of
population pressure.
– Human activities increased carbon dioxide level as a result
of increasing physical waste material which leads to
environmental degradation.
4
• From economic perspectives rapid population
growth puts more pressure on depleting stock of
both non-renewable and renewable resources.
• Negative environmental effects of population

density with poverty results environmental
degradation like;
– Deforestation for
• Seek of fuel wood
• Expansion of Arable land food supply
• Shifting cultivation
5
• As the population expands and the land does
not grow simultaneously,
• Results, new generations must either
intensify production on existing lands or
bring marginal lands into production which
finally over exploite natural resource and
disposal of environmental pollution.
6
Economic growth and the environment
• There is no any clear causal relationship between economic growth and
the environment.
• Sometimes economic growth will have a positive impact on the
environment while others say it will have a negative impact on the
environment.
• According to World Bank (1992) report ‘The view that the greater
economic activity inevitably hurts the environment is based on static
assumptions about technology, testes and environmental investment’.
• Growth and new investment stimulates technological change, this

produce new market opportunities which is part of the growth processes.
• The size of modern industrial output, rapid technological development,

continued pressure for more material growth have increased the rate of
environmental change.
7
.For example: the use of fertilizer and pesticides, and the
cultivation of marginal lands have affected landscape quality and
reduced the diversity of flora and fauna.
.Environmental problems increases with economic growth it

includes emissions of carbon dioxide and nitrogen dioxide in
to the atmosphere.
.The cost of bearing and controlling these problems is huge.

These problems are not static or inevitable. They depend on
country’s environmental policy.
8
 Environmental problems decline as the
economy is growing.
It includes sanitation problems, safe water,
and urban congestion.
9
Some problems initially worsened and then improved as
income rises.
It includes air pollution, and water pollution.
10
Environmental Kuznets Curve (EKC)
• The EKC hypothesize that instead of being a threat to
the environment, economic growth is the means to
environmental improvement.
• As countries develop economically, moving from

lower to higher levels of per capita income, overall
level of environmental degradation will eventually
fall.
11
• Although economic growth usually leads to
environmental degradation in the early stages of
development, in the end the best and probably the
only way to attain a decent environment in most
countries is to became rich.
• This implies that, given likely levels of income per

capita, the global environment impact concerned
would decline in the medium term future.
12
• The general proposition that economic growth is good for
the environment has been justified by the claim that ‘there
exists an empirical relationship between per capita income
and some measures of environmental quality’.
• Even if an EKC relationship between income and

environmental impact is generally applicable, given
exponential income growth, it is only in very special
circumstances that there will not, in the long run, be positive
relationship between income and environmental impact.
• EKC implies that the magnitude of environmental impacts of

economic activity will fall as income rises above some
threshold level, when both these variables are measured in
per capita terms.
13
• Case-A: environmental impacts per unit of income eventually
fall to zero as the level of income rises. Suppose that world
consists of two countries developing and developed which are
growing at the same rate, constant ‘g’
• but, the growth process began an earlier time in DCs and so at

any point in time its per capital income is higher than LDCs,
so that in long run they are optimist about the environmental
quality as PCI increases.
14
• In the initial stage of economic growth, with rapid
industrialization, pollution will result but after some growth
the need for decreasing pollution arises because of the strong
power of the government and the need for recreational site.
• Case- B: with increasing PCI, a country will shift from

manufacturing to industrialization, consequently the DCs will
stop in producing dirty products but import from LDCs and
they will produces clean products.
• Until Q*, both have positive relationship because at low level

of development, people have high income elasticity to
necessary items (food, cloth, & shelter) than environmental
quality.
15
• Moreover, There is insignificant literacy rate, state of
technology maters, less awareness about the environment
and more deforestation, stage of agricultural transformation,
excessive use of fertilizer and pesticides etc.
• To the right of Q*, both have negative relationships because

people have high income elasticity to environmental quality.
• In addition, there is information intensive technology,

increased environmental awareness, enforcement of
environmental regulation, better technology and higher
environmental expenditure.
16
Sustainability
• Sustainability is defined as a non-declining utility or

consumption of a representative member of the
society to the future.
• A sustainable state is one in which utility (or
consumption) is non-declining through time.
• The alternative approach (to sustainable
development) is to focus on natural capital assets and
suggest that they should not decline through time.
17
• Preserving opportunities for future generations as a
common sense to minimal notion of intergenerational
justice.
• Sustainable activity is that level of economic activity
which preserve environmental quality, with the policy
objective corresponding to this notion being the
maximisation of net benefits of economic
development subject to maintaining the services and
quality of natural resources over time.
18
• The Critical issues which explain sustainability are:
• the degree of resource substitutability
• the rate of technical progress
• the degree of ecosystem stability and resilience
• irreversibility of “investment” decisions
 The degree of resource substitutability
• The assets available to society now and in the future includes:
• Natural capital
• Physical capital
• Human capital (labour and embodied skills)
• Intellectual capital (disembodied skills & knowledge)
• Some of these can be accumulated over time. Others cannot be they
are either finite to their accumulation.
• So, as we move through time, to what extent can those resources

which can be accumulated substitute for those which cannot (or which
are depleted)?
19
 The rate of technical progress
• It is important because technical progress implies
getting more output from given quantities of inputs.
So limited resources can be used further through
technology.
• Technical progress may also affect the extent of
resource substitutability.
• And possibly affect the degree of eco-system stability
and resilience.
 The degree of eco-system stability and resilience

• It is the fundamental limit of all economic activity .
20
• One of the recent interest in the research literature in
this regard are:
• decline in biodiversity and evolutionary capacity
may arise due to interference with natural
ecosystems
• Various indicator shows future stability/resilience of
ecosystem.
• But can never know ex ante(the past) whether a
system is stable and resilient.
• Changes are non linear and path dependent (so
dependent on initial conditions).
21
 Irreversibility of “investment” decisions
• Suppose that an asset is developed (or used) in some
way.
• New information arrives and we change our mind
about the desirability of that development.
• Is it possible to reverse the process so that we are
back in the original position?
22
• More often this is not possible. In those
cases, the decision is irreversible.
• This gives us much less room for
making mistakes.
• But most decisions about the use of
environmental services cannot be
reversed, particularly those that involve
the extraction of resources or the
development of undisturbed ecosystems.
23
• When irreversibility is combined with imperfect
knowledge of the future, then optimal decision rules
can change significantly.
• In these circumstances, there are good reasons for

keeping options open and behaving in a relatively
careful manner (with a presumption against
development built into each choice).
24

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CHAPTER- TWO

Issues on the Environment and

• Negative environmental effects of population

• Growth and new investment stimulates technological change, this

• The size of modern industrial output, rapid technological development,

.Environmental problems increases with economic growth it

.The cost of bearing and controlling these problems is huge.

• As countries develop economically, moving from

• This implies that, given likely levels of income per

• Even if an EKC relationship between income and

• EKC implies that the magnitude of environmental impacts of

• but, the growth process began an earlier time in DCs and so at

• Case- B: with increasing PCI, a country will shift from

• Until Q*, both have positive relationship because at low level

• To the right of Q*, both have negative relationships because

• In addition, there is information intensive technology,

• Sustainability is defined as a non-declining utility or

• So, as we move through time, to what extent can those resources

 The degree of eco-system stability and resilience

• In these circumstances, there are good reasons for

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