Compiled by Bedrich Moldan
The World Bank views environmentally sustainable development from three perspectives: economic, sociocultural, and ecological. The diversity of these needs and concerns suggests that there is no universally 'right' or 'wrong' policy path to achieve environmentally sustainable development. Moreover, given the inadequate state of empirical evidence regarding the impact of human activity on nature, technical experts rarely can provide policy-makers with unambiguous advice about trade-offs among competing long-term goals. To escape this conundrum, policy-makers, technical experts, and the public must all share both knowledge and responsibility. Open discussion of the fuzzy links among the indicators currently available and countries' most pressing current concerns is therefore an essential first step toward achieving environmentally sustainable development.
This first edition of Monitoring Environmental Progress (see also Box 3H) picks up the central theme of the Bank's World Development Report 1992, the complementary aspects of economic development and environmental management. Economic development cannot be the antagonist of the environment for long and remain sustainable. By the same token, the best policies for environmental protection also help further economic activity. Good environmental policies are good economic policies and vice versa. Fortunately, considerable knowledge and experience already exist for designing a program to make the world wealthier while preserving its environment for future generations. The report addresses a sequence of issue-oriented questions about the practical implications of this view of development.
Monitoring Environmental Progress poses a series of compelling questions that properly targeted indicators for environmentally sustainable development should help to answer. The discussion, therefore, explores the strengths and weaknesses of available indicators and suggests avenues for developing new ones. The selection of questions is not meant to suggest that these are the only or most pressing issues. They were chosen rather to illustrate how even the rough indicators that are now available can yield analytical insight and help establish near-term priorities for basic research, including data compilation and modelling.
Perhaps the earliest sign of progress in developing useful environmental indicators was the shift of attention away from forests as producers of commercial wood supplies to concern about the sustainability of wood supplies, which is now giving way to a focus on the ecosystem functions of forests. Such a shift requires the development of indicators much broader than those that measure wood supplies or that evaluate forests in terms of the commercial wood industry. Chapter 1 suggests that progress has been achieved by using forest area and its loss as indicators of environmental health. But, as our continuing inability to make authoritative and timely statements about trends in deforestation amply demonstrates, this change has not yet been universally adopted. To give just one example, the most recent data on forests at the global level are those for 1990. Similarly, too little is known about forest quality, and a finer grain of data is required to reach informed judgements in this area.
The usefulness of ecosystem indicators, moreover, extends beyond forests to other environmental concerns. Improved indicators for assessing the management of forest ecosystems, for example, would also strengthen the monitoring and evaluation of biological diversity, although the number of other factors involved in establishing biodiversity indicators makes it difficult to reach common agreement on appropriate action in this area. An analytical framework is offered in chapter 2 to guide discussions of biodiversity and direct attention to the most relevant monitoring tasks. The aim is to help establish priorities for local action and decision making, which should in turn lead to better site-specific indicators. The problem is that it is unclear how to summarize fine-grain information across disparate locations when the information collected is tailored to site-specific observations. Attempts to develop summary indicators of biodiversity are noted in this report, but the results represent possible applications only and were not derived from direct studies of biodiversity in individual countries. ,
Chapter 3 emphasizes the fact that excessive use of the ecosystem as a pollution sink is likely to undermine the health of ecosystems, impose constraints on economic development, and above all, jeopardize human health. With their improved prevention technology and better institutional capacity to address such problems, high-income countries have been better able than poorer nations to deal with the problems of air and water pollution. But bearing in mind the increasing morbidity and mortality associated with air and water pollution, developing nations also need to include environmental concerns among their top priorities and to target action where it will bring the greatest health improvements at the lowest cost. Chapter 3 therefore identifies key pollutants and the parameters for monitoring them.
Chapter 4 explores technology's role in keeping development sustainable and the degree to which economic processes use natural resources efficiently. Grouping countries by income level suggests that, when income rises, input of resources at the margin is reduced. But the signals are mixed with regard to countries' reliance on renewable or nonrenewable resources and their attention to waste.
Governments can encourage or discourage the rational use of natural resources through taxes, subsidies, or less direct approaches. By considering the key sectors of energy and electricity, Chapter 5 shows that there is considerable scope for improvement in this area.
Chapter 6 discusses emissions of carbon dioxide and other greenhouse gases. Stabilization of carbon dioxide emissions is examined by considering which countries are adding the largest increments to the stock of carbon in the atmosphere each year. This is not a simple story. While several developing countries are among the largest incremental emitters, on a per capita basis their emissions are but a small fraction of those put out by rich countries. On the other hand developing countries are several times less efficient in their use of energy. As this discussion of the indicators for greenhouse gas emissions shows, an equitable sharing of global commons will not be achieved easily.
Clearly there is much more to nature than can be accounted for entirely in terms of monetary indicators. Valuing in situ natural resources solely as raw materials, for example, ignores their role in the earth's complex life-support systems. Non-monetary weighting schemes have therefore been suggested for forests, biodiversity, nonrenewable resources, and aspects of the global commons. In each case this report links the ecological goal of conservation to the economic goal of saving, even if expressing the two in equivalent accounting terms is not yet possible. The emphasis on nonmonetary approaches is not, and should not be interpreted as, a rejection of monetary valuation schemes. In fact, chapter 7 introduces World Bank work on a short-cut approach to 'green' national accounts that yields time series for some ninety countries. When used to refine studies of saving-investment conditions, these computations convey an important analytical message to environmentalists and economists alike. While it is widely recognized that rich and poor nations must both save to accumulate wealth, it is suggested here that conventional accounts give policy-makers, particularly in resource-based economies, an overly optimistic view of domestic savings rates. Apart from environmental consequences (excessive use of natural resources), miscalculation of the savings residual can lead to a mistaken view of how well a nation is preparing for its future. A new measure of genuine saving is therefore suggested.
Chapter 8 contains an attempt at measuring the wealth of nations, in part to emphasize that natural capital ought to be viewed as a factor of production, and as an increasingly scarce one at that. The empirical questions focus on measuring natural resources relative to produced assets and human resources and determining which countries have relatively rich or poor natural endowments. The overshadowing importance of human resources is also noted. One approach to measuring wealth is the trial balance sheet. Using this approach, the report suggests that natural resources should be viewed as scarce goods for which appropriate macro- economic policies should be adopted. The discussion of wealth emphasizes the relative and complementary importance of human capital, produced assets, and natural resources in today's world. It concludes that human capital is worth more than either produced assets or natural resources, but that natural resources are probably worth more than produced assets, even without taking into account nature's invaluable life-support role. As might be expected, natural resources are far more important in developing economies than in high-income economies. More surprising is the observation that produced assets account for 15 to 20 per cent of an economy's wealth regardless of the level of total per capita wealth. Natural resources have been valued only as raw materials on the trial balance sheet. While prevailing market prices seem to have meaning for these items, monetization is only one form of valuation. In principle a global balance sheet should also take account of the value of the life-support functions of the earth, which would require more flexibility in approaching issues of valuation, weighting, aggregation, and so on. Some aspects (efficiency of input procedures, saving the forest while using the trees, and so on) can be linked to items on the asset side of the wealth balance sheet. The liability side seems more appropriate for recording use of the environment as a sink for pollution and waste. For practical reasons some items (biodiversity, global commons, and so on) may have to be treated as memorandum items for the present. When issues discussed in the early part of this report give way to sectoral analysis and monetization is considered alongside other approaches to aggregation and weighting, a macroeconomic framework begins to emerge. To help policymakers, a variety of such measures need to be summarized and subjected to similar valuation procedures.
The overriding importance of human resources in a nation's wealth draws attention to the importance of investing in human capital, which leads to chapter 9 and a discussion of how the poor have fared. Recognition that poverty is multidimensional underscores the need for indicators that reflect such varied issues as income, health, basic needs, and environment. A fair number of country-level indicators are already available. But poverty is both a household attribute and an attribute of nations, and it is important that indicators capture the microeconomic-level interactions. With information on basic needs and environmental indicators relatively scarce at the household level, this should be a prime direction for future work.
REFERENCES
The World Bank (1995) Monitoring Environmental Progress: A Report on Work in Progress. Washington, D.C.