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The Environment and Sustainable Development in Asia


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Title: The Environment and Sustainable Development in Asia

Chapter 12
  • The Environment and Sustainable
    Development in Asia

  • Environmental problems in Asia include the
    deterioration of natural treasures at a dramatic
  • Other problems include air pollution,
    contaminated rivers and reckless disposal of
    hazardous wastes
  • Economic implications of these problems include a
    reduction in the pace of economic development
  • Reduced productivity of resources
  • Health related expenses

Environmental Degradation A Source of Market
The Market of an Environmental Good
  • Q is the most efficient level of output since
  • Marginal benefit (MB) Marginal cost (MC) of
    providing the good,
  • Producers and consumers gains are maximized from
    the exchange.
  • Coase Theorem

  • Coase theorem says that a market for a public
    good can be created.
  • The market will determine the price of a public
    good based on the marginal social cost and the
    marginal social benefit.
  • By incorporating the environmental damage into
    the pricing structure of public goods markets can
    determine a social optimum.
  • Government intervention is not needed.
  • The Coase theorem can work in many cases but not
    in others.

What is Market Failure?
  • Market failure is
  • In the environmental sense, when the market
    determined price and output levels of
    environmental goods are not efficient
  • In other words, there is a disparity between MSC
    and MPC or MSB and MPB for a market at Q level
    of production

Market Failure
An Example of Market Failure
S, (MSC)
S, (MPC)
Q (units of resource)
  • Externalities is one of the major sources of
    market failure
  • It refers to costs incurred or benefits gained by
    a third party from an exchange of good or service
  • It brings about a disparity between MSC and MPC
    from production activity
  • For e.g. river pollution by industrial producer
    induces MSC gt MPC
  • It brings about a disparity between MSB and MPB
    from consumption activity
  • For e.g. immunization induces MSB gt MPB

Externalities Property Rights
  • Property rights defines owners rights to use a
  • It can be vested with individuals or a state
  • Externalities often arise because of improperly
    designed or inadequate property rights systems
  • Thus adequate property rights are essential to
    the societys efficient use of natural resources

Externalities Property Rights
  • Efficient resource allocation in a market economy
    depends on 4 basic characteristics of property
  • Privately owned resources
  • Exclusivity prevents non-owners from gettingany
    benefits from the resource
  • Transferability property rights can be
    transferred from one part to another
  • Enforceability the resource cant be seized by
    someone else.

Externalities Property Rights
  • Property rights cannot be easily implemented for
  • Open-access resources -resource
  • For e.g. air, rivers and seas.
  • Public goods goods that, once provided, can not
    exclude users
  • For e.g. community parks, defense, roads, light
  • They have indivisible and non-exclusive nature,
    and this results in the free rider problem

Approaches to Correct Externalities
  • Three broad approaches taken by the government to
    correct externalities
  • Public Education
  • Command and Control Regulations
  • Economic Incentives

Approaches to Correct Externalities (Public
  • True costs of environmental degradation are
    unknown due to imperfect information failures
  • Public education to influence public behavior via
    moral suasion and direct mitigation of
    environmental market

Approaches to Correct Externalities (Regulations)
  • Direct controls
  • Restrict behaviours of individuals
  • Include specific laws and rules and regulations
  • Penalties apply if these are violated.
  • Command and control regulations
  • Restrictions on inputs and output
  • Effective if the polluters are easily identified

Approaches to Correct Externalities (Economic
  • Economic incentives
  • Matches individual self-interest with the
    interest of the wider society via pollution
    taxes, pollution subsidies, market permits,
    deposit-refund system, bonding and liability
  • Taxation forces firms and households to
    internalize the external cost and reduce cost
  • Tax revenue earned can be used to fund
    environmental programs and compensate the
    affected party
  • Effective if polluters are highly responsive to

Approaches to Correct Externalities (Economic
  • Marketable permits
  • Allows holders to harvest resources up to a
    limit or
  • Grants license to pollute the environment to a
    certain specific amount
  • It provides firms incentives to make their
    production process more environmentally friendly
  • Provide buyers and sellers a choice, unlike

Economic Incentives
  • Marketable permits use markets to regulate
    pollution by raising the price of products that
    pollute to equate marginal social cost with
    marginal social benefit.
  • They also presume that there is a level of
    pollution that is acceptable.
  • Marketable permits then can be sold by one
    polluter to another to reflect the costs of
  • A high polluter can buy permits from a low
    polluter, thereby raising his costs and lowering
    the costs of the low polluter.
  • This provides an incentive in the long run for
    best practice firms low polluting firms to
    prevail over polluting firms

Developing Countries Natural Resources
  • 2 important factors contributing to environmental
    degradation in developing countries are
  • High incidence of poverty and
  • Population growth

Developing Countries Natural Resources Asia
  • Rich endowment of resources
  • 2nd largest rain forest
  • More than 50 of worlds coral reefs
  • 17 of important wetlands
  • Rapid development in the region puts these at risk

Fresh Water Resources in Asia
  • Fresh water resources in Asia have been worst hit
    by rapid economic and population growth
  • It has the highest rate of fresh water
    withdrawals in the world
  • This results in an inadequate supply of clean

Fresh Water Resources in Asia
  • Asia has the lowest per capita availability of
  • This adversely affects peoples health conditions
    and lower productivity levels
  • Irrigation problems are also experienced
  • There is severe shortage of safe water
    particularly in South and Southeast Asia

Air Quality in Asia
  • Air quality in Asia is ranked among the worlds
    most polluted
  • Rapid and unplanned urbanization has increased
    air pollution
  • Transportation is the major source of air
    pollution in most Asian cities
  • E.g. Bangkok, Beijing, Delhi, Tokyo etc

Air Quality in Asia
  • Other causes of air pollution include the burning
    of fossil fuels in
  • Domestic heating
  • Power generation
  • Industrial processes
  • Asia has a heavy dependence on carbon-intensive
    fuels and is a big consumer of wood fuels as well
    as coal

Carbon and global warming
  • When burned coal is the biggest source of carbon
    dioxide and also a source of methane which is 10
    times as damaging to the environment in terms of
    raising air temperatures (global warming)
  • China and India are the worlds largest consumers
    of coal.
  • China recently surpassed the US as the biggest
    emitter of carbon dioxide.
  • Scientists are working on how to reduce the CO2
    emissions from coal by sequestering the carbon
    dioxide underground.
  • They are also working on using other fuels.
  • Oil is the second biggest polluter after coal

Global warming
  • China produces twice as much coal as the US and
    consumes about twice as much as the US.
  • There are hundreds of new power plants being
    commissioned in China every year.
  • Most of them are not using most modern equipment
    to get rid of sulphur and fly ash byproducts.
  • As a result pollution levels are high and also
    respiratory illness.

Land and Forest in Asia
  • Asia has lost 72 of over 15 million sq. km of
    original forest
  • Main losses are due to
  • Commercial logging
  • Agriculture
  • Settlement demand by the rapid growing population

Land and Forest in Asia
  • Most severely hit countries include
  • Bangladesh
  • India
  • Philippines
  • Sri Lanka
  • Vietnam
  • Only a mere 6 of the remaining forests are
    frontier forests, found in islands of Borneo,
    Sumatra, Sulawesi and Irian Jaya

Protecting the Environment (Policy Implications)
  • Owing to the presence of market failure,
    government intervention is necessary to stop
    environmental degradation
  • Policy instruments available include
  • Command and Control Policies
  • Economic Incentives
  • Clarity of Property Rights
  • Phasing out Subsidies
  • Improving Institutional Capacity

Protecting the Environment (Policy Implications)
  • Command and control policies are popular
    approaches especially in cases where
  • Monitoring costs are high e.g littering, toxic
  • Zero level emissions is best
  • During emergencies
  • Economic incentives are generally preferable to
    command and control policies

Protecting the Environment (Policy Implications)
  • Other policy instruments such as clarity of
    property rights are not easily implemented for
    open access resources
  • It is also more relevant for countries where
    tenanted farming is still in place

Protecting the Environment (Policy Implications)
  • Phasing out subsidies reduces overuse of natural
    resources and improve the allocation of
    resources. This includes reduced subsidies to
    energy production, logging, fishing and water.
  • Improving institutional capacity involves taking
    a decentralized approach to environmental policy
  • It also stresses partnership with the private
    sector, NGOs and local communities

Water Availability in Asia
  • Water stress is getting worse in Asia
  • Water stress is encountered when the amount of
    fresh water per capita falls below 1700 cubic
    meters per year.
  • South Asia is sometimes coming close to that
  • Pricing needs to reflect the costs of water.
  • Irrigation water should be better regulated and
  • Urban water systems recover only about 35 percent
    of costs.
  • Less than half of Asias population has access to
    sanitation and clean water.

Aquatic Resources
  • Over fishing is widespread.
  • Subsidies to fishermen to build and maintain
    bigger boats is counterproductive.
  • Destruction of natural habitats on sea coast such
    as mangrove raises risks of flooding and high
    tides as well as Tsunamis.
  • Pollution also increases the risk of red time
    algae that poisons shellfish.
  • Coral reefs also bleached by warmer water
    associated with global warming.

Air Quality
  • Coal has already been mentioned.
  • Wood burning by the poor for cooking also
  • Fires from burning straw after harvest a policy
    followed in Malaysia and Indonesia has caused a
    sharp deterioration in air quality and an
    increase in respiratory disease.
  • Mercury concentrations as well as lead (in leaded
    gasoline) , cadmium are spread to fish through
    air pollution.
  • Sulfur dioxide levels are also high.

Damage from water pollution
  • Arsenic poisoning responsible for many deaths in
    Asia Bangladesh in particular.
  • Water borne diseases like malaria, intestinal
    problems affect billions of people (4 billion
    cases of diarrhea, 2 billion people at risk from
  • Disability Adjusted Life Years (DALY) is a way of
    measuring economic loss from illness caused by
  • 42 of DALY is due to water pollution and
    inadequate sanitation.
  • Environmental clean up has secondary benefits for
    the poor who are more likely to be affected by
    water pollution.

Costs of global warming
  • Cost of global warming so far is modest.
  • Ultimate cost will depend on sea level rise.
  • A one meter rise would flood parts of China,
    Bangladesh and India as well as low lying areas
    of Thailand.
  • Science is still not clear how much sea will rise
    and when.
  • Extreme weather patterns are predicted to
  • Earth is in a warming cycle now and will be for
    the foreseeable future.

  • Asia will account for the bulk of increase in
    energy use over the next two decades.
  • Need more public transport in India and China
  • More fuel efficient and less polluting cars in
  • Replace coal burning into coal gasification
    (Integrated gasification combined combusion or
  • IGCC allows separation of mercury and sulfur and
    easy disposal.
  • So far India and China not adopting this
  • There are still energy subsidies in China.

  • Alternative energy sources are not going to help
  • Ethanol raises prices of food and causes
    substitution of production from ethanol producers
    to other countries that may be more polluting.
  • Nuclear, tidal power, solar, geothermal cant
    supply much.
  • Long run hope is fusion.
  • Even with new technology OECD projects fossil
    fuels will supply 77 percent of global primary
    energy needs by 2030 down from 81 percent with no
    change in technology.

  • Is there a magic bullet in the long run to
    substitute for coal, oil and natural gas?
  • Genetically modified crops can save on water and
    artificial fertilizers.
  • Nuclear power can provide some help but capacity
    in India and China is very low.
  • It will increase a lot in next twenty years but
    so will demand (see Table 6.5 in book)
  • Solar power not a major source in Asia outside of

Technology and Global Warming
  • Table 6.3 shows the pattern of climate change
    historically and shows we are still in a very
    cold phase of earths climate experience.
  • There are also nonlinear changes that could make
    climate change accelerate.
  • Amount of carbon dioxide released by
    invertebrates and microbes is 10 times higher
    than the level of carbon emission from fossil
  • Soil hold more carbon than trees and atmosphere
  • Disruptions in the carbon cycle in soil could
    result in greater acceleration in global warming.

Technology and Global Warming
  • Adopt policies that
  • encourage super externalities
  • such as

Gore Socolow Pacala
  • More efficient use of electricity in heating,
    cooling, lighting, running of appliances
  • Better building design
  • More efficient automobiles
  • More efficient trucks, mass transit.
  • Wind and biofuels
  • Capture and storage of carbon.

A Solar energy alternative
  • Install solar panels in deserts throughout the
    world. These include Southwest of US, Gobi and
    Sahara deserts, Argentina, Chile and Peru.
  • The energy generated during the day can be stored
    as compressed air and then released on demand.
  • Storage in salt an alternative but seems more
    risky because of corrusion.
  • Energy sent from the solar cells through
    high-voltage DC lines to storage facilities
    throughout each individual country.

A Solar Energy Alternative
  • These facilities would be similar to existing
    storage facilities for natural gas.
  • Such a system has been described for the United
    States in January 2008 Scientific American.
  • System would require some natural gas to help
    power the turbines that generate electricity.

Thermostats to control use
  • Economists suggest thermostats that give a better
    picture of energy usage.
  • Book that details this is called Nudge, by
    Richard Thaler and Cass Sunstein.
  • These would include red lights that indicate high
    usage and comparisons with others in the
  • High users would follow more efficient use of
  • Also will show trade offs in life style choices
    car emissions not offset by recycling, postponing
    long air flights could save more than
    substituting a Prius for a Hummer.

Global agreements
  • Kyoto Protocol agrees to cut greenhouse gases by
    5.2 percent by 2012 from 1990 levels.
  • Signed by 141 countries not including US and
    Australia, who didnt ratify the treaty.
  • India and China are exempt although they did
  • Pollution rights can be purchased through a
    trading system.
  • Industrial countries buy rights from poorer
  • Unclear whether the transfer of resources to poor
    countries will do anything for global compliance.

Time delays and environmental management
  • Ecological changes take time to manifest and to
  • Mercury poisoning is an example working up
    through the food chain.
  • Nonlinear and irreversible changes possible
    great barrier reef, crown of thorns starfish and
    Giant Briton shellfish.
  • Aging of the global population could reduce human
    impact on environment.
  • Older people live in smaller more dense spaces,
    consume less, drive less etc

Ecological footprint
  • Ecological footprint is a measure of total area
    required to produce food and other products plus
    area required to dispose of waste and construct
  • Footprint compared with biocapacity, which is
    drawn down by consuming resources.
  • Keep global biocapacity by reducing toxic
    chemicals, soil erosion, protecting wetlands,
    watersheds, forests and fisheries.
  • Increase technology investment to improve
    efficiency of resource use.

Ecological footprint
  • Reduce consumption of luxury goods.
  • Reduce rate of population growth.
  • Good to reduce footprint and raise human
    development index.
  • US footprint is huge, more than twice that of
    nearest country, Japan see Table 6.11 in textbook
    and on next page

(No Transcript)
Who Cares?
  • The answer to who thinks global warming is a big
    problem is as follows (see chart at right)
  • So why should we do anything?
  • Set example for others -start a garden, plant
  • Install solar water heater.
  • Find more efficient utilities.
  • Stop eating meat.
  • Bike or walk.

Final Thoughts
  • Concerted and wide ranging efforts needed to
    conserve and maintain environmental quality in
  • Table 6.12 lists a wide variety of areas from
    population to water availability, air quality,
    land and forest resources, solid and waste
    management, energy, bildiversity, global warming
  • Asia will be the biggest source of most pollution
    particularly CO2
  • Loss of biodiversity is also happening in Asia.
  • Half of global consumption of energy will come
    from Asia over next 15 years.

Final Thoughts
  • Electronic waste rising dramatically with use of
    personal computers. 4 million are discarded each
  • 60 percent of remaining frontier forests in Asia
    are under threat. Forest cover declining at 1
    percent per year.
  • Asia has most polluted air in the world. 13 of 15
    dirtiest cities are in Asia.
  • Water stress likely in India by 2025 and also in
    China a little later.
  • Most of global population growth will come from
    China and India as well as rest of South Asia.
    Global population could peak at less than 10
    billion if population growth is controlled in
    these countries

Summary of what we have learned
  • Introduction to environmental problems in Asia
    and its causes
  • Understanding of externalities and property
  • Policy implications for protecting the environment